RISK AND RISK
MANAGEMENT
LESSON OBJECTIVES
• Display understanding of typical risks businesses
face
• Evaluate approaches to risk management and
mitigation
KEY VOCABULARY TERMS
• Asset
• Business interruption
insurance
• Diversification
• Employee
Confidentiality
Agreement
• Fire Insurance
• General Liability
Insurance
• Insurance
• Malpractice
• Mitigate
• Premiums
• Product Liability
Insurance
• Product Testing
• Pure Risk
• Quality Assurance
KEY VOCABULARY TERMS
• Risk
• Risk Mitigation
• Speculative Risk
• Strategic
Partnership
• Surety Bond
• Theft insurance
• Vehicle insurance
• Worker’s
compensation
• Worker’s
compensation
insurance
WHAT’S THE RISK?
• Every business faces a certain amount of risk.
• Some risks can be controlled and prevented, while
other risks are unpredictable and uncontrollable
• What types of risks would a fast food restaurant face?
• Unpredictable risks
• Preventable risks
WHAT’S THE RISK
• All businesses are financial entities that have
assets—property, equipment, money in the bank,
intellectual property, and people that are things the
business values.
• Unfortunately, these valuable things constantly face
risks from the real world. These risks take the form of
accidents, disasters, market downturns, and other
unforeseen events. These dangers must be
protected against.
• Companies often purchase insurance or pursue
specific strategies to reduce their level of risk.
UNDERSTANDING RISKY BUSINESS
• Download- Reading: Risky Business
• Download- Worksheet: SQ3R
• Fill out while reading
MITIGATING RISKY BUSINESS PART 1
• Download- Team Activity: Risky Business
• Imagine that you are risk mitigation consultants hired by
ECPak to suggest a package of strategies and insurance
policies to reduce the company’s overall risk
MITIGATING RISKY BUSINESS PART 1
• Analyze the cost per year and potential benefit of
the type of risk mitigation that is being offered
• There is a budget involved, so start with the most
necessary types of insurance and then see how
much money they have left before purchasing
“nice-to-have” insurance
• In most states certain types of insurance such as
workers’ compensation are mandatory, find the
required insurance under NJ law for this assignment
MITIGATING RISKY BUSINESS PART 1
• How many groups had trouble staying within the
financial constraints of the ECPak Company?
• Out of all of the choices listed on the Mitigation
Menu, which one seems to be the most important?
Why?
RISKY BUSINESS PART 2
• My basket contains cards representing unfortunate
events that could happen to ECPak.
• Use the card to calculate the overall cost of and
savings from their risk mitigation plan.
RISKY BUSINESS PART 2
• How did groups choose which options to pick?
What was their reasoning?
• What are the tradeoffs in the area of risk mitigation?
RISKY BUSINESS PART 2
• Tradeoffs are made by businesses every day—and
because losses are unpredictable, they have to be
very careful when selecting types of insurance,
using the knowledge that they have available
• A business located in a flood plain, for example,
would take their location into account when
determining whether flood insurance is necessary
REVIEW
• List and define the risks associated with running a
business
• List and describe the types of insurance available to
the business
• How can business mitigate risk outside of insurance?
• What are the most important types of insurance a
business can have?
CLOSURE
• The most important thing a business owner should
remember when thinking about ways to minimize
the risks involved with business ownership
• In your opinion, what is the one thing a business
owner should always remember when thinking
about ways to minimize risk?
ENRICHMENT
• Research different risk mitigation companies and
present information about the company to the
class.
ENRICHMENT
• Research pure risk and speculative risk and write a
brief essay describing why speculative risk is not
insurable.
ENRICHMENT
• Create a poster describing different types of risk
and how to avoid it.