OCR GCSE Business A291

Investigation 1 – risks of business

Worksheet

• Please complete this worksheet while watching the presentation

Lesson objectives and success criteria

• To be able to discuss the general risks of running a business

• To be able to assess if Kirsty has made a through examination of the risks of running her own business

Starter – memory test

Investigation 1

Assess whether or not Kirsty has made a thorough examination of the risks and rewards of running her

own business.

You should consider the following in your investigation:

• your knowledge and understanding of the risks and rewards of running a business

• the data provided in Fig. 2

• any other information that may be relevant.

[10 marks] Starter challenge - How much of

this can you remember?

RISKS OF A BUSINESS

Risks – 4 steps

• Your task is to gather some information, so you can discuss if Kirsty has “made a through examination” of the risks and rewards of running a business. This is how we will do this…

1) First learn about general risks 2) Now work out of they are relevant to Kirsty’s business 3) Watch the video and see if you can identify the risks that Kirsty has missed. 4) In your report you will be discussing – did Kirsty miss out any risks in Fig 2 of the OCR material*?

Working list - risks

• These next slides look at some of the general risks that a business may face, especially when it first starts

• Your task is to think about whether or not the risk is relevant to Kirsty’s car servicing business aimed at just women

IP issues

• IP stands for Intellectual property see video here • IP can be protected by patents, trade marks,

design and copyright and gives ideas their value. IP rights protect your work. Whether you design, invent, write, perform or research, IP matters.

I am not sure if IP is

relevant to my

business – what do

you think?

Click on Graphic to go to IP website

Cyber attacks

• A new report (2016) from the Federation of Small Businesses has found that small firms are collectively attacked seven million times per year, costing the UK economy an estimated £5.26 billion.

• Despite the vast majority of small firms (93%) taking steps to protect their business from digital threats, two thirds (66%) have been a victim of cyber crime in the last two years. Over that period, those affected have been victims on four occasions on average, costing each business almost £3000 in total.

Malware Virus

Hacking Spyware Phishing

What happens if my

customer database

is hacked?

Recession /economic / political problems and instability

• In a recession or times of economic or political instability customers tend to save rather than spend on non-essential items.

Is my service essential to

customers? Could they

carry out a car service

themselves? Will it affect

the value of their car?

Change in tastes and trends

• Consumer tastes change over time which means that a business is at risk if they don’t keep up with current trends.

Are trends

and tastes

changing a

risk to my

business?

Employment laws and regulations

• All businesses in the UK must obey the employment laws

• For example they must pay the minimum wage or above, if they don’t they are breaking the law

I plan to employ

women as

mechanics, do I

need to obey UK

employment

laws?

Poor reputation

• If a business provides poor customer service, or suffers a problem, then it may have a poor reputation

• This can lead to loss of sales, loss of revenue and loss of profitability

• This can lead to job losses

Do I need to

worry about the

reputation of my

business?

Risk from competition

Is my business at

risk from

competition?

Financial risks • Starting a business can be a financial

risk for the owner • The owner may put their own cash

and other assets (e.g. a van) into a business

• If the business does not do well then the owner could lose their money, which is why many businesses become ltd to protect the owner

• If the owner borrows money from a bank to finance the business, they still have to pay this back (with interest), even if the business does not do well

What financial

risks do I face,

what money

might I lose if the

business fails?

Risk of not managing cash flow

• Cash flow is the flow of money in and out of a business

• A business needs more money coming in than going out to survive, and that money also needs to come in on time or they cannot pay their overheads (bills)

• Being prepared for a cash shortage using an overdraft is a sensible idea for a start-up

• Most businesses now prepare a cash flow forecast so they can see when they might have a cash shortage, and to arrange finance with a bank

Will I need to

create a cash

flow forecast?

Failure to plan for the future / lack of strategy

• If a business fails to plan for the future it may risk losing out to competitors

• A business must have a clear strategy and plan if it is to survive in a today’s dynamic business world

• For example Blockbuster failed to take up the Netflix offer as they had no digital strategy

Watch this video

Do I need a plan

or a strategy?

Staff training and safety

• A business needs to train its staff so that they can; operate machinery safely, work a till, deal with customers or sell products and services

• Well trained staff can give the business a good reputation

• A business also needs to look after the safety of staff an obey a number of UK laws on Health and safety at work

• HSE Vehicle repair link to website

Is this relevant to

my business?

Weather and other unforeseen factors, natural disasters

• A disaster can strike any organisation, large or small. It can arrive in the shape of storm, flood, fire, earthquake and even a tsunami

• It may take some time for the business to return to normal operation after an incident

• Climate change means UK businesses must plan for extremes of weather

Agriculture and farming are often the worst hit

industries in natural disasters

Video here from BBC

Is this

relevant to

my business?

Operational risks – break down of equipment

• Many businesses have a variety of machines or equipment, including computers

• Many businesses run their machines 24/7 and cannot afford machines to stop in the event of a break-down e.g. bread factories

• When machines break down there is the cost to fix the machine plus the cost of lost production time

Will I need

any

equipment in

my business?

Staff – reliability

• A business will need reliable staff who turn up on time, every day, ready to work

• Without reliable staff a business will not be able to offer the right level of customer service

• This can have an impact on reputation, revenue and profit

What happens to

my business if

my staff are not

reliable?

Commercial risks, failure of suppliers to supply and customers to pay

• If a supplier fails to supply goods or services to a business, this could be critical

• If customers cannot get the product or service they need, they may go elsewhere, especially if there are lots of substitute businesses selling the same good or services

• If customers do not pay on time, then this may cause cash flow problems for the business who will need to pay their suppliers

Do I need to

worry about

suppliers and

customers?

RISKS OF KIRSTY'S BUSINESS

REWARDS OF A BUSINESS

INFORMATION FROM OCR OF

Kirsty’s thoughts on the risks and rewards of starting her own car servicing business

https://www.youtube.com/watch?v=qk1dvGSAMr8

Plenary

Risks and rewards

Plenary

• Which of the risks to Kirsty’s business do you think is the most important?

• Do you think that Kirsty has made a thorough examination of the risks of running her own business?

Glossary

• Risk; this is the possibility that the business will have a lower than expected profit or a loss

• Reward; this is the benefit of having a business which may be keeping the profit, working for yourself or being able to take holidays when you want

• IP; this means intellectual property and could be copyright, patents, trademarks or designs. These should be protected to prevent theft from competitors

• Cash flow; this is the flow of cash in and out of a business

Revisionstation

Copyright

• Owners of this pack and their students are welcome to use the pictures of “Kirsty” in their report. They are also allowed to use photos from:

• www.carolinescars.co.uk

• Photos have been included in this pack if you wish to upload them to your shared drive or VLE.