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Small Business – No Risk?
Most small businesses that suffer fire, flooding or systems failure and are not insured or are underinsured will fail within 12 months, according to recent statistics.
For this reason small business owners should be prudent about possible risks and set out to understand their risk exposures and ways to contain or transfer the risk.
Small businesses can also learn much from their larger counterparts about a risk management approach to business insurance, with particular emphasis on business interruption cover.
Vero Insurance GM of SME Products, Rob Walters, says about 70% of uninsured or underinsured small businesses that suffer from a big loss fail within 12 months. The statistics show small business owners lack an understanding of the consequences for their businesses in the event of a major interruption to trading.
Clearly, identifying and managing the risks a business faces and having a contingency plan in place can help minimize exposure to severe interruption in the event of major events.
Another benefit for small businesses in having a risk management plan is that they can be rewarded with lower insurance premiums while still being adequately covered for a major catastrophe and the loss of trading.
Companies like Vero recommend that small business operators should seek advice from an insurance broker, who can assess the right cover for their needs.
The Australian Bureau of Statistics and the Insurance Council of Australia estimate that 67% of small businesses have no business interruption insurance or are underinsured.
Vero says the campaigns to educate small businesses on being appropriately insured have been relatively unsuccessful, and business interruption insurance in particular continues to be forgotten or misunderstood.
When thinking of insurance needs, small business owners should consider the question:
“What would happen tomorrow if my business suffered a major property, loss tonight?”
Based on this question, small business owners would be able to get a good idea of their exposure to certain risks and the resulting consequences to business continuity. Small businesses should have a business plan and a major element of that plan should be the contingency or disaster plan.
Strategic plans should include storing back-up computer files and important documents off-site, and keeping replacement equipment off the premises.
Mr Walter says the workplace should be inspected in detail and every possible vulnerability assessed.
Source: Sunrise. 10 March 2006