Locating a shop in a high crime rates area is a rather risky decision, On the one hand, the competition rates are going to be rather low, which will allow for impressive sales benefit and future expansion. On the other hand, the unceasing threat coming from the local criminals should also be taken into account; not only does it reduce the number of customers, but also makes one question whether the losses taken from a possible raid can be covered by the shop revenues.
To prevent the shop owner from suffering major financial losses in the case of a raid, such a method as the noninsurance transfer can be suggested. However, to make this strategy work, the owner of the shop must calculate the amount of the hypothetic loss and make sure that the money retained previously will cover this loss. Choosing between the three existing noninsurance transfer methods, one must give credit to the incorporation of a business firm. The given means of managing the incredibly high risks in question might seem somewhat unreliable, yet in the environment described above, it should be considered a very feasible solution.
The decision provided above, however, also has its problems, and very obvious ones at that. To start with, the incorporation procedure presupposes that the shop will become a part of a larger chain and that the owner of the shop will no longer be at the helm. The change in the leadership strategy and the shop management, which is bound to take place afterward, will have rather dissatisfying effects on the sales revenues, as well as on the organization behavior. It is highly doubtful that the new managers will be able to embrace the range of specifics by which the company in question works. Therefore, the owner of the shop will have to get used to the idea that a slight reduction in revenues can be expected. More to the point, the owner of the shop will lose the role of a leader and become a co-owner instead. Thus, the has-been leader will have to coordinate their choices with the rest of the company’s shareholders.
Another viable method of staying afloat in the specified environment, retention can be considered a viable strategy. Seeing how the environment in which the shop is located presupposes a constant threat, it is crucial that the risk management methods should be considered not as something temporary, but as a strategy that must be a part of the owner’s vision (Rejda “Insurance and Risk” 26). In other words, the security principles must be regarded as a part of the company’s philosophy. Hence, the need to consider retention arises. Defined by Redja as the strategy of retaining part of the losses that can be taken by the owner of a company because of a particular risk (Rejda “Risk in Our Society” 13), this strategy will help the company remain competitive even in the worst-case scenario. Even though retentions, as a rule, involve buying insurance, Reja explains that insuring the property bought in the process remains merely an option.
Speaking of the second option that the shop owner in question has, the concept of the lease should be considered (Rejda “Risk in Our Society” 13). Presupposing that the premises or the goods should be rented to the second party, a lease will help the owner of the shop retain their leadership position; speaking of the risks, however, one must admit that, in case of a raid, a considerable part of the losses will be taken by the owner as well, though the person signing the contract will have to share their part of responsibility.
Rejda, George. “Risk in Our Society.” Principles of Risk Management and Insurance. 11th ed. Upper Saddle River NJ: Prentice Hall. 2011. 2–19. Print.
Rejda, George. “Insurance and Risk.” Principles of Risk Management and Insurance. 11th ed. Upper Saddle River NJ: Prentice Hall. 2011. 19–42. Print.