By Cynthia Alo
Insurance experts from Old Mutual Nigeria have advised Small and Medium Scale Enterprises (SMEs) on the need to adopt insurance policies in order to mitigate business risks and ensure sustainability.
The advice is coming in the wake of the huge losses suffered by SME businesses due to the civil unrest that was witnessed in several parts of the country.
The experts explained that SMEs were hugely affected by the recent crisis that originated from the protest and other existing factors such as exchange rate, interest rate, unemployment, “while some are geopolitical factors, technological factors which most times could put their businesses on halt temporarily and in some cases permanently.”
They hinted that since SMEs are the key drivers of the economy, they should be the major buyers of the insurance policies as several risks abound in business.
Speaking during at virtual meeting tagged: ‘Managing Risk in Uncertain Times-Enabling Businesses to Succeed,’ the Chief Risk Officer, Old Mutual, Mr. Kunle Odetola-Odeleye, said the meeting is aimed at SMEs business owners to guide them on how to look out for uncertainties.
He also stated that the meeting also provided an opportunity to teach SMEs how to sustain their businesses in order to achieve their dreams by ensuring that they manage their risks appropriately.
“The whole point of this webinar is for you to be able to secure your business in the long run,” he stated.
He advised entrepreneurs to understand the economic key indicator that applies to them while examining how the economy is performing.
According to him, “If the economy is producing more and also vibrant during the boom period, the Gross Domestic Product will be increasing. Interest rates speak to the cost of financing your business, while unemployment speaks to the people who have money to buy your products. The higher the unemployment rate, the higher the risk of the decline in sales of your products depending on the industry you are into. Inflation rate speaks to the cost of operation, and international trade that covers a spectrum of things. These are some of the areas where risk arises. Some of these problems can be economic, geopolitical, psychological, technological, or opportunities. Things are changing and things will continue to change, so we need to be able to protect our business, family, and endeavours.”
Odetola-Odeleye tasked business owners to always discuss extensively with insurance relations officers in assessing the potential impacts and different scenarios that could play out in their business.
Continuing, he remarked that the gross total of a business would help an entrepreneur determine the profile of risk, and the inherent risk that it carries, “the business owners might not know this but we need to develop the culture of anticipating potential pitfalls except the ones we do not have control over.”
Speaking on the pyramid for concerns for SMEs, Head, Bancassurance, Dumebi Okonkwo disclosed that with insurance, business owners would protect their brands, ensure growth, maintain it, and protect it from future crises.
On areas to secure in businesses, Okonkwo posited that the current crisis witnessed in the country could make some business owners not to bounce back to production because of the fathom of loss they suffered.
She said: “In the midst of this, the insurance companies should put out a statement noting that as a result of the chaos, they incurred substantial loss running into billions. When you dig down into the makeup of this loss, you will feel sad that not up to 10 per cent of the SME business owners will benefit from the insurance. The reason is simple, they didn’t insure.
“While a number of them will be back in operation, the owners of the malls themselves insured the assets, the tenants too who once occupied these malls will not be able to come back because they didn’t insure their business.
“The insurance companies will be paying the malls and they will renovate those malls in no distance time pending the process of the insurance payments. Given that the SMEs are the main drivers of the economy, they would have been the ones to be the most beneficiary of the insurance claims payout.
“In utilizing insurance as a platform for providing security, the few steps that must be carried out includes risk assessment, this means identifying understanding, evaluating those potential hazards that have the capacity to bring your business to a halt. Risk assessment is critical so when a business owner is assessing his risk, it means he is identifying his assets and ways in which he can mitigate financial loss that will flow from these assets.”
Speaking on understanding SMEs and risks involved, Head Corporate Sales, Life Business, Mr Tubi Makanjuola, stated that with the current state of the economy, there is a need to recover the critical sector which is the small and medium enterprise business.