Intro to Business Chapter 14

Dealing with Risks (A T I A)

**AVOID the Risk: With though planning you may be able to avoid some risk **TRANSFER the Risk: If a business is not in the position to assume the risk, it may choose to transfer it. **INSURE the Risk: Purchase Insurance **Assume the Risk: Usually, damage will not have a serous financial impact on the business

Insuring Business Operations

**Business Interuption Insurance **Liability Insurance

Types of Risks

**Economic Risk **Personal Risk **Property Risk **Liability Risk **Non-Economic Risk **Pure Risk **Speculative Risk **Controllable Risk **Uncontrollable Risk **Insurable Risk **Uninsurable Risk

Business Insurance

**Health Insurance **Disability Insurance **Life Insurance

Insurance Basics

**Insurer **Insured **Policyholder **Premium **Claim

Purchasing Insurance

**Most people & businesses cannot afford to pay for large economic losses, so they purchase insurance to provide financial protection. To show that is has taken on the risk, the insurance company issues a written contract, or insurance policy

Insurance Companies

**Offer financial protection for policyholders **Investment companies **Premiums collected from the policyholders make up the funds used to pay for claims & are invested to earn income for the insurance company

International Property Rights

**Property Rights **Intellectual Property **Patent **Trademark **Copyright

Strategies for Reducing Risk in International Business (4) Text p 357

-Carry out business in many countries Reduces Risk vs. doing business in only 1 country -Offer a range of Products, if sales goes down for one product it won't hurt the business -Involve business partners in business decisions -Employ local management in key position. Executives Management who are native to a country or region better understand the cultural & social norms & political environment.

Uninsurable Risk Factors (6) ECCTLB

-Economic Conditions -Consumer Demand -Competitors actions -Technology Changes -Local Factors -Business Operations

Managing Risks (8) Text p356

-Study changes in economy -Competitors Actions -Study technology -Collect & Review customer info including complaints & requests -Watch sales -Monitor all operating costs -Inspect facilities & Equipment -Careful employee hiring & ongoing training -Businesses should put security systems -Back up copies & store in safe spot

Trademark

A DISTINCTIVE Name, Symbol, Word, Pictur or combination of these that a company uses to IDENTIFY products or services (Nike Swoosh)

Uncontrollable Risk

A Risk that CANNOT be REDUCED by your actions

Pure Risk

A Risk that PRESENTS THE CHANCE of LOSS but NO OPPORTUNITY for GAIN

Economic Risk

A Risk that can RESULT in FINANCIAL Loss, including **Personal risk **Property Risk **Liability Risk

Property Risk

A Risk that can lead to loss of personal or business property including **money **vehicles **buildings

Personal Risk

A Risk that can result in PERSONAL LOSSES, such as **Health **Personal Well-Being

Insurer

A company that AGREES to take on a certain economic risks & to ay for losses, if they occur

Insurance

A form of RISK protection that exchanges the uncertainty of a possible large financial loss for a certain smaller payment

Insurance policy

A policy stating the conditions to which the insurance company & the policyholder have agreed

Claim

A policyholder's request for payment for a loss that the insurance policy covers

Liability Risk

A risk that relates to HARM or INJURY to other people or property resulting from the products, services or actions of a business

Controllable Risk

A risk that you can REDUCE or ELIMINATE by actions you take

Insurance Agent

An agent who represents the insurance company & sells insurance policies to individuals & businesses

Workers Compensation

An insurance plan that provides MEDICAL & SURVIVOR benefit (due to Loss of Life) for people INJURED, DISABLED, or KILLED ON THE JOB

Vehicle (Automobile) Insurance

Coverage of AUTOMOBILES, TRUCKS, & Other Business Vehicles

Commercial Property Insurance

Coverage of PROPERTY Losses resulting from **Fire **Storms **Accidents **Theft **Vandalism

Liability Insurance

Covers claims by OTHERS based on DAMAGES SUFFERED because of business operations, employees, or products Ongoing business expenses that occur if a business has a TEMPORARY SHUTDOWN due to FIRE, FLOOD or OTHER Major Problem. (ex. Power outage)

Life Insurance

Insurance that pays the amount of the insurance policy upon the death of the insured. The payment is made to people named in the policy known as BENEFICIARIES

Beneficiary

People named in a LIFE Insurance policy who receive payment of money (benefit) upon the death of the insured.

Disability Insurance

Protection again something happening to a person physically causing them NOT to able to function

Liability Risk

Protection against losses from injury to other people or their property be cause of your ACTIONS

Health Insurance and Group Insurance

Protection against the high costs of individual health care. It covers routine costs of medical care and may also cover costs of hospitalization or other needed medical treatment Group Insurance: Health Insurance coverage offered to a LARGE number of Employees & their family members

Business Interruption Insurance

Provides compensation for ongoing business expenses that occur if if a business has a TEMPORARY SHUTDOWN due to a coverage hazard

Intellectual Property

TECHNICAL KNOWLEDGE or CREATIVE work. It includes **Software **Clothing Designs **Music **Books **Movies

Speculative Risk

The CHANCE either to GAIN or to LOSE

Patent

The EXCLUSIVE right of an INVENTOR to **MAKE **SELL **Use a PRODUCT or PROCESS

Property Rights

The EXCLUSIVE rights to possess & use property & its profits

Non Economic Risk

The May result in INCONVENIENCE or DISCOMFORT bus DO NOT have FINANCIAL IMPACT

Risk

The POSSIBILITY of INCURRING a LOSS

Premium

The amount of policy hold must pay for insurance coverage

Insured

The person or business for which the insurer assumes the risk

Policyholder

The person or company buying the policy

Copyright

The protection of the CREATIVE WORK or AUTHORS, COMPOSERS, & ARTISTS

Insurable Risk

When a LARGE number of people face a given risk and the COST of the POSSIBLE LOSSES can be PREDICTED

Uninsurable Risk

When a Risk is NOT COMMON or if it is IMPOSSIBLE to predict the amount of loss that could be suffered

Counterfeiting

ILLEGAL uses of INTELLECTUAL Property, PATENTS, TRADEMARKS, & COPYRIGHTS