A firefighter prepares to put out a fire. Rare incidents such as fire
can threaten the life of a business. PHOTO BY RACHEL MABALA
Many owners
of Small and Medium businesses might consider insurance a luxury or an
unnecessary expense, putting it at the bottom of their priority list.
These
common misconceptions ruined very many businesses and business owners
who only realise the need for insurance after they have suffered
significant loss and damage.
While several studies and
mainstream media have indicated that SMEs in the East African region
collapse within 24 months because of “lack of basics in enterprise
management, insurance continues to be frequently overlooked as a part of
strategic enterprise and risk management; until the 24th hour.
Looking at the key risks that face SMEs might help us better understand why insurance should be prioritised.
Financial risks
Many local investors have invested their life’s savings into their business. A rare occurrence such as fire, flood, theft of or damage to key equipment/machinery can threaten the life of a business. Imagine losing your life’s savings and having to start again!
Many local investors have invested their life’s savings into their business. A rare occurrence such as fire, flood, theft of or damage to key equipment/machinery can threaten the life of a business. Imagine losing your life’s savings and having to start again!
Strategic risks
The Brexit debate has demonstrated how strategic planning can make the difference between your business being a going concern and your business being a victim of the economic circumstances.
Strategic risks can be anything from supply chain to staff infidelity and fraud, from regulatory compliance to loss of key person(s). The good news is there are several insurance solutions to manage all these risks and protect your business.
The Brexit debate has demonstrated how strategic planning can make the difference between your business being a going concern and your business being a victim of the economic circumstances.
Strategic risks can be anything from supply chain to staff infidelity and fraud, from regulatory compliance to loss of key person(s). The good news is there are several insurance solutions to manage all these risks and protect your business.
For example, many young and small business heavily on the expertise of one or two individuals.
For Ugandan businesses, this is usually a director/shareholder. Imagine what would happen to the daily operations if this individual were suddenly injured or lost, and the cost (temporary or permanent) of hiring another equally competent staff, or training one of the existing staff to the run the business as efficiently. In such cases, Key person (or Keyman) insurance provides an excellent solution by providing the finances to temporarily or permanently replace your key staff/employees.
For Ugandan businesses, this is usually a director/shareholder. Imagine what would happen to the daily operations if this individual were suddenly injured or lost, and the cost (temporary or permanent) of hiring another equally competent staff, or training one of the existing staff to the run the business as efficiently. In such cases, Key person (or Keyman) insurance provides an excellent solution by providing the finances to temporarily or permanently replace your key staff/employees.
Risks
A fire, machinery damage/loss, a flood, an accident involving your truck can render your business idle for a few days or weeks. Over and above the revenue lost, you still must service your bank loan, pay your workers and other operating expenses.
A fire, machinery damage/loss, a flood, an accident involving your truck can render your business idle for a few days or weeks. Over and above the revenue lost, you still must service your bank loan, pay your workers and other operating expenses.
A business
interruption extension, which is an addition to your insurance cover
will cover your operating expenses and lost revenue while you set about
doing repairs or replacement.
Insurance can help
differentiate your product from competition. A consultant can assure
their client of a refund of payment if their advice caused their client
loss. Insurance can provide a spare parts dealer or manufacturer an
option to provide a warranty; a contractor can use insurance to provide a
custody management/liability period to their employer after completion
of the project, or to manage sub-contractors.
If you
are still not convinced, it may be important to note that two of the top
18 barriers to winning tenders for SMEs in Uganda are failure to meet
insurance, public liability and professional indemnity requirements and
failure to meet health and safety requirements according to
FinancialSafetyNet.
The good news is that as a
business, one does not have to take a separate insurance solution for
each risk identified; there are insurance solutions tailored to SMEs and
other businesses. dfcu Bank is now licensed to provide our customers
with insurance advisory services, at no extra cost.
The Bank has no direct benefit in the insurance cover and is careful to seek out an insurer that will protect its reputation. dfcu Bank has through the years demonstrated its understanding of the SME business, and is therefore best positioned to negotiate these insurance placements as well as provide claims service.
The Bank has no direct benefit in the insurance cover and is careful to seek out an insurer that will protect its reputation. dfcu Bank has through the years demonstrated its understanding of the SME business, and is therefore best positioned to negotiate these insurance placements as well as provide claims service.
There exists a
temptation to look at insurance through the lens of expenditure. If
however, you consider the impact of an occurrence on your business, and
then consider what your contingency plan is, you will start to see
insurance as the wealth protection mechanism it really is.
The writer is the principal officer, Bancassurance at dfcu bank.
The writer is the principal officer, Bancassurance at dfcu bank.
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