What Is Business Risk Ppt – GNF Technologies

What Is Business Risk Ppt

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25 Risk prevention Many companies that provide insurance to businesses are also involved in developing effective risk management plans. Marketing Basics Chapter 34, Section 34.2 18 Transfer of Risk Insurance policies are a means of transferring risk from the business owner to an insurance company. The amount you pay for insurance depends on the amount of risk of loss that appears to the insurer. Marketing Essentials Chapter 34, Section 34.2 Once a company`s management has developed a risk management plan, it is important that they take the extra step of documenting everything in case the same situation happens again. After all, business risk is not static – it tends to repeat itself over the course of the economic cycle. 29 Article 34.2 Companies may manage the risk of financial loss in several ways, including prevention, control, transfer, retention and prevention of loss. Establishing and maintaining security conditions and controlling external and internal flights can reduce financial losses. Insurance is a common way to transfer risk. You can also transfer risk through guarantees or changes in ownership of the business. Sometimes, however, the cause of the risk lies outside a company. For this reason, it is impossible for a company to fully protect itself against risks. However, there are ways to mitigate the overall risks associated with running a business.

Most companies achieve this through a risk management strategy. 20 Basics of a Strong Insurance ProgramIdentify Business Risks That Can Be Insure Secure Coverage for All Major Potential Claims Evaluation of an Insurance Program Linking Premium Costs to Probability of Loss © 2014 Cengage Learning. All rights reserved. May not be copied, scanned or duplicated, in whole or in part, except for use in a license distributed with a particular product or service, or otherwise authorized on a password-protected educational website. Whenever a company`s reputation is ruined, whether by an event resulting from a previous business risk or by another event, it runs the risk of losing customers and damaging its brand loyalty. HSBC`s reputation stagnated after the fine was imposed for bad anti-money laundering practices. 2 Enterprise Risk ManagementKey Terms Business Risk Management Economic Risks Natural Risks Human Risks Objectives Explain the Nature and Scope of Risk Management Identify the different types of business risks Marketing basics Chapter 34, section 34.1 An entity with higher enterprise risk may opt for a capital structure with a lower leverage ratio to ensure that it is financially able comply with its obligations at all times. With a low debt-to-equity ratio, the company may not be able to service its debt as revenues decline (which can lead to bankruptcy). On the other hand, when revenues increase, a company with a low debt-to-equity ratio makes more profits and is able to meet its obligations. However, many U.S.

states do not have this type of distribution system. Compliance risk arises when a trademark does not understand the individual requirements of the state in which it operates. In this situation, there is a risk that a brand will not comply with country-specific distribution laws. Strategic risk occurs when a company does not operate according to its business model or plan. If a company does not operate according to its business model, its strategy becomes less effective over time and it may struggle to achieve its defined objectives. For example, if Walmart strategically positions itself as a low-cost supplier and Target decides to reduce Walmart`s prices, it becomes a strategic risk for Walmart. Art. 21 Requirements for taking out insuranceThe risk must be calculable to allow the calculation of premiums.

The risk must be present in sufficient numbers for the law of averages to work. The insured property must have commercial value. The policyholder must have an insurable interest in the insured person or person. © 2014 Cengage Learning. All rights reserved. May not be copied, scanned or duplicated, in whole or in part, except for use in a license distributed with a particular product or service, or otherwise authorized on a password-protected educational website. Business risks cannot be completely avoided because they are unpredictable. However, there are many strategies that companies use to reduce the impact of all types of business risks, including strategic, compliance, operational, and reputational risks. 13 Business Risk ManagementStudy Organizer Copy this diagram. If you are reading this section, fill in the fields with the different risk management methods.

Marketing Basics Chapter 34, Section 34.2 The third type of business risk is operational risk. This risk occurs within the group, especially if the day-to-day activities of a company do not work. In 2012, for example, multinational bank HSBC faced high operational risk and therefore faced a hefty fine from the U.S. Department of Justice when its in-house anti-money laundering team was unable to adequately stop money laundering in Mexico. After all, most companies have a risk management strategy. This can be done either before the start of business operations or after a setback. Ideally, a risk management strategy helps the business better prepare for risks when they arise. The plan should have tested ideas and procedures in case risks arise. 24 Property and casualty insurance (continued)Business interruption insurance Refunds of lost income and current expenses due to direct losses affecting business income. General liability insurance (RCG) covers bodily injury and property damage for which the company is responsible. Auto Insurance Protects against liability and property damage to a vehicle caused by insured hazards such as collision, theft, vandalism, hail and flood.

© 2014 Cengage Learning. All rights reserved. May not be copied, scanned or duplicated, in whole or in part, except for use in a license distributed with a particular product or service, or otherwise authorized on a password-protected educational website. 20 Transfer of risk There are different types of insurance for different types of risks. Marketing Essentials Chapter 34, Section 34.2 8 Human Risks Human Risks Risks Risks triggered by errors or omissions and the unpredictability of customers or work environments. X human risks are risks caused by human error or dishonesty, or other risks that can be controlled by humans, including: Employee/customer dishonesty Inadequate safety programs in the work environment Computer-related crime Marketing basics Chapter 34, section 34.1 7 Natural hazards Natural hazards Risks arising from natural events such as earthquakes or bad weather.