23-1 small business management, 11th edition longenecker, moore, and petty © 2000 south-western...
TRANSCRIPT
23-1
Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
Chapter 23
Risk and InsuranceRisk and Insurance
In the Spotlight:Whaler’s Catch RestaurantIn the Spotlight:Whaler’s Catch Restaurant
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
Learning Objectives: Chapter 23
1. Define risk and explain the nature of risk.
2. Explain how risk management can be used in coping with business risks.
3. Describe the risks associated with different types of assets, both physical and human.
4. Explain the basic principles used in evaluating an insurance program and the fundamental requirements for obtaining insurance.
5. Identify the different types of insurance coverage.
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
The Process of Risk Management
Step 1: Identify risks.
Step 2: Evaluate risks.
Step 3: Select methods to manage risk.
Step 4: Implement the decision.
Step 5: Evaluate and review.
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
Ways to Deal with Risk
RiskControl
RiskFinancing
Riskavoidance
Riskreduction
Risktransfer
Riskretention
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
Risks Associated with Property
• Fire
• Natural disasters
• Burglary and business swindles
• Shoplifting
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
Risks Associated with Personnel
• Employee dishonesty
• Competition from former employees
• Loss of key executives
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
Risks Associated with Customers
• On-premises injuries
• Product liability
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
The Wheel of Misfortune
Fire
Natural Disasters
Burglary and Business Swindles
Shoplifting
BankruptcyCompetition from Former Employees
Loss of Key Executives
Employee Dishonesty
Bad Debts
Product Liability
On-Premise Injury
Property Risks
Customer Risks
Personnel Risks
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
1. Identify business risks to be insured.
2. Limit coverage to major potential losses.
3. Relate premium costs to probability of loss.
Basic Principles of a Sound Insurance Program
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
Requirements for Obtaining Insurance
1. Risk must be calculable.
2. Risk must exist in large numbers.
3. Insured property must have commercial value.
4. The policyholder must have an insurable interest in the property or person insured.
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Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing
• Commercial property coverage
• Surety bonds
• Credit insurance
• Commercial liability insurance
• Key-person insurance
• Disability insurance
Types of Insurance