Question

Identify 2 risks that are encountered by a small business. Describe to the class what techniques they can use to minimize and manage these risks. Is it possible to cover either risk with insurance? What type of insurance?

Answer 1

Answer:-

1.Small business is usually run by one person or gruop of persons.These people are the owner and managers of business.Business is completely dependent on these people.Suppose if the owner suffers from any bodily injury or any disease,then the business will be directly affected.Such type of risks can be minimized by taking insurance cover.In such cases a personal risk insurance policy or life insurance policy or health insurance policy can be useful.

2.Business small or big are exposed to risk of losses caused by natural calamities or fire.With limitation of capital it is very difficult for small businesses to replace the assets and inventory lost during such calamities or fire.An insurance cover can help to minimize these risks.Replacement value risk cover and fire insurance policy can be used to recover the losses arising from these natural calamities or fire.

3.Products manufactured by small business may be subject to product liability risk.It means that if a consumer gets allergy due to the use of products sold by small business and files a suit against the business,then the damages are to be borne by business.In such cases, a product life insurance cover can mitigate the risk and losses.