Managing Risk: Ec 6 Entreprenuership Reporters: Jan Goliman Ruchie Biaculo

MANAGING RISK
EC 6 ENTREPRENUERSHIP
REPORTERS: JAN GOLIMAN
RUCHIE BIACULO
Managing risk is a process in which
business identify, assess and treat risks
that could potentially affect their business
operation.
What is a risk?
A risk can be as an event or

circumstance that has a negative effect
on your business.
For example the risk of having
equipment or money stolen as a result of
poor security procedures.
MAJOR TYPES OF RISK
Speculative Risk – involves a chance of either profit or

loss. Example engaging entrepreneurship
Pure Risk – involves a threat of loss with no chance of
profit. Examples are the risk of fire, robbery, and injuries
to third parties.
TYPES OF RISKS
Speculative
Pure
EVENT EVENT
(Desired) (Dreaded)
Occured Did not occur Occured Did not occur
Profit Loss No profit

;Loss
No loss
THE MOST COMMON BUSINESS RISK
CATEGORIES ARE:
Strategic – decisions concerning your business

objectives
Compliance – the need to comply with laws,
regulations, standards, and codes of practice
Financial – financial transactions, systems and
structure of your business
Operational – your operational and administrative
procedures
Environmental – external events that the business has
little control over such unfavorable weather or
economic conditions
Reputation – the character or goodwill of the business
Others include heath and safety, project, equipment,
security, technology, stakeholder management and
service delivery.
PREPARING A RISK MANAGEMENT PLAN
>Your risk management plan should detail strategies

for dealing with risks specific to your business.
>Its important to allocate time and resource the
likelihood of an incident affecting your business.
STEPS IN RISK MANAGEMENT PLAN
1. Identifying the risk

2. Assess the risk
3. Manage the risk
4.Monitor and review
Identifying the risk
>Evaluate each function in your business and identify

anything that could have a negative impact on your
business.
>Review your records such as safety incidents or complaints
to identify previous issues.
>Consider any external risk that could impact on your
business.
>Brainstorm with your staff.
Assess the risk
Risk evaluation allows you to determine the
significance of risks to the business and decide to
accept the specific risk or take actions to prevent or
minimize it.
This can be done by considering the
consequences and probability of each risk. Many
business find that assessing consequence and
probability as high, medium or low is adequate for their
needs
MANAGE RISK
Managing risk involves developing cost effective

options to deal with them including:
>Avoiding
>Reducing
>Transferring
>Accepting
Avoid the risk – change your business process,
equipment or material to achieve a similar outcome
but with less risk.
Reduce the risk – if a risk cant be avoided reduce its
likelihood and consequence. This could include staff
training, documenting procedures and policies
complying with legislation, maintaining equipment,
practicing emergency procedures, keeping records
safety secured and contingency planning.
Transfer the risk – transfer some or all of the risk to
another party through contracting, insurance,
partnership or joint ventures
Accept the risk – this may be your only option(no
choice)
RISK ASSUMPTION
 Some companies find that setting aside an amount periodically to

cover possible losses is a viable alternative. In this manner the
company assumes the risk and gets ready for whatever loss comes
from the risks covered.
SHIFTING RISK TO AN INSURANCE COMPANY
 When the first three method of handling risk cant meet the
requirements of the company or are impractical, shifting the risks to
an insurance company may be feasible. This involves process by
which the firm, for a fee, agrees to pay another firm of sum of money
stated in written contract when losses occurs.
TYPES OF INSURANCE COVERAGES
 This insurance coverage that the small business may use to protect its
interests consist of the ff. general classification 1. life and 2. non life
 Life insurance policies are that cover risks of losing ones life , disability or
sickness. Non life insurance policies cover any of the ff. risk:
 1. fired and allied risks
 2. motor car
 3. marine
 4.surety
 5. general liability, and

 6. miscellaneous risk.
LIFE INSURANCE
 People working in a small firm will have to worry about losses due to
sickness, injury and death. The financial strain may be too much for
the firm to carry if losses happen as a result of not having such risks
covered by life insurance.
Types of life insurance polices according to coverage
 Life policies (covers death due to any cause, except suicide)
 Accident policies (accidents, murder, assault)
 Health policies (medical expenses, sickness, check up)
MONITOR AND REVIEW
You should regularly monitor and review your risk

management plan and ensure the control measures
and insurance cover is adequate.
Discuss your risk management plan with your insurer
to check your coverage.
THANK YOU

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MANAGING RISK

A risk can be as an event or

Speculative Risk – involves a chance of either profit or

Occured Did not occur Occured Did not occur

Profit Loss No profit

Strategic – decisions concerning your business

>Your risk management plan should detail strategies

1. Identifying the risk

>Evaluate each function in your business and identify

Managing risk involves developing cost effective

 Some companies find that setting aside an amount periodically to

 5. general liability, and

You should regularly monitor and review your risk

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