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SMALL BUSINESS: Small Business Survival Depends on Managing Risks

 





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From globalisation, increased competition and crime, through legislation with its red tape, overbearing hurdles and agreement costs, to lack of credit or incentive, the risks that SME聮s face in South Africa聮s unwelcoming small business environment are legion.

Yet despite the hurdles facing small businesses in South Africa, 聯many SME聮s fail to tone down risk with intelligent risk solutions聰, says Hillary Magede, Senior Manager, Alexander Forbes Insurance.

Despite an unsupported SME environment overburdened with tax, compliance, crime and labour issues, combined with spiralling input costs in a shrinking retail environment, Magede is surprised that more small businesses haven聮t started using targeted risk improvement strategies to lessen the uncertainty of unforeseen misfortune that so often destroys businesses.

Developing an Insurance Package for Small Businesses

Certainly, given the competitive edge that properly structured and priced business insurance can bring to a small business 聯I聮m always surprised to find that it is usually the last thing on most South African small business owner聮s minds,聰 says Magede.

As such, when looking to develop an insurance package for small businesses- Magede and his team focused research on the assets, earnings and legal liabilities that real small businesses face in South Africa.

Research on Risks facing Small Businesses in South Africa

The results of this research highlighted the following risks as key to the success or failure of South African SME聮s:

路 Damage or destruction to property such as; buildings and contents, including stock, plant and machinery, electronic equipment, money, glass and documents (on the premises or in transit).

路 Loss of profits or revenue (and continuing fixed expenses) suffered due to the interruption of small business operations while damaged or stolen property is repaired or replaced.

路 Loss or damage to property from theft or criminal activity, either by employees or others.

路 Legal costs or liability arising from accidental damages, loss or injury to any persons (including employees) or property.

路 Loss, damage or liability arising from motor vehicles 聳 requiring either third party only, third party, fire and theft or comprehensive depending on the risk.

路 Unaffordable excesses. Motor excess stated as a percentage of loss - means the cost to customer is only determined after the accident. As such, large losses result in higher excesses. Stating motor excesses as flat Rand amounts means the business always knows what it will have to pay.

路 Disability or accidental death, and associated medical expenses, of key personnel - either in the workplace or elsewhere, like travelling to and from work.

路 Providing unemployment packages or having to reorganise a business or reduce staff due to unfavourable business conditions, the introduction of new technology; Or in response to changes in the Labour Relations Act.

路 Legal Costs and witness attendance expenses for legal actions instituted by or against the business.

The Tool to Reduce Risks for Small Businesses

Developing risk management solutions for the South African SME market 聳 which, given other pressures, does not have the time to negotiate customized cover at acceptable rates - meant that 聯simplicity, clarity, affordability and ease of use had to remain central聰, said Magede.

While accomplishing this function for the vast variety of SME聮s in South Africa was a challenge, Magede and his team are now confident that they are offering a fresh, user-friendly tool that will reduce the risk and currently high failure rate of small businesses in South Africa.


 
 
 
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