Is your small business risk resilient?

XonRisk is in intermediary focused on ensuring entrepreneurs and small businesses are more risk resilient. We will be sharing some insights from the XonRisk team on our blog. This first story is about helping entrepreneurs and small businesses identify whether their businesses are risk resilient. If not, contact the XonRisk team as XonRisk is a specialist in making SMEs risk resilient.

By Noxolo Dlamini

The hashtag #entrepreneurlife will reveal many images of the modern entrepreneur: up at all hours of the night, inspired, brave, hardworking and coming up with ingenious ideas to societal problem.  A very generic definition of the word is: “a person who sets up a business or businesses, taking on financial risks in the hope of profit.”

While we could fill another article with the many different definitions of the word entrepreneur, what is clear is that this is an enterprising individual who takes on risk and offers something of value in exchange for commercial gain.

In setting up the business the risk that the entrepreneur takes on is, more often than not, financial. They raise some form of financial capital in order to bring their ideas to life and turn a concept into an actual business that is ready to sell to markets. Should the business not work they risk losing this financial injection, sometimes with interest. There is, thus, a bigger risk that all businesses face, from start up to the JSE Top 40: sustainability.

All businesses start up with a view to succeed in the long-term however we know this is not always the case. In South Africa it is estimated that as much as 80% of new enterprises are out of business within 2 years of starting out. So, somewhere between the genius of conceptualisation coupled with the bravery of actually starting a business, and the statistic just quoted, something goes horribly wrong. There are many reasons businesses and start-ups cease operations however, we believe insufficient buffers against risks is a highly overlooked reason.

What exactly is risk?

Risk can be defined as exposure to a hazard that causes harm or loss. Businesses face a myriad of these, in varying degrees, all resulting in financial loss and threatening the future of the business. Great businesses utilise risk management mechanisms to make themselves more resilient to events that threaten the existence of the business or the efficiency of its continued operation in a less severe event. Examples of risk events include theft, natural perils such as fire, storm, and, with technology playing an ever-prominent role in every aspect of life including the way we do business, cyber-attacks such as hacking, phishing, and ransomware invasions.

So, how do businesses build better risk resilience?

A comprehensive insurance program is one way to achieve resilience to risk. Insurance is a mechanism where the financial impact of a negative risk event is transferred to an insurance company in exchange for a premium. In plain terms: if something bad happens that causes your business to suffer a financial loss and that cause is covered by your insurance policy, the insurance company compensates you out for the financial loss suffered. This can be done in a number of ways, all with the objective of returning your business to the position it was in before the loss happened.

With the intervention of an insurance policy, it is almost like the negative risk event never happened and your business is protected from unforeseen financial losses. Insurance enables entrepreneurs to manage their cash flow with more certainty, and a negative risk event – which is out of your control and which cannot be predicted to occur with any certainty – does not shut down your operations indefinitely while you try to scrape together resources to plug the hole that has been left in your finances.

Through insurance the expensive assets that are so vital to the operation of your business and took so much effort and capital to acquire, are protected should they be lost, stolen, or damaged.

There is no “one size fits all” approach to insurance; what works for your competition may not work for you. This is due to each individual and each business having a different risk profile and risk appetite. This means that the risks that one business face do not exactly match yours. For this reason, you should seek out professional advice to assist you in identifying the risks that you face and in sourcing options for insurance products suited to your needs and requirements. At this juncture, the service of an insurance broker proves itself absolutely invaluable.

Who can help me with this?

XonRisk is dedicated to meaningful economic empowerment by assisting small businesses and start-ups to manage their risks so that they are more sustainable and well-positioned for long-term commercial success. Through walking the risk management journey with our clients and facilitating the placement of insurance solutions that suit the business at each stage of its life cycle, we help these businesses grow from start-ups to large corporate, taking care of their evolving insurance needs along the way.

Contact us to find out how we can help you protect your business!

We started XonRisk because we believe in SMEs, the entrepreneurs that drive them and we have uniquely positioned ourselves to help them with their insurance needs.

XonRisk, pronounced “ZonRisk”, is dedicated to meaningful involvement in African economic development. XonRisk is powered by leading independent risk and short-term insurance advisory business Econorisk, which combines years of experience in the South African insurance industry, creative solutions, and a deep need to help. It is for these reasons that we offer the ideal solution for SMEs and start-ups. Our clients enjoy the benefits of access to leading expertise and a dedicated broker that understands the challenges these businesses face.