A paycheck advance is a small, short-term loan that is intended to cover a borrower’s expenses until his or her next paycheck. Legislation regarding paycheck loans varies widely between different countries and, within the USA, between different states. For example, there are some states that do not allow paycheck advance loans and others that limit the amount a consumer may borrow at any given time.

Borrowers visit a paycheck lending store or a trusted online payday loan lender secure a small cash loan, with payment due in full at the borrower’s next paycheck (usually a two week term). In the United States, finance charges on paycheck loans are typically in the range of 15 to 30 percent of the amount for the two-week period. The borrower writes a postdated check to the lender in the full amount of the loan plus fees. On the maturity date, the borrower is expected to return to the store to repay the loan in person. If the borrower doesn’t repay the loan in person, the lender may process the check traditionally or through electronic withdrawal from the borrower’s checking account.

If the account is short on funds to cover the check, the borrower may now face a bounced check fee from their bank in addition to the costs of the loan, and the loan may incur additional fees and/or an increased interest rate as a result of the failure to pay.

Paycheck lenders require the borrower to bring one or more recent pay stubs to prove that they have a steady source of income. The borrower is also required to provide recent bank statements. Individual companies and franchises have their own underwriting criteria.

Online paycheck loans are marketed through e-mail, online search, paid ads, and referrals. Typically, a consumer fills out an online application form or faxes a completed application that requests personal information, bank account numbers, Social Security number and employer information. Borrowers fax copies of a check, a recent bank statement, and signed paperwork. The loan is direct-deposited into the consumer’s checking account and loan payment or the finance charge is electronically withdrawn on the borrower’s next paycheck.

Marty was immediately dubious about the idea of partnering. He didn’t want to partner with Jean over anything. He said his group was doing just fine, and from what he could tell, Housekeeping was doing a good job, too. Jean said guests often complained that her staff had done a poor job of cleaning the room. She noticed that these were the rooms that had been scheduled for maintenance, and she was constantly sending housekeepers back to rooms where Maintenance had just completed a job. She complained that the maintenance engineers made a mess and never cleaned up after themselves.Marty just smirked.

I suggested that we meet individually to talk about the problem. I first met with Marty. I wanted to know several things about Marty’s operation. What was his vision of the maintenance organization in the hotel? He told me he wanted to make sure everything in each room operated properly and was in good repair. “But, you know, with eight hundred guest rooms, three dining rooms, fifteen meeting rooms, two kitchens, a laundry, and a suite of executive offices, it’s impossible not to have something broken.” I told him I could understand his point. When I asked about his relationship with Jean, he said that she was all right “personally” but was overly sensitive to criticism—and that her staff was not always competent and frequently did a poor job and then blamed it on Maintenance. Once I understood the relationship issues, I began to ask about the tasks. I asked how people got assigned jobs, the hours when people were scheduled, and other issues where I thought there might be conflicts. I got an understanding of how they measured their work and noted the performance issues that were important to them. Marty showed me a priority list of items that the maintenance people followed to help them get the job done.

It is also sensible to be aware of and take into account the human dimension. People behave differently and inconsistently when making decisions involving risk. They may be exuberant or diffident, overconfident or overly concerned. Or they may simply overlook the issue of risk.

One important priority is to identify significant risks within and outside the organisation and allow these to inform decisions. This makes it easier to avoid unnecessary surprises. Examples of significant risks might be the loss of a major customer, the failure of a principal supplier or the appearance of a significant competitor.

Risk surrounds us all the time. As Harold Macmillan, a former British prime minister, once said: “To be alive at all involves some risk.” Some of the most common areas of risk affecting business are summarised in Table 11.1. It is valuable when attempting to identify risks to define the categories into which they fall. This allows for a more structured analysis and reduces the chances of risks being overlooked.

To this list should be added another, intangible category: the opportunity cost associated with risk. In other words, avoiding a risk may mean avoiding a potentially huge opportunity. There is a tendency for people to be too cautious and risk averse, even though they are often at their best when facing the pressure of risk or deciding to take a more audacious approach. It is also worth considering that sometimes the greatest risk of all is to do nothing.

Discounted cash flow analysis is used to help value the potential of an organisation and in making other investment decisions. The discounted cash flow method assesses the projected stream of economic benefits (such as cash flow, net sale proceeds, value of intangible assets) and calculates the maximum investment that should be made. This is known as net present value analysis. It also enables comparison of an investment amount with a stream of economic benefits and provides an overall rate of return. This is known as internal rate of return analysis, enabling analysts to assess the rate of return provided by a particular investment. Many consider that discounted cash flow analysis is more useful than other valuation methods, such as price/earnings ratios. If an investment case is sound, then discounted cash flow will highlight this.