Five risks that could severely impact smes

African economy, and the one area which should create growth in order to ignite a lacklustre economy. It has been said that Small and Medium Enterprises (SMEs) are the bedrock of the South

The broker’s responsibility

However, SMEs must be made aware of risks which could impact their business continuity and bottom line. This is where commercial insurance specialist knowledge comes into play.

However, it is the broker’s responsibility to help business owners understand the risks around not having sufficient or correct commercial insurance in place, and to explain the following risks which could severely impact business continuity:

1. In an ever more litigious society, public liability cover is becoming more relevant. It is critical that businesses are insured in such a manner that they can sustain a large liability claim and that brokers explain the various limits of indemnity which these policies are subject to. Firstly, business premises must be safe and comply with, amongst others, the Occupational Health and Safety Act. Secondly, business owners should practise good housekeeping, by for instance, safely securing stock. Thirdly, visitors should be made aware of potential dangers on the premises and business owners should ensure that their staff are well equipped and correctly skilled to work with tools and equipment.
2. Comprehensive vehicle insurance is an important factor. Brokers must keep in mind that the market value of a vehicle does not define the customer’s exposure to third party risk. Businesses with large vehicle exposure can suffer hefty individual losses if one of their vehicles are responsible for loss or damage to the property of a third party.
3. Using costly electronic equipment or machinery. Does the insurance product cover power surge damages related to load-shedding? It is advisable that business owners install power surge protection mechanisms, to avoid resultant claims and the impact on business continuity. With the high crime rate in South Africa, SMEs are particularly exposed to theft. While smaller businesses often hold a valuable amount of stock on-site, they cannot always afford highly secured premises. Most insurance products would cover theft of stock and moveable property on the condition that certain security measures are taken. So, it is advised that businesses put in place fencing, burglar bars and alarm systems linked to an armed response unit and keep records of instalments and incidents.

1. Load shedding and fire risk. With additional measures being taken to mitigate the impact of load-shedding, businesses install generators and cables which are used during electricity interruption. Business owners should be made aware that the transition of currents on and off the grid onto back-up equipment, as well as cables, generators and other electrical parts need to be checked and signed off by a qualified electrician as it could be a potential fire hazard. Proper record of this has to be kept.
2. Ensure against business interruption. When deciding whether a business needs Business Interruption insurance, firstly consider potential disasters that could befall the business, i.e., the building burns to such an extent that the business is not able to continue manufacturing and selling stock or a business’ own imported equipment with specialised parts breaks down and takes time to replace. The second issue to consider is the recovery time needed after incidents. This will guide the amount of cover required.

Firstly, back-up all financial and sales records, as well as inventories off-site, which should enable speedier claims finalisation and recommencement of operations.

Secondly, put safeguards in place as per the relevant cover requirements, i.e., in the case of fire cover, ensure that the building is compliant with building regulations; in the case of stock cover, ensure that alarm systems are in good working order.

Ensure customers are informed.

It is important to keep these risks in mind when advising customers, and brokers should also ensure that customers are informed of the requirements of cover on the individual policies.