Académique Documents
Professionnel Documents
Culture Documents
Protection
Risk Management and
Insurance
Chapter 17
McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
17-2
Learning Objectives
17-3
Risk in Small Business
Business risk
– The level of probability that the future
economic state of the business will be
worse than expected.
17-4
Most Commonly Identified
Sources of Risk
Financial risk Injury from
Nonpayment of accidents incurred
debts by customers
Changes in Natural events
technology (storms, floods, fire,
earthquakes)
Injury and illnesses
Theft of business
suffered by
property
employees
Misbehavior by
employees
17-5
Risks Associated with Specific
Business Operations
1. Events related to the property of the
business
2. Events related to personnel
3. Events related to customers and
others
17-6
Property of the Business
17-7
Events Related to Personnel
17-8
Loss of Key Employees
Key employees
– Employees whose experience and skills
are critical to the success of a business
Loss of key employees is a
particularly acute risk for small
businesses
17-9
Events Related to Customers
and Others
1. Injuries suffered while upon business
property
2. Injury or damage that is caused
during the use of the business’s
products.
17-10
Events Related to Customers
and Others
Product liability
– Payment for injury or damage that
occurs during the use of the business’s
products
17-11
Events Related to Customers
and Others
Risk of nonpayment by customers is
experienced by all businesses that
offer credit
Must balance:
– giving credit to customers will increase
your sales
– offering credit guarantees sooner or later
some customer will not pay as promised.
17-12
Managing Risks
17-13
Managing Risks
17-14
Managing Risks (cont.)
17-15
Managing Risk to Computers
and Data
Required PC
protection
17-16
How Online Backup
Systems Works
Figure 17.1
17-17
Managing Risk to Intangible
Property
Intellectual property rights comprise
the legal rights to use unique features of
products or services that provide
competitive advantage.
If the holder of the intellectual property
rights promptly reacts to infringement by
making written objections to any and all
infractions, can the legal rights be
maintained.
17-18
Protecting Yourself from Theft
Separation of duties
– A type of internal control that separates
the physical control of an asset from the
person accounting for that asset.
17-19
Sources of Theft
Figure 17.2
17-20
Percentage of Frauds
by Method of Detection
Figure 17.3
17-21
Managing Risk Resulting from
Events Involving Personnel
Internal control
– A set of rules and procedures that work
to limit the opportunity for employee
theft or malfeasance.
17-22
Managing Risk from Violations of
Tax Regulations
Tax codes
– Laws and regulations that specify the
requirements of taxation
– include franchise or corporation taxes,
income taxes, employee taxes, sales
and use taxes, and property taxes
17-23
Managing Risk from Violations of
Tax Regulations
1. Keep complete, accurate accounting
records
2. Establish a relationship with both an
accountant and a lawyer who are
expert in tax issues
3. Make paying your taxes your first
financial priority
17-24
Managing Risk from Employee
Violation of Government
Regulations
1. Have a written policy provided to
each employee
2. Conduct training of managers and
employees concerning those
policies,
3. Immediately and consistently act
upon receipt of any complaint.
17-25
Handling ADA Requirements
17-26
Using an Internal Audit as a Tool
to Manage Risk
A properly conducted, independent
internal audit will give you:
An evaluation of your overall level of business risk.
An objective evaluation of your risk control
structure.
A systematic analysis of your business processes
and controls.
Information on irregularities detected during the
audit process.
17-27
Using an Internal Audit as a Tool
to Manage Risk
Review of your firm’s compliance with
relevant regulations.
A review of the existence and value of the
assets of your business.
Review of operational and financial
performance.
Recommendations for more effective and
efficient use of resources.
17-28
Insuring against Risks
Insurance
– A contract between two or more parties
in which one party agrees, for a fee, to
assume the risk of another.
17-29
Developing a Comprehensive
Insurance Program
Coverages
– Contractual provisions of insurance
policies that specify what risks the
insurance company is assuming.
17-30
Developing a Comprehensive
Insurance Program
Identifying risk is the first task
Determine which risks are to be
covered
– Vehicle liability
– Worker’s compensation
– General liability
– Various types of malpractice coverage
17-31
Insuring the Property of the
Business
Insurance is determined:
– Property’s insurable value
– Amount of deductible loss
– Amount of co-insurance required
– Loss limits of the policy
17-32
Insuring the Property of the
Business
Insurable value Deductible
– The amount of an – An amount of loss
asset for which a that will not be
company will write paid by an
an insurance insurance
policy. company.
17-33
Insuring the Property of the
Business
Co-insurance
– A contract stipulation that requires a
policyholder to carry insurance in an
amount equal to a stated minimum
percentage of the market value of the
property insured.
17-34
Insuring the Property of the
Business
Fidelity bonds
– Bonds, also called dishonesty bonds,
that repay employers for losses caused
by dishonest or negligent employees.
17-35
Insuring the Property of the
Business
Surety bonds
– An agreement with an insurance or
bonding company that will pay a
specified amount in the event that the
entity bonded fails to comply with
specified contractual requirements.
17-36
Insuring the Property of the
Business
Buyout insurance
– Insurance that provides money to
owners of a business to buy the shares
of any deceased owner from that
owner’s heirs.
17-37
Insuring the Property of the
Business
Credit insurance
– covers abnormal losses from credit
customers not paying their bills
Personnel insurance
– available to protect both you and your
employees from specific risks
– Life, Disability, Medical coverage
17-38
Insuring the Property of the
Business
Key person
– protects you in the event that a key employee
dies or is disabled and cannot work
Life insurance
– provided to employees to provide security for
their families
Medical
– most highly desired form of insurance for most
employees
17-39
Sharing Risk
Joint venture
– An agreement between two or more
entities to pool resources in order to
complete a project
17-40