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Unit 4 Managing Risk for the Small Business. Small Business Operations. Managing Risk. Risk is the possibility that a loss can occur as a result of a business decision or a business activity. Marketing, 3e, page 532

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Unit 4 Managing Risk for the Small Business

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managing risk
Managing Risk
  • Risk is the possibility that a loss can occur as a result of a business decision or a business activity. Marketing, 3e, page 532
  • Risk management includes providing security and safety for products, personnel, and customers. Marketing, 3e, page 537

Frameworks 4.1

classifications of risk
Classifications of Risk
  • Natural risk is caused by the unpredictability of nature. Examples: floods, tornados, earthquakes
  • Human risk is caused by the potential actions of customers, employees, or other individuals. Examples: shoplifting, employee pilferage or negligence
  • Economic risk is associated with political and economic trends. Examples: unemployment, inflation, competition, new government regulations

Frameworks 4.1

Source: Marketing, 3e, page 533

great advice for entrepreneurs
Great Advice for Entrepreneurs!
  • Entrepreneurs must be willing to accept risk in order to be successful.
  • The opposite of risk is opportunity – the possibility of success. Marketing, 3e, page 532
  • There is a direct relationship between risk and reward. The greater the potential success, the greater the risks involved.
  • However, the opposite is NOT necessarily true: situations that involve great risk often have little or no upside. There are stupid risks that should NOT be taken.

“You can’t succeed if you’re afraid to fail.”

Lebron James

Frameworks 4.1

Source: www.caycon.com

chinese protest starbucks at cultural landmark
Chinese Protest Starbucks at Cultural Landmark

Read the “Judgment Call” case study on page 535 of Marketing, 3e.

Answer the three question on your own paper.

safety issues for the sbe
Safety Issues for the SBE
  • Slips, trips, and falls are common workplace accidents and can be avoided by:
    • Wearing non-slip waterproof shoes.
    • Lacing and tightly tying shoes.
    • Avoiding leather or smooth soled shoes.
    • Not wearing open-toed shoes.
    • Eliminating cluttered or obstructed work areas.
    • Cleaning up spills immediately to avoid falls.
    • Never running or engaging in horse play in the workplace.
    • Avoiding porous fabrics such as canvas. They do not provide enough protection.
    • Not climbing on chairs or countertops in order to reach high places, use a step ladder instead.

Source: www.osha.gov/SLTC/youth/restaurant/cooking_slips.html

Frameworks 4.2

safety issues continued
Safety Issues Continued
  • There are many electrical hazards in businesses today because of the variety of electrical appliances in use. You can avoid being shocked by knowing:
    • Not to plug in electrical equipment while touching a wet or damp surface.
    • How to shut off the current in case of an emergency.
    • To pull the plug, not the cord when unplugging equipment.
    • To keep power cords clear of equipment during use. 
    • Not to touch a worker being shocked until the power has been turned off.
    • Not to use faulty equipment or damaged receptacles and connectors.
    • Not to use cords that are worn or damaged or cords that feel warm during use.
    • To use only, when necessary, a multi-outlet power strip unit with a built-in circuit breaker instead of an extension cord.
    • Do not use equipment cords that feel warm during use have them checked by an electrician. 
    • To report unsafe equipment and work practices immediately.

Frameworks 4.2

Source: www.osha.gov/SLTC/youth/restaurant/cooking_electrical.html

safety issues continued1
Safety Issues Continued
  • In the event of a fire:
    • Know the evacuation plan.
    • Activate the fire alarm.
    • Use the fire extinguisher.
    • Do not throw water on an electrical fire or a grease fire.
    • If you are on fire, stop, drop, and roll.

Frameworks 4.2

safety issues continued2
Safety Issues Continued
  • Nearly 40% of all workplace injuries are sprains, strains, and tears.
  • Nearly a quarter of all injuries are the result of overexertion.
  • Never lift more than you are capable of.
  • Always practice appropriate lifting techniques.
  • Wear a back brace or other safety equipment recommended for your job or profession.

