Chapter 34 Section 34.2.pptx

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Marketing Essentials

Marketing

Essentials

n Chapter 34 Risk Management

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SECTION 34.2

What You'll Learn What You'll Learn

Handling Business Risks

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SECTION 34.2

_{Handling Business Risks}

Why It's Important Why It's Important

Businesses use certain strategies to help prevent, avoid, and protect against

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SECTION 34.2

_{Handling Business Risks}

Key Terms Key Terms

 _{insurance policy}  _{extended coverage}  _{fidelity bonds}

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SECTION 34.2

_{Handling Business Risks}

There are four basic ways that businesses can handle risks:

 _{risk prevention and control}  _{risk transfer}

 _{risk retention}  _{risk avoidance}

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SECTION 34.2

_{Handling Business Risks}

Risks can be prevented and controlled by:

 _{screening and training employees}  _{providing safe conditions and safety}

instruction

 _{preventing external theft}  _{deterring employee theft}

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SECTION 34.2

_{Handling Business Risks}

The best way to prevent the human risk of employee carelessness and incompetence is through effective employee screening,

orientation, and training. Properly trained personnel are better able to meet customer needs and wants. This also helps to prevent the risk of lost sales through human error.

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SECTION 34.2

_{Handling Business Risks}

To prevent employee injuries, businesses can design stock and selling areas for

efficient foot traffic and merchandise storage, and provide safety instruction on proper

ways to lift and store merchandise

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SECTION 34.2

_{Handling Business Risks}

Shoplifting involves the theft of merchandise from a business. Effective store layouts,

security guards, and security devices can help prevent shoplifting.

Robbery is the stealing of money or

merchandise by violence or threat. Robbery prevention measures including keeping

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SECTION 34.2

_{Handling Business Risks}

Employee theft is stealing merchandise, funds, or other company property. Effective

prevention measures include:

 _{Closed-circuit television systems used in}

conjunction with point-of-sale terminals to monitor employee transactions.

 _{Preemployment screening to detect}

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SECTION 34.2

_{Handling Business Risks}

Some business risks can be handled by

transferring the risk to another business or to another party. Three of the most common risk transfers are:

 _insurance

 _{product and service warranties}

 _{transferring risks through business}

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SECTION 34.2

_{Handling Business Risks}

Businesses can insure property and people against potential loss by purchasing an insurance policy— a contract between a business and an insurance company to cover a certain business risk.

Businesses can buy several kinds of insurance:

Purchasing Insurance

_{Property insurance}

_{Business liability insurance} _{Personal liability insurance}

_{Performance bonds} _{Life insurance}

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SECTION 34.2

_{Handling Business Risks}

Property insurance covers the loss of or damage to buildings, equipment, machinery, merchandise, furniture, and fixtures. It typically covers replacement costs and loss of income.

Business liability insurance protects a

business against damages for which it may be held legally liable, such as an injury to other

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SECTION 34.2

_{Handling Business Risks}

Personal liability insurance covers damage claims made by customers and employees.

Product liability insurance protects against business loss resulting from personal injury from products manufactured or sold by a business.

Fidelity bonds protect a business from

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SECTION 34.2

_{Handling Business Risks}

Performance bonds (surety bonds) insure against losses that might occur when work is not finished on time or as agreed.

Life insurance is often purchased by a

business owner to ensure that there will be sufficient funds to pay business debts in the event of the owner’s death.

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SECTION 34.2

_{Handling Business Risks}

Credit insurance protects a business from losses on credit extended to customers.

Credit life insurance pays the balance of any loans in the event the borrower dies.

Workers' compensation insurance is paid

by employers to cover employee job-related injuries and illness .

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SECTION 34.2

_{Handling Business Risks}

Warranties are promises by the seller or manufacturer concerning the performance and quality of a product and protection

against loss.

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SECTION 34.2

_{Handling Business Risks}

The corporate form of ownership offers the most protection from losses, because the stockholders, as owners, have only limited liability for business risks.

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SECTION 34.2

_{Handling Business Risks}

In some cases, it is impossible for

businesses to prevent or transfer risks, so they retain or assume responsibility for them. This is called risk retention. This can happen because a business is not aware of the risk, underestimates the risk, or simply accepts the risk.

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SECTION 34.2

_{Handling Business Risks}

Certain risks can be avoided by anticipating them in advance. Market research can lead businesses to conclude that investment in a product is not worth the risk.

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34.2

A

SSESSMENTSSESSMENT

Reviewing Key Terms and Concepts

1. Identify the four ways businesses handle risk.

2. Name four ways that companies prevent and control risks.

3. How can businesses reduce the human risk of on-the-job injuries?

4. What are the three principal ways to transfer risk?

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34.2

A

SSESSMENTSSESSMENT

Thinking Critically

What important factors should a business consider when selecting an insurance

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