ERIC ED373257: Risk Management. Unit 20. Level 3. Instructor Guide. PACE: Program for Acquiring Competence in Entrepreneurship. Third Edition. Research & Development Series No. 303-20.

21 Pages·1994·0.49 MB·English

by  ERIC

DOCUMENT RESUME
CE 067 091
ED 373 257
Risk Management. Unit 20. Level 3. Instructor Guide.
TITLE
PACE: Program for Acquiring Competence in
Entrepreneurship. Third Edition. Research &
Development Series No. 303-20.
Ohio State Univ., Columbus. Center on Education and
INSTITUTION
Training for Employment.
PUB DATE
94
21p.; For the complete set, i.e., 21 units, each done
NOTE
see CE 067 029-092. Supported by the
at thr:e
International Consortium for Entrepreneurship
Educations the Coleman Foundation, and the Center for
Entrepreneurial Leadership Inc.
Center on Education and Training for Employment, 1900
AVAILABLE FROM
Kenny Road, Columbus, OH 43210-1090 (order no.
RD303-20 IG, instructor guide $4.50; RD303-20 M,
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resource guide, RD300G, $175).
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Behavioral Objectives; Business Administration;
DESCRIPTORS
*Business Education; *Competency Based Education;
*Entrepreneurship; *Insurance; Learning Activities;
Postsecondary Education; Risk; *Risk Management;
Secondary Education; *Small Businesses; Teaching
Guides
*Program for Acquiring Competence Entrepreneurship
IDENTIFIERS
ABSTRACT
This instructor guide for a unit on risk management
in the PACE (Program for Acquiring Competence in Entrepreneurship)
curriculum includes the full text of the student module and lesson
plans, instructional suggestions, and other teacher resources. The
competencies that are incorporated into this module are at Level 3 of
learning--starting and managing one's own business. Included in the
instructor's guide are the following: unit objectives, guidelines for
using PACE, lists of teaching suggestions for each unit
objective/subobjective, model assessment responses, and overview of
the three levels of the PACE program. The following materials are
contained in the student's guide: activities to be completed in
,tudent reading materials,
preparation for the unit, unit objectives,
individual and group learning activities, case study, discussion
questions, assessment questions, and references. Among the topics
discussed in the unit are the following: minimizing losses due to
risks, policies to minimize losses, insurance needs, and costs of
risk management options.
(KC)
INSTRUCTOR GUIDE
UNIT 20
Risk
LEVEL 3
Management
Unit 20
Risk Management
Level 3
HOW TO USE PACE
Use the objectives as a pretest. If a student
is able to meet the objectives, ask him or
her to read and respond to the assessment
questions in the back of the module.
Program for Acquiring
Competence in
Entrepreneurship
THIRD EDITION
Duplicate the glossary from the Resource
Guide to use as a handout.
Rtxurth & no.elopment Scrits No. 303.20
Use the teaching outlines provided in the
Instructor Guide for assistance in focusing
The left side of
your teaching delivery.
Objectives:
bjectives with the
each outline page list
corresponding headi%,s (margin questions)
from the unit. Space is provided for you to
Investigate how to minimize losses due to risks.
add your own suggestions. Try to increase
student involvement in as many ways as
possible to foster an interactive learning
process.
Prepare policies that will help minimize losses.
When your students are ready to do the
Activities, assist them in selecting those
that you feel would be the most beneficial
to their growth in entrepreneurship.
Determine the insurance needed for your business.
Assess your students on the unit content
when they indicate they are ready.
You
may choose written or verbal assessments
Analyze the costs of risk management options.
Model re-
according to the
situation.
Cr
sponses are provided for each module of
U S DEPARTMENT OF EDUCATION
-PERMISSION TO REPRODUCE THIS
While these are suggested
IDUCATIONAL RESOURCES INFORMATION
each unit.
BY
MATERIAL HAS BEEN GRANTED
CENTER (ERIC}
0 This document has been reproduced as
responses, others may be equally valid.
received from the Person or organt7ation
O
onTri:tbor; if
%nor changes have been made to
improvo roproductoon qualify
V
2
Points GI view or opinions staled in this
TO THE EDUCATIONAL RESOURCES
document du not necessarily represnt
offriai OERI posliton or policy
INFORMATION CENTER (ERICI
BEST COPY AVAILABLE
Objectives
Teaching Suggestions
1. INVESTIGATE HOW TO
MINIMIZE LOSSES DUE
TO RISK
The text describes three ways that businesses cope with, and
What methods can be used to cope
with risks?
attempt to minimize risk. Discuss and expand on each.