Frameworks 4.2

preventing customer accidents
Preventing Customer Accidents
  • Personal injury lawsuits frequently arise when customers slip and fall on a business’s premises. This can be fatal to the small business. Avoid customer slips and falls by:
    • Being sure that walking surfaces are even and unbroken.
    • Immediately and completely cleaning all spills and liquids from the floor.
    • Not allowing customers to walk on wet floors.
    • Immediately picking up all debris from the floor.
    • Being sure that rug edges are not sticking up or bunched up.
    • Ensuring that doors are opening and closing correctly.

Source: www.unigard.com

Frameworks 4.2.2

take the osha quizzes
Take the OSHA Quizzes


inventory shrinkage
Inventory Shrinkage
  • Inventory shrinkage is the loss of products due to theft, fraud, negligence, or error. Marketing, 3e, page 380
  • Shoplifting occurs when customers take an item without paying for it or intentionally pay less than the retail price. Concealing merchandise with the intent of stealing it is also considered shoplifting. www.onlinelawyersource.com
  • Employee pilferage is employee theft – any stealing, use or misuse of the employer’s assets.

Shoplifting costs retailers nearly $10 billion in losses annually.


Frameworks 4.3 & 4.4

preventing customer shoplifting
Preventing Customer Shoplifting
  • Make eye contact with and GREET all customers.
  • Put the smallest and most expensive merchandise in a location where it is always visible to you.
  • Install video surveillance cameras.
  • Use merchandise security tags.
  • Use mirrors to eliminate hidden corners and concealed nooks.
  • KEEP AN EYE on everyone in the store - not obviously, but constantly. People who watch you back are probably a problem.

Source: www.associatedcontent.com

Frameworks 4.3

preventing employee pilferage
Preventing Employee Pilferage
  • Checking Applicant Employment History
  • Personality Tests
  • Drug Tests
  • Security Cameras
  • Under Cover Security Agents
  • Statistical Analysis of Transactions
  • Encouraging Reporting by Other Employees
  • Requiring that cashiers be responsible for only their cash drawer.
  • Prosecution of all offenders.
  • Issuing keys or access cards to gain entry into areas that contain valuables – helps prevent internal theft.

Frameworks 4.4.2

employee theft
Employee Theft

Employee dishonesty and theft costs U.S. business over $50 billion dollars annually. National estimates show that 75% of all employees steal from their employers at least once throughout their careers. The same statistics show that at least half of these 75% steal multiple times from their employer. It is plain to see that the businesses of the United States cannot continue to function if they let employees steal from them.

Source: www.ifpo.org

what could happen to the small business
What could happen to the small business?

Employee theft is responsible for 33% of all business bankruptcies.

Source: www.ifpo.org

what should you do during a robbery
What should you do during a robbery?
  • Robbery is taking the property of another person by means of force or fear.
  • Exhibit calm behaviorduring a robbery to reduce the risk of additional danger or injury to employees or customers.
  • During an armed robbery you should do what you are told in order to protect yourself and customers.

Frameworks 4.5.1

Source: www.belmont.edu

completing transactions
Completing Transactions
  • A point-of-sale terminal is a sophisticated cash register connected to a computer. Business Principles and Management, 12e, page 389.
  • The POS includes a touch screen monitor, cash drawer, computer, customer display, magnetic stripe reader, and receipt printer.
  • The POS can read a customer’s credit card information and contact the bank, via internet connection, to authorize the purchase.
  • The POS can also track inventory, manage sales, manage employee information and scheduling, and store customer information - including gift card information.

Source: www.businessdictionary.com

Frameworks 4.6 & 4.7

cash transactions
Cash Transactions
  • Verify that the bill is not counterfeit - look for a watermark behind the head and security threads woven into the fabric. www.associatedcontent.com
  • Use a counterfeit detector pen on larger bills. A clear or amber mark passes the test. If the mark turns dark brown or black, the bill is probably counterfeit. www.itestcash.com

Frameworks 4.6.1

cash transactions1
Cash Transactions

This article appeared in the Harrison Daily Times on July 8, 2010.

