Please put together complete and well thought out responses. I am looking for original input so please share your thoughts and experiences so we can all learn from them. Please make sure that you back up the posts with factual information from the textbook, research, work/life experiences, etc. The primary source of information and answers to the discussion questions will come from the course textbook. However, external sources of information can be included as secondary and tertiary sources of information to support your position.
1. Business risk is defined as the possibility of losses associated with the assets and earnings potential of a firm (Longenecker et al., 2023). Pure risk is the situation where only the risk of loss or no loss exists, such as a business’ physical assets that could be lost due to a natural disaster or not (Longenecker et al., 2023). Pure risk doesn’t correlate to a possible gain, unlike market risk (Longenecker et al., 2023). Market risk is the uncertainty associated with an investment decision where the investor hopes for financial or equitable gain but also realizes there is potential for loss (Longenecker et al., 2023).
2. The different types of risk businesses may encounter are property risks, liability risks, and personnel risks (Longenecker et al., 2023). Property risks include risks associated with the purchase or lease of real property to conduct business and the risks to personal property which is all other property other than real property (Longenecker et al., 2023). Liability risks include statutory, contractual, and tort risks (Longenecker et al., 2023). Personnel risks pertain to risks that directly affect a company’s employees but also in many cases affect the business also, such as premature death, poor health, and insufficient retirement income (Longenecker et al., 2023).
3. Managing risk in a business is practically the same as the way risk is managed in the Navy. Managing risk, from my experience, and the steps involved can be applied to any decision-making process. The authors of our text describe that business risk is managed by employing the following steps (in order): identify and understand risks, evaluate the potential severity of each risk, select methods to manage risks, implement those decisions, and then review and evaluate to progress and/or outcomes (Longenecker et al., 2023). In my Master Training Specialist training in the Navy, Operational Risk Management is conducted by following the acronym I-AM-IS. This stands for: identify risks, assess risk severity, make risk decisions, implement risk controls based on those decisions, and the supervise the results to improve the process in the future by incorporating lessons learned.
Longenecker, J. G., Hoy, F., Palich, L. E., & Petty, J. W. (2023). Small Business
Management: Launching & Growing Entrepreneurial. Cengage Learning.
Business, Market, Pure Risks
A business risk is the possibility of losses associated with the assets and earnings potential of a firm. Longnecker et al (2023). This means that the business has a possibility of earning lower profits or even a cause for bankruptcy. There are two factors that distinguish a business risk. One is called market risk, which is unpredictable with an investment choice. Pure risk, however, is a situation where only loss or no loss can occur-there is no potential gain. Longnecker et al. (2023). This essentially means that the superior outcomes are a loss or no loss. Some people experience this with weather problems like fires, lightning, etc.
Types of Risks a Business Can Encounter
Some types of risks that a business may encounter are property, liability, and personal property risks. Real property is the property that the owner owns. Personal property is all of the equipment and amenities that the owner needs. Liability risks are the legal responsibilities that, when disobeyed, can result in direct or indirect financial loss. Longnecker et al. (2023).
Basic Ways to Manage Risk in a Business
One way to manage risks in a business is to replace the value of the property. This means that the owner must replace personal and real property risk costs. Another way is to use the actual cash value of the property. This is insurance that can help with the value of the property. Longnecker et al. (2023). Insurance companies can significantly help a business if it is gaining big losses. Risk control and risk financing are great ways to reduce and avoid the risk of losing money.
Longenecker, J. G., Petty, J. W., Hoy, F., & Palich, L. E. (2023). Small Business Management: Launching & Growing Entrepreneurial. Cengage Learning.