Quiz 17: Risk Management, Insurance, and Crime Prevention


In business risks are there and it has its various ways. Risks are associated with business and other related activities. Risks are of two types; first one is calculated risks and second is uncalculated risks. In the business places, managements always consider the risks factors before taking a major decisions. All the risks are associated with profit and loss mostly that may lead the business to bankruptcy. Some risks can be avoided, some are not. For those cases where risks cannot be avoided and the business needs to move further with the risk factors, there organization should take calculated risks only. Calculated risks means assessing the risks monetarily and thus the organization judges the limit to consider a risk. Risks are important factors in the business. Risks are the hidden threats which may affect the business suddenly. Thus managing the risks are one of the most challenging tasks for the businesses which are called risk management. Some risks may be avoided by taking bold decisions that enhanced with the experiences. Other risks can be transferred with the help of insurance. There are various types of insurances available in the market and an organization can choose the product accordingly. Customizations are available too with wide ranges. Some popular products are fire insurance, marine insurance, theft insurance, goods in transit insurance and others. Apart from these types of risks management, some risks related to theft of goods may be controlled by changing some rules and regulations within the organization and using technologies too. Such thefts are identified as two types like shop lifters thefts and kleptomaniac's thefts which can be controlled by strengthening security teams. Thus, organizations added an extra value to their products for maintaining the costs of managing risks.

Risk is associated with every activity nowadays. Business activities are surrounded by various types of risks. Some of those risks are predictable and some risks are unpredictable. In business risks are related to finance and money primarily. Thus the risks which are predictable may be prevented with some risks management tools. So these risks may be transferred by paying some money to others who are experts in these matters. Insurance companies offers various customized products to the customers and corporate who requires protection against risks. Management analyzes the risk factors before preceding any kind of activity that may lead to financial losses. Risks are managed with the help of risk management tools. Risks in the business are generally related to finances. Though exceptions are there too where loss may be incurred in trust or goodwill. Risks are classified in two types in business. First one is pure risk that means in business there are risks which are uncertain in nature and occur immediately. These risks are unavoidable but affect the business badly. These risks may be assumed sometimes but precautions against these risks are not possible. For example, death of the owner of business, who has no predecessors In such cases, businesses are in great trouble. These types of risks are pure risks and unavoidable too. Second type of risks is speculative in nature. That means some speculations can be done based on the experience in business and precautions may be taken. In these cases, risks may be transferred too. For example, stock levels of raw materials have a great impact on the production in future. Risks of thefts or robbery for cash in transit from office to bank are some risks which are predictable and to avoid such risks insurance products are available by paying premiums.

Risk is invisible but not avoidable. In business, whether it is big or small risks are associated with it. Apart from risks there are hidden threats from the markets which are also classified as risks by the risk management experts. Managing risks has its various ways and organizations tackle the risk as per their convenient ways. Thus, it is clear from the above views that managing risks are different and organizations as per their business volumes tackle the risks in different ways. A multinational company may tackle all the risks very easily by covering all the operations and assets under insurances by paying a hefty amount of premiums. The above step might not suit a small business. They have their own ways to tackle risks. Money is the factor here. They might use this money in some other places for business developments. For small business it is not possible to cover all the risks under premiums. Besides, pure risks which are uncovered by insurance affect them badly. Thus, these small organizations have four ways of managing risks that are discussed below: First one is risk avoidance. In this step, small business generally avoids such operations which may brings risks for them and chances of losses are much bigger than the expected profits from these operations. Second one is risk prevention or risk control. In this step, the management looks forward on each and every aspect from where risks may generate and thus they try to tighten the gap. Such steps generally apply to operations of business-like pilferage or damages of goods in transits. Third step is risk transfer. This step is taken by the management to protect the working capital and human capital. These two assets of the small businesses are the two pillars of the organizations and thus hampering these assets may stop the business activities. Fourth step is risk assumptions and self insurance. Despite of all the precautions taken risks are there which are hidden in nature. Assuming those risks are important for the management and to take the step accordingly. Negligence in this step is quite common but risks are much bigger. Self insurance like employers indemnity policy, personal accidental policy are recommendable.