Frameworks 4.6.1

organizing the cash drawer till
Organizing the Cash Drawer/Till

The cash drawer, also called the till, is organized from right to left by lowest denominations. The empty slots to the left can be used for rolled coins, dollar coins, or larger bills.

Frameworks 4.6.1

verify the opening cash fund
Verify the Opening Cash Fund
  • The till is the cash drawer of the point-of-sale terminal.School Store Operations, DECA, Inc. 2005, Page 86
  • The opening cash fund is the amount of money that each cashier will start with at beginning of the day or the beginning of their shift. School Store Operations, DECA, Inc. 2005, Page 92
  • Every cashier should verify the opening cash fund prior to beginning the shift.

Frameworks 4.6.2

cash transactions2
Cash Transactions
  • State the amount of cash given to you by the customer.
  • Place the bill on the self above the drawer.
  • Count the change as you take it out of the cash drawer.
  • State the amount of change due the customer. This will be displayed on the POS display and printed on the receipt.
  • Count the change back to the customer as you place it in their hand.

Never place the customer’s change on the counter.

Frameworks 4.6.3

credit cards vs debit cards
Credit Cards Vs. Debit Cards
  • Offering credit allows customers to buy immediately and pay later.Store Operations, DECA, Inc. 2005, Page 200
  • A debit card is used like a credit card, but the funds are transferred directly from the customer’s bank account to the business’s account.Store Operations, DECA, Inc. 2005, Page 90

Frameworks 4.7.1

credit cards vs debit cards1
Credit Cards Vs. Debit Cards
  • A credit card is issued by a bank and allows customers to purchase goods or services from a merchant on credit.
    • The card comes in a standard size with a magnetic stripe that holds machine readable code.
    • It is a convenient substitute for cash or checks.
    • Credit card holders draw on a credit limit approved by the bank.
    • The small business owner will normally pay a fee equal to approximately 2%-5% of credit card purchases to the credit card processing company.

Most small business will accept debit cards and major credit cards; Visa, MasterCard, or Discover.

Source: www.entrepreneur.com

Frameworks 4.7.1

credit transactions
Credit Transactions
  • Verify that the card is signed on the back. If the card is NOT signed ask the customer for a photo ID.
  • Swipe the card and wait for authorization. Do not immediately return the card to the customer.
  • Have the customer sign the receipt if the purchase is over $25.
  • Compare the signature on the receipt to the signature on the card.

Many small businesses are using an electronic signature pad.

Frameworks 4.7.2

what is a burglary
What is a burglary?
  • Burglary is illegal entry into a building to commit a theft and usually occurs when the business is closed.
  • Many businesses are leaving exterior and interior lights on in the business throughout the night to deter burglaries.
  • Be sure doors and windows are securely locked and that entry keys are limited to essential personnel.

Source: www.bizmove.com

Frameworks 4.8.1 & 4.8.2

dealing with risk
Dealing With Risk
  • The small business owner can deal with risk in one of the following ways:
    • Avoid the risk – choose a different strategy that doesn’t involve that risk.
    • Transfer the risk – let another business assume the risk of that activity. (VISA and MasterCard)
    • Insure the risk – purchase insurance to cover that risk, however, some risks are uninsurable.
    • Assume the risk – proceed with the activity and take full responsibility for the risk.

Source: Marketing, 3e, page 534

Frameworks 4.9.1

insuring risk
Insuring Risk
  • A surety bond provides insurance for the failure of a person to perform his or her duties or for losses resulting from employee theft or dishonesty.Marketing, 3e, page 547
  • Product liability insurance provides protection from consumer claims arising from the use of the company’s products.Marketing, 3e, page 547
  • Professional liability insurance protects against claims of negligent or harmful actions by business professionals. Example: malpractice insurance for a doctorMarketing, 3e, page 548

Frameworks 4.9.1

end of unit 4
End of Unit 4
  • Visit the website www.HarrisonDECA.org and click the Quizlet.com icon and study the flashcards for this unit.
  • Or you may click the Quizlet link below.