What is liability insurance?
Discuss the importance of various types of insurance that address
the wide range of business risks.
What is casualty insurance?
Refer to above suggestion.
2. PREPARE POLICIES THAT
WILL HELP MINIMIZE LOSSES
How can management policies,
Procure from local companies the written policies, procedures,
procedures, and guidelines mini-
and guidelines which they use to minimize their risks. The type
mize risk?
of information will vary from company to company. Try to get
information from different types of businesses and share it with
the class.
What guidelines can be used to re-
Its the form of questions, the text provides some guidelines for
duce shoplifting?
Encourage students to expand these
antishoplifting policies.
guidelines by adding their own questions to the list.
What guidelines can be used to re-
Review the guidelines provided in the text.
duce bad check losses?
What guidelines can be used to re-
Refer to above suggestion.
duce robbery and burglary losses?
What guidelines can be followed
Refer to above suggestion.
to reduce vendor and employee
theft?
3. DETERMINE THE INSURANCE
NEEDED FOR YOUR BUSINESS
How can insurance protect your
The following are suggested topics for students to investigate
business?
and report on: early historical roots of the concept of insurance
and its relation to small business; the history of insurance in the
United States;
the role of insurance in response to national dis-
asters (e.g., hurricanes, floods, earthquakes, etc.); and the nature
of specialty insurance" offered by companies like Lloyd's of
London.
How can a sound insurance pro-
To emphasize the importance of recognizing risks, give the class
gram be developed?
examples of different types of small businesses. On the chalk-
board or overhead list the businesses followed by two columns,
one for 'risks faced' and the second for 'minimizing action'.
Record the findings of the class.
3
Teaching Suggestions
Objectives
Working with the class, develop a plan for choosing an insur-
How do you choose an insurance
the same types of small busi-
ance agent. You may want to use
agent?
suggestion.
nesses that you proposed in the previous
What is adequate insurance protec-
Stress the importance of seeking technical assistance when at-
tion?
of
tempting to define risks and determine levels and adequacy
coverage.
Why is adequate insurance cover-
age important?
Refer to above suggestion. Many of these issues would be best
What is property and fire insur-
addressed by a guest subject matter expert.
ance?
4. ANALYZE THE COSTS OF
RISK MANAGEMENT OPTIONS
Discuss the concepts of endorsements, actual cash value, actual
How much does insurance cost?
Presenting insurance costs for
replacement cost and deductible.
specific businesses may serve as a useful examples. The guest
speaker should be able to provide some generic data on typical
insurance costs.
MODEL ASSESSMENT ANSWERS
sound management
The three most often used methods to control risk are: (I) eliminating risk, (2) developing
1.
policies, and (3) shifting risk by purchasing insurance.
in place to deal with it when
Because no retail business is safe from shoplifters it is important that policies be
2.
it occurs.
hours. At these times,
It is important to set a time to accept vendor shipments that is not during peak business
3.
there is usually too much confusion, which creates a diversion and makes theft easier.
building, type and
Some of the factors that affect the cost of insurance are; materials used to construct the
4.
stored, the location, and past record of
amount of safety equipment, nature of business and types of materials
accidents. Of course, many other factors could be added to this list.
Logically any
Endorsements in respect to insurance are either additions to, or deletions from existing policies.
5.
the policy.
additions will necessitate a higher premium, and conversely any deletions will lower the cost of
trade-off
Increasing the deductible of an insurance policy means that the actual premium will go down. The
6.
of pocket expense (the deductible) is
occurs if, or when, there is an occurrence requiring a claim, then the out
higher.
insurance
A business should reevaluate its' insurance plan regularly. As a business expands or diversifies, the
7.
needs will also change and must be updated to ensure adequate and appropriate coverage.
4
Program for Acquiring.
Competence in
Entrepreneurship
ag1...20.04.1F
Incorporates the needed competencies for creating and operating a small business at three levels of learning, with experiences and
outcomes becoming progressively more advanced.
Level 1
Understanding the creation and operation of a business.
Level 2
Planning for a business in your future.
