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Risk?

Every business potentially faces


challenges, or risks.
The term business risk refers to the
possibility of inadequate profits or
even losses due to uncertainties e.g.,
changes in tastes, preferences of
consumers, strikes, increased
Business risks can be
competition, change in government
classified by the influence by
policy, obsolence etc .
two major risks:internal
risks(risks arising from the
events taking place within the
organization) andexternal
risks(risks arising from the

Business Risks Terms

Risk
The possibility of a financial loss.

Risk management
The process of managing a
businesss exposure to risk in order
to achieve business objectives.

Business risk

The possibility of business failure or


loss.

Economic Risks
Risks that result from changes in
overall business conditions. Examples
of economic risks include:
Competition More businesses that
would compete with your business open
in the area.
Changing consumer lifestyles The
lifestyle of the consumers in your area
changes due to new industry opening or
closing, new businesses, etc.

Economic Risks continued


Limited usefulness of products new products introduce replace your
products or the needs of customers
needs change
Inflation the availability of cash to
customers will reflect in the buying
patterns.
Product obsolescence products
you offer to the public is not longer
needed or out-of-date.

Economic Risks continued


Government regulation new
regulations can change the status
of your products. Products can be
recalled because of safety
measures such as baby products
or medicines.
Recession Just as with inflation
the availability of cash affect
customer purchases.

Natural Risks
Risks resulting from natural
causes. Examples include:

Floods
Earthquakes
Fires
Lightening
Droughts
Unexpected changes in normal
weather

Human Risks
Risks caused by human errors as
well as the unpredictability of
customers, employees, or the work
environment.

Employee theft
Robbery
Computer crime
Stolen credit cards and bad
checks
Accidents and injury

Managing Business Risks

Ways to Reduce Risk

Design work areas to reduce the


chance of accident or fire.
Educate employees on safe use of
equipment.
Check and service safety
equipment on a regular basis.
Stress the limits of your
companys products.

Provide customers with instructions on the


proper and safe use of products, as well as
warnings about possible hazards.

Ways to Reduce Risk

Control employee theft.

Install closed-circuit television systems


and point-of-sale terminals that
generate computerized reports.
Provide company policies that make
employees aware of expectations.
Utilize pre-employment testing to detect
employee attitudes about honesty.

Emergency Planning

Businesses must:
create emergency response plans to
help handle emergency situations
more smoothly.
have procedures in place before a
crisis occurs.

Ways to Reduce Risk

Shoplifting is a form of external


theft that involves taking items
from a business without paying
for them.
Ways to reduce shoplifting.

Educate employees on shoplifting


prevention guidelines.
Provide effective store layouts with
adequate lighting and orderly displays.
Store expensive items in locked display
cases or tag expensive merchandise with
electronic devices.
Employ the use of two-way mirrors,
security personnel, or closed circuit

Ways to Reduce Risk

Purchase property insurance to


cover:

the loss of physical property such as cash,


inventory, vehicles, buildings.
real property such as buildings, land, and
fixtures.
personal property such as vehicles, clothing,
furniture, jewelry.

Purchase business interruption


insurance to make up for:

lost income if a business is shut down for

INSURANCE ACT

The Insurance Act of 1938 was the


first legislation governing all forms of
insurance to provide strict state
control over insurance business.
Purpose:- to safe guard the interest
of insured, setting the norms for
carrying out the business of
insurance smoothly, Minimizing
disputes

IMPORTANCE OF INSURANCE
Provides protection against occurrence of
uncertain events.
Device for eliminating risks and sharing
losses.
Co-operative method of spreading risks.
Facilitates international trade.
Serves as an agency of capital formation.
Financial support.
Medical support.
Source of employment.

Types of insurance

Distinction b/w double insurance and reinsurance


Double insurance

Reinsurance

Risk

The same risk and same


subject in insured by the
policy holder.

The transfer of part of


the risk by the insurer.

Extent of
liability of the
insurer

The loss will be shared by


all the insurers.

The re-insurer will be


liable for a proportion of
part of the loss.

To whom
liable

Each insurer is directly


liable to the policy holder.

The re-insurer is liable


only to the first insurer.

Object

It is a method of assuring
the benefit of insurance.

It is a method of
reducing of the risk of
the insurer.

Life insurance:
Life insurance is a contract between the policy
owner and the insurer,
where the insurer agrees to reimburse the
occurrence of the insured individual's death or
other event such as terminal illness or critical
illness.
The insured agrees to pay the cost in terms of
insurance premium for the service. Specific
exclusions are often written in the contract to limit
the liability of the insurer, for example claims
related to suicide, fraud, war, riot and civil
commotion is not covered.

General insurance
Insuring anything other than human life is
called general insurance.
Examples are insuring property like house
and belongings against fire and theft or
vehicles against accidental damage or theft.
Injury due to accident or hospitalizationfor
illness and surgery can also be insured. Your
liabilities to others arising out of the law can
also be insured and is compulsory in some
cases like motor third party insurance