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Business security is a comprehensive term that encompasses the physical and digital security measures that businesses take to protect their assets, employees, and customers. It includes everything from locks and alarms to firewalls and data encryption.
Business security is important for a number of reasons. First, it helps to protect your assets from theft, damage, or destruction. Second, it helps to protect your employees from harm. Third, it helps to protect your customers’ privacy and financial information. Fourth, it helps to protect your business’s reputation.
Main Aspects of Business Security
There are many different aspects of business security, but some of the most important include:
- Physical security: This includes measures to protect your business’s physical assets, such as property, equipment, and inventory. It includes things like locks, security cameras, and access control systems.
- Cybersecurity: This includes measures to protect your business’s digital assets, such as computer systems, data, and intellectual property. It includes things like firewalls, antivirus software, and data encryption.
- Employee security: This includes measures to protect your employees from harm, both physical and digital. It includes things like workplace violence prevention programs, security awareness training, and password policies.
- Business continuity: This includes measures to ensure that your business can continue operating even if it experiences a security incident. It includes things like disaster recovery plans and business interruption insurance.
Types of Business Security
Debt Securities
Debt securities, or fixed-income securities, represent money that is borrowed and must be repaid with terms outlining the amount of the borrowed funds, interest rate, and maturity date. In other words, debt securities are debt instruments, such as bonds (e.g., a government or municipal bond) or a certificate of deposit (CD) that can be traded between parties.
Debt securities, such as bonds and certificates of deposit, as a rule, require the holder to make regular interest payments, as well as repayment of the principal amount alongside any other stipulated contractual rights. Such securities are usually issued for a fixed term, and, in the end, the issuer redeems them.
Equity Securities
Equity securities represent ownership interest held by shareholders in a company. In other words, it is an investment in an organization’s equity stock to become a shareholder of the organization.
The difference between holders of equity securities and holders of debt securities is that the former is not entitled to regular payment. Still, they can profit from capital gains by selling the stocks. Another difference is that equity securities provide ownership rights to the holder so that he becomes one of the owners of the company, owning a stake proportionate to the number of acquired shares.
In the event a business faces bankruptcy, the equity holders can only share the residual interest that remains after all obligations have been paid out to debt security holders. Companies regularly distribute dividends to shareholders sharing the earned profits coming from the core business operations, whereas it is not the case for the debtholders.
Derivative Securities
Formerly, derivatives were used to ensure balanced exchange rates for goods traded internationally. International traders needed an accounting system to lock their different national currencies at a specific exchange rate. There are four main types of derivative securities:
1. Futures
Futures, also called futures bonds, are an agreement between two parties for the purchase and delivery of an asset at an agreed upon price at a future date. They are traded on an exchange, with the contracts already standardized. In a futures transaction, the parties involved must buy or sell the underlying asset.
2. Forwards
Forwards, or forward contracts, are similar to futures but do not trade on an exchange, only retailing. When creating a forward contract, the buyer and seller must determine the terms, size, and settlement process for the derivative.
Another difference from futures is the risk for both sellers and buyers. The risks arise when one party becomes bankrupt, and the other party may not be able to protect its rights and, as a result, loses the value of its position.
3. Options
Options, or options contracts, are similar to a futures contract, as it involves the purchase or sale of an asset between two parties at a predetermined date in the future for a specific price. The critical difference between the two types of contracts is that, with an option, the buyer is not required to complete the action of buying or selling.
4. Swaps
Swaps involve the exchange of one kind of cash flow with another. For example, an interest rate swap enables a trader to switch to a variable interest rate loan from a fixed interest rate loan or vice versa.
Hybrid Securities
Hybrid security, as the name suggests, is a type of security that combines the characteristics of both debt and equity securities. Many banks and organizations turn to hybrid securities to borrow money from investors.
Similar to bonds, they typically promise to pay a higher interest at a fixed or floating rate until a specific time in the future. Unlike a bond, the number and timing of interest payments are not guarantee. They can even be convert into shares, or an investment can be terminated at any time.
Examples of hybrid securities are prefer stocks that enable the holder to receive dividends before the holders of common stock, convertible bonds that can be convert into a known amount of equity stocks during the life of the bond or at the maturity date, depending on the terms of the contract, etc.
Conclusion
In conclusion, business security is an essential part of any business. It helps to protect your assets, employees, customers, and reputation. There are many different types of business security, and the specific measures that you need will vary depending on the size and nature of your business, as well as the specific risks that you face. However, by taking steps to implement these security measures, you can help to protect your business from harm.