Level 3
Starting and managing your own business.
Self-contained Student Modules include: specific objectives, questions supporting the objectives. complete content in form of answers
to the questions, case studies, individual activities, group activities, module assessment references. Instructor Guides include the full text
of each student module and lesson plans, instructional suggestions. and other resources. PACE,Third Edition, Resource Guide includes
teaching strategies, references, glossary of terms, and a directory of entrepreneurship assistance organizations.
For information on PACE or to order, contact the Publications Department at the
Center on Education and Training for Employment. 1900 Kenny Road. Columbus, Ohio 43210-1090
[phone], (8(X)) 848-4815.
Support for PACE, Third Edition provided in whole or in part by:
International Consortium for Entrepreneurship Education
The Coleman Foundation
and
International Enterprise Academy
Center for Entrepreneurial Leadership Inc.
Center on Education and Training for Employment
5
Ewing Marion Kauffman Foundation
The Ohio State University
UNIT 20
Risk
LEVEL 3
Management
The
Your Potential
Business
Nature of
Global Markets
Business Plan
as an
Opportunities
Small Business
Entrepreneur
Financing
Pricing
Help for
Marketing
Types of
Location
the Business
Strategy
the
Analysis
Ownership
Entrepreneur
Business
Human
Selling
Promotion
Legal
Management
Resources
Issues
Customer
Financial
Operations
Record
Credit
Analysis
Keeping
for Acquiring
Progr
h
Competence in
Entrepreneurship
CENTER ON EDUCATION
AND TRAINING FOR EMPLOYMENT
Research & Development Series No. 303-20
COLLEGE OF EDUCATION
THE OHIO STATE UNIVERSITY
RISK MANAGEMENT
April 4, 1994
BEFORE YOU BEGIN
. . .
Consult the Resource Guide for instructions if this is
1.
your first PACE unit.
2.
Read What are the Ob'ectives for this Unit
on the following page. If you think
you can meet these objectives now, consult your instructor.
3.
These objectives were met in Level 1 and Level 2:
Level 1
Discuss the importance of planning to minimize risk.
Define areas of risk for the entrepreneur.
Explain preventive measures that
can be taken by entrepreneurs.
Level 2
Explain the responsibility of the entrepreneur in risk
management.
Identify various protective
measures that can minimize shoplifting.
Describe procedures that can be used
to reduce the amount of losses from
internal theft.
Identify procedures that can be used
to reduce the amount of bad check
losses.
Discuss how to secure business premises against
burglary and robbery.
Discuss how accidents and lawsuits
can be prevented.
List the different types of business insurance
policies available.
4.
Look for these business terms
as you read this unit.
If you need help with the
meanings, ask your instructor for
a copy of the PACE Glossary contained in the
Resource Guide.
Actual cash value
Insurance
Actual replacement cost
Insurance broker
Actual replacement value
Insurance policy
Claims
Premiums
Climatic perils
Self insurance
Coverage
Supplemental perils
Deductible
Two-party checks
Endorsements
Copyright © 1994, Center on Education and
Training for Employment,
The Ohio State University. All rights reserved.
3
RISK MANAGEMENT
WHAT ARE THE OBJECTIVES FOR THIS UNIT?
Upon completion of this unit you will be able to
investigate how to minimize losses due to risks,
prepare policies that will help minimize losses,
determine the insurance needed for your business, and
analyze the costs of risk management options.
WHAT IS THIS UNIT ABOUT?
In addition, you will
minimize losses.
Once
you have started your own business,
examine the factors that affect the cost of
you will need to identify all the risks faced
insurance protection.
by the firm and design a plan for protecting
it against losses. All businesses risk losses,
but it will be up to you to establish a sound
WHAT METHODS CAN BE
protection program that will minimize your
USED TO COP; WITH RISKS?
Such a protection program
firm's losses.
will consist of establishing policies and pro-
cedures for business management practices
and purchasing insurance that will protect
Proper risk management can be achieved by
Businesses are
your business adequately.
following these steps:
different from one another, so protection
plans may vary.
Identify the risks that the business faces.
1.
In this unit you will review how to minimize
Evaluate the probability of the occur-
2.
losses from the risks that a business faces.
rence of each risk that has been iden-
You will learn how sound management poli-
Eliminate the risks from which
tified.
cies and adequate insurance protection can
you can afford to absorb losses.
