Transcript Unit 2 Risk Management

RISK MANAGEMENT
RISK
• THE POSSIBILITY OF FINANCIAL GAIN OR LOSS OR
PERSONAL INJURY.
• WHAT WOULD BE AN EXAMPLE OF FINANCIAL LOSS?
• CATEGORIES OF RISK
• NATURAL RISK
• WEATHER CONDITIONS THAT CANNOT BE AVOIDED
• HUMAN RISK
• DISHONESTY (AND INCOMPETENCE) OF THOSE INVOLVED:
CUSTOMER, EMPLOYEE, ETC.
• ECONOMIC RISK
• CHANGES IN THE BUSINESS ENVIRONMENT: ECONOMY
CLASSIFICATION OF RISK
• GAIN OR LOSS RISK
• DO YOU KNOW YOU WILL MAKE MONEY?
• SPECULATIVE RISK: WHAT INVESTORS ENDURE WHEN INVESTING
IN A NEW COMPANY
• PURE RISK: OCCURRENCES WHERE THERE IS NO POSSIBILITY OF
MONETARY GAIN
• CONTROLLABLE RISK
• LOSS THAT CAN BE PREVENTED OR MINIMIZED
• INSURABLE RISK
• PREDICTABLE LOSS AND CAN BE ESTIMATED
RISK MANAGEMENT
• PREVENTING, REDUCING OR LESSENING THE
NEGATIVE IMPACTS OF RISK
• MARKETERS MUST DEVELOP RISK MANAGEMENT
STRATEGIES TO ENSURE ALL POSSIBLE RISKS ARE
ADDRESSED.
• HOW CAN CHOOSING THE WRONG PLAYER BE COSTLY FOR A
TEAM?
• NFL COMBINE: 3 DAY JOB INTERVIEW PROCESS WHERE PLAYERS
ARE OBSERVED, PHYSICALLY TESTED, DRUG TESTED, AND
PERSONALLY INTERVIEWED BY OWNERS, MANAGERS, AND
COACHES.
RISK MANAGEMENT
AKA: STRATEGIES FOR MANAGING RISK
• RISK AVOIDANCE
• LOOK AT ALL POSSIBLE SITUATIONS AND FIND WAYS
TO MINIMIZE AND IF POSSIBLE, AVOID ALL RISK
• LIABLE
• THE BUSINESS IS LEGALLY RESPONSIBLE FOR DAMAGES AND
MIGHT HAVE TO PAY FOR THE MEDICAL COSTS AND OTHER
LOSSES SUFFERED BY AN INJURED PERSON
• RISK INSURANCE
• CONTRACT WITH INSURANCE COMPANIES AND OTHER
FINANCIAL INSTITUTIONS TO COVER RISK OF
FINANCIAL LOSS
• EG. LOSS FROM A FIRE, INJURY, THEFT
RISK MANAGEMENT CONTINUED
• RISK TRANSFER
• TRANSFERRING THE RISK TO ANOTHER COMPANY OR
TO THE CUSTOMER
• EXAMPLES?
• EXCEPTIONS?
• RISK RETENTION
• UNINSURABLE RISKS THAT THE BUSINESS OWNER
MAY/WILL HAVE TO ENDURE
• EXAMPLES?
SOMETHING TO PONDER…
• SHOULD PROFESSIONAL ATHLETES BE RESPONSIBLE
FOR THEIR OWN SAFETY OR IS IT THE JOB OF THE
TEAM TO PROTECT THEM FROM INJURY?
• WHAT TYPES OF RISK ARE INVOLVED?
• HUMAN RISK
• LOSS RISK
• CONTROLLABLE AND (DEPENDING ON THE CIRCUMSTANCE)
UNCONTROLLABLE RISK
• HOW CAN YOU MINIMIZE THE RISK?
• RISK AVOIDANCE
• RISK TRANSFER
• RISK RETENTION
REVIEW
• WHAT IS CONTROLLABLE RISK?
• A RISK THAT CAN BE PREVENTED OR ITS LIKELIHOOD OF
THE RISK OCCURRING IS REDUCED
• WHAT IS AN EXAMPLE OF HUMAN RISK?
• EMPLOYEE/CUSTOMER DISHONESTY, CHECK WRITTEN
WITHOUT FUNDS, UNSKILLED LABORERS
• THREE CLASSIFICATIONS OF RISK?
• GAIN/LOSS RISK, INSURABLE RISK AND CONTROLLABLE
RISK
• WHAT ARE THE 4 STRATEGIES OF MANAGING RISK?
• RISK AVOIDANCE, RISK INSURANCE, RISK TRANSFER, RISK
RETENTION