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Business Administration & Management

Business Administration & Management. Mr. Bernstein Insurance and Risk Reduction, pp 492-504 June 12, 2013. Business Administration & Management Mr. Bernstein. Types of Risk Businesses Face Speculative Risk: Profit or Loss Product Market People Financial

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Business Administration & Management

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  1. Business Administration & Management Mr. Bernstein Insurance and Risk Reduction, pp 492-504 June 12, 2013

  2. Business Administration & ManagementMr. Bernstein Types of Risk Businesses Face Speculative Risk: Profit or Loss Product Market People Financial Competitors

  3. Business Administration & ManagementMr. Bernstein Types of Risk Businesses Face Pure Risk: Risk of Loss with no potential for upside Crime - Small Businesses 35x more likely to be victims than Large Businesses Employee Theft – “Shrinkage” > shoplifting Burglary, Robbery Credit Card fraud, bad checks Natural Disasters Fire Accidents and Injury

  4. Business Administration & ManagementMr. Bernstein Insurable Risks Pure Risk Losses can be estimated Uninsurable Risks (see slides 8-12) Economic conditions, Consumer Demand, Competitor Actions, Technology

  5. Business Administration & ManagementMr. Bernstein Reducing Insurance Costs: Controllable Risks Can be reduced by actions (ie theft) Uncontrollable Risks Cannot affect with actions (ie weather)

  6. Business Administration & ManagementMr. Bernstein Types of Insurance Available Property Insurance Business Interruption Insurance Liability Insurance Life Insurance Worker’s Compensation Flood (not usually included in Property Insurance)

  7. Business Administration & ManagementMr. Bernstein How insurance rates are established Insurance companies will insure against risks which both loss amounts and frequency can be estimated Actuaries analyze data and make those estimates Deductible amounts reduce premiums

  8. Business Administration & ManagementMr. Bernstein Uninsurable Risks Economic conditions, Consumer Demand, Competitor Actions, Technology Advances Black Swan Events Rare events beyond the realm of normal expectations

  9. Business Administration & ManagementMr. Bernstein Reputational Risk 85% of international firms consider brand their most important asset Respondents ranked “loss of reputation” their greatest risk. Source: Interbrand /Citibank and Knight, RF & Pretty, DJ, Reputation & Value - the case of Corporate catastrophes

  10. Business Administration & ManagementMr. Bernstein Reputation is: An intangible asset Greater than brand Sum total of all stakeholders’ experience

  11. Business Administration & ManagementMr. Bernstein Management of reputation is crucial “If I lost all of my factories and trucks but kept the name Coca-Cola, I could rebuild my business. If I lost my name, the business would collapse”. CEO, Coca-Cola

  12. Business Administration & ManagementMr. Bernstein Management of reputation is crucial Reputation is damaged when something is done that causes stakeholders to lose trust in an organization It does not matter whether it is real – it is the perception that counts. Reputation can be destroyed very rapidly Have a crisis plan

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