O
4
Identify all possible methods of con-
accidents suffered by others on the premises
3.
trolling the remaining risks.
Consider
of your business.
the cost of each method, especially the
cost of the required insurance coverage.
HOW CAN MANAGEMENT
4. Implement the best method for control-
POLICIES, PROCEDURES,
ling each risk.
AND GUIDELINES
MINIMIZE RISK?
You may be able to absorb some of the loss-
es caused by the risks your business faces.
Generally, however, most businesses control
A major part of protecting
your business is
losses from risks by (1) eliminating the risks,
(2) developing sound management policies
the establishment of policies and procedures
for dealing with specific risk
and procedures to reduce risks, or (3) pur-
situations.
chasing insurance to shift the risk to others.
Policies and procedures help reduce misun-
derstandings and encourage consistent solu-
Firstly, you could control losses by eliminat-
tions to similar problems.
ing the risk once it has been identified. For
example, if faulty wiring is detected,
it
As a business owner, it is your responsibility
should be replaced immediately. You could
to establish policies and procedures in sev-
also use a delivery service to remove the
eral areas in order to minimize losses. You
risks associated with operating your own
will need to formulate policies to reduce
delivery vehicles.
losses from shoplifting, bad checks, employ-
ee theft, vendor theft, robbery, and burglary.
A second way to control risk is to develop
sound management policies and procedures.
For example, a careful study of well-main-
WHAT GUIDELINES CAN
tained store records should warn you of any
BE USED TO REDUCE
In addition, to reduce
developing trends.
SHOPLIFTING?
losses from crime, you must develop ade-
quate policies and procedures, as well. You
must decide whether or not to purchase se-
Shoplifting is
a universal crime, and no re-
curity devices such as in-store cameras.
tail business is considered safe from this
menace. This is an area that requires you to
The third method to control risk is by pur-
establish policies for both the apprehension
chasing insurance which shifts your losses to
and prosecution of shoplifters.
Strong poli-
an insurance company. Usually, there is no
cies for dealing with shoplifters can discour-
alternative to purchasing insurance to protect
age such theft at your business.
your building and its inventory against possi-
ble losses such as fire, theft, floods, or hur-
The following questions will serve as guide-
ricanes. In most states, owners are required
lines for establishing antishoplifting policies
by law to carry workers' compensation in-
in retail businesses.
However, remember
surance to cover their employees. And, you
that once you establish policies and proce-
must have
liability
insurance
cover
to
t I
5
Customer services, such as check cashing,
dures, you must train your employees effec-
frequently give a business an advantage over
tively to recognize and react to shoplifting.
However, if you decide
the competition.
that your business will accept customer
Will customers be permitted to bring
checks for purchases, some safeguards are
shopping bags into the store without
needed. You should have established proce-
having them checked at the service desk
dures to follow so that all employees handle
or cashier's station?
checks in the same manner.
How many garments will customs be
You should give consideration to the follow-
ing points when formulating a check-cashing
allowed to take into dressing rooms at
policy:
one time?
What identification will be required by
How will shoplifters be handled?
the customer who wants to cash a check?
What are the state laws regarding shop-
What limit will be set for the amount of
lifters?
a check?
In addition to establishing store polices and
training employees in shoplifting prevention,
Will checks be cashed for more than the
the purchase
you may also want to consider
amount of purchase?
These
of equipment to deter shoplifters.
of your
may include mirrors for the corners
Will two-party checks be accepted?
surveillance
rnirro,-,
one-way
business,
price
cameras, or tamper-proof/electronic
tags. These are added expenses, but uncon-
Will payroll, Social Security, and welfare
trolled shoplifting losses are also a drain on
checks be accepted?
your profits.
Which employee(s) will be authorized to
accept checks and for what amount?
WHAT GUIDELINES CAN
BE USED TO REDUCE
These are only general questions that you
BAD CHECK LOSSES?
should consider when designing check-
Think of others that
cashing guidelines.
relate to your specific business.
In recent years, the handling of business and
You may also want to consider the purchase
personal transactions by check has greatly
of equipment that will deter chronic bad-
increased. This increase in the use of checks
Such equipment could in-
check passers.
has opened the door to another kind of crim-
clude computer cash registers or fingerprint/
inal activitypassing bad checks.
You may also
photographic equipment.