Page 507 - Business Principles and Management

Unit 5

6. Within any business community, there are numerous local risks. For
example, the relocation of highways may cause customers to change their
shopping behavior. The development of new highways or new regional
shopping centers may take customers to larger communities to do their
shopping. Street improvements may make one location more attractive
than another and draw customers away from an old location. The estab-
lishment of no-parking zones may have a negative effect on certain types of
businesses. Population shifts may make it necessary for businesses to move.
No insurance can protect businesses from these and similar risks. Unless busi-
nesspeople recognize trends and take action, they may find their businesses totally
or partially destroyed. Noninsurable risks pose a great challenge to managers.

CHECKPOINT
List several noninsurable risks that businesses should anticipate
and prepare for.

18.3 Assessment

UNDERSTAND MANAGEMENT CONCEPTS
Determine the best answer for each of the following questions.
1. The possible financial loss that a policyholder will suffer if property
is damaged or destroyed is
a. a risk
b. an insurable interest
c. an insurance policy
d. a deductible
2. Which of the following would not be an example of a noninsur-
able risk?
a. poor weather conditions that result in lower-than-expected sales
b. a road closure that makes it difficult for customers to get to a
business
c. the theft of expensive jewelry from a jewelry store
d. old buildings, equipment, and technology that make a business
appear out-of-date to customers

THINK CRITICALLY

Answer the following questions as completely as possible.
3. What could happen to a business if the owners decide to put money
into a savings account to pay for possible losses rather than purchase
insurance?
4. What changes are occurring in your city that may have a nega-
tive effect on businesses but are not insurable? What actions
could businesses take to reduce the impact of
the changes?

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