Unit 2.08 Class Notes
A. Risk
1. Definition – the potential for loss or failure
2. Importance of assessing risks when making personal decisions – risks come in many forms and it
is important to identify potential threats that are applicable to your business – identify threats early
allows you to plan for and respond to the risks
B. Types of risks that individuals may face as a result of personal decisions
1. Human – from illness, death, injury, or other loss of a key individual
2. Operational – from disruption to supplies and operations, loss of access to essential assets, or
failures in distribution
3. Reputational – from loss of customer or employee confidence, or damage to market reputation
4. Procedural – from failures of accountability, internal systems and controls; or from fraud
5. Project – from going over budget, taking too long on key tasks, or experiencing issues with
product or service quality
6. Financial – from business failure, stock market fluctuations, interest rate changes, or nonavailability of funding
7. Technical – from advances in technology, or from technical failure
8. Natural – from weather, natural disasters, or disease
9. Political – from changes in tax, public opinion, government policy, or foreign influence
10. Structural – from dangerous chemicals, poor lighting, falling boxes, or any situation where staff,
products, or technology can be harmed
C. Factors impacting risk assessments
1. Perceptions - an attitude or understanding based on what is observed or thought
2. Emotions - a strong feeling about somebody or something
3. Known Information - generally recognized knowledge, acquired or supplied about something or
somebody, that is proven to be something
D. Factors to consider when assessing risks
1. Time – is the potential negative outcome related to the risk going to occur now or sometime in the
future
2. Physical distance – is the risk nearby or is it far away
3. Personal distance – will the risk affect me or my family
4. Cost vs. benefit – which is greater, the benefit derived from taking the risk , or the costs associated
with either reducing it or remediating its effects
5. Probability – is the risk in question a rare event, or something that is likely to occur
6. Magnitude – is the resulting affect of taking the risk likely to be large or small
E. Steps in assessing the risks of personal decisions
1. Identify threats – threats can come from many sources – use different approaches and involve
others to help you spot your vulnerabilities
2. Estimate risk – you should estimate the risk by considering the probability of the event occurring
and the cost of the event
3. Manage risk – some risks can be managed by making changes in your business to processes and
personnel responsibilities – other risks cannot be controlled or insured and a contingency plan should
be put into place – some risks can be insured against to protect the business
4. Review – costs and impacts may change – new risks could appear and old risks become obsolete
Part II
A. Negative consequences of failing to accept responsibility for decisions and actions
1. Overly dependent on others for recognition, approval, affirmation and acceptance
2. Chronically hostile, angry or depressed over how unfairly you have been or are being treated
3. Fearful about ever taking a risk or making a decision
4. Overwhelmed by disabling fears
5. Unsuccessful at the enterprises you take on in life
6. Unsuccessful in personal relationships
7. Emotionally or physically unhealthy
8. Addicted to unhealthy substances or unhealthy behavior
9. Over responsible and guilt ridden in your need to rescue and enable others in your life
10. Unable to develop trust or to feel secure with others
11. Resistant to vulnerability
B. In order to accept personal responsibility you need to develop the ability to
1. Seek out and to accept help for yourself
2. Be open to new ideas or concepts about life and the human condition
3. Refute irrational beliefs and overcome fears
4. Affirm yourself positively
5. Recognize that you are the sole determinant of the choices you make
6. Recognize that you choose your responses to the people, actions and events in your life
7. Let go of anger, fear, blame, mistrust and insecurity
8. Take risks and to become vulnerable to change and growth in your life
9. Take off the masks of behavior characteristics behind which you hide low self-esteem
10. Reorganize your priorities and goals
11. Realize that you are the party in charge of the direction your life takes
C. Identify steps in accepting responsibility for decisions and actions
1. Step 1: To decide if you are having problems accepting personal responsibility
2. Step 2: Rate yourself on a scale of 1 to 5 as to the level of personal responsibility you have
accepted
3. Step 3: Identify your beliefs that prevent acceptance of responsibility for yourself. Develop new,
rational, replacement beliefs to help you accept responsibility for yourself.
4. Step 4: You are now ready to develop a plan of action
5. Step 5: If you still have trouble in accepting responsibility for yourself, return to Step 1 and begin
again
Have students complete the activity in Appendix B – information can be found at the following
website http://www.livestrong.com/article/14698-accepting-personal-responsibility/
D. Ethics
1. Definition – guidelines for human behavior; the study of moral choices and values; choosing
between right and wrong
2. Ethical behavior – knowing the difference between right and wrong and consciously choosing to
do right
3. Code of ethics – a systematic set of rules and procedures used to guide the behavior of an
individual, a business, or a culture
E. Applying principles of right and wrong to situations in the workplace
F. Personal and business ethical decisions
1. generate and sustain trust
2. demonstrate respect, responsibility, fairness and caring
3. demonstrate good citizenship
4. making ethical decisions requires:
a. commitment – the desire to do the right thing regardless of the cost
b. consciousness – awareness to act consistently and apply moral convictions to daily behavior
c. competency – ability to collect and evaluate information, develop alternatives, and foresee
potential consequences
G. Ethical dilemmas
1. arise when responsibilities and loyalties conflict – a decision about the appropriate (ethical) course
of action must be made
2. are you willing to sacrifice pride, integrity, reputation and honor by making an unethical choice
3. are you willing to suffer the consequences of a bad choice
H. How to make ethical decisions
1. think about the impact of your actions on all the stakeholders
a. stakeholders are those people affected by a decision
b. determine who is likely to be helped or harmed – avoid or reduce the harm
2. ask yourself whether your options are trustworthy, respectful, responsible, fair, caring and
examples of good citizenship
a. ethical values trustworthiness, respect, responsibility, fairness, caring and citizenship outrank
and override unethical ones (money, popularity and prizes)
3. the long run outranks the short run
a. go with the choice that will produce the most good for the most people
b. eliminate choices that have nothing to do with ethics (like power, popularity, and prizes)
c. then pick the most ethical option left
4. make your decision and take responsibility for the outcome – whether good or bad
I. Ethics and risk – the risk of business as usual
1. companies are put at risk when leaders fail to see that ethical leadership is vital for effective and
responsible management
2. poorly managed corporate risk/ethical decisions have irrevocable human and financial
consequences
a. deaths and accidents from the unintended acceleration in Toyota vehicles
b. deaths of oil platform workers in the BP explosion and subsequent environmental catastrophe
in the Gulf of Mexico
J. Factors impacting risk/ethical decisions
1. perception – how you see things – is cheating ethical and unethical?
2. emotions – if you family has no food, do you steal food from the grocery store?
3. Known vs. unknown information – using a photo without knowing if it is copyrighted or not
K. Factors businesses should consider when assessing risks/ethical decisions
1. time – time is money – coming in to work 5 minutes late or leaving early
2. probability – the chance that the outcome will be negative – if I speed, what are the chances I’ll get
caught or have an accident
3. magnitude – the number of people affected – oil spill in the Gulf of Mexico
4. cost vs. benefit – human and financial
5. physical and personal distance – how might this decision affect you personally
L. Ethical responsibility towards customers
1. treat all customers with respect
2. be honest
3. do not exaggerate the merits of your products/services
4. inform customers of possible dangers of your products/services
5. handle all disputes fairly
M. Ethical responsibility towards employees
1. hold yourself to high ethical standards
2. serve as a role model to others
3. always treat employees fairly and honestly
4. employees tend to copy the behavior of the business owner
5. ethical behavior gains the trust and respect of customers
6. create a written code of ethics to set guidelines to help the business owner and employees make
ethical decisions
7. establish company policies and procedures to let business owners and employees know how to ac
tin certain situations – have employees attend an orientation meeting on this information
N. Ethical responsibility towards the community
1. contribute money to charities, cultural institutions, and other reputable causes
2. get involved
3. donate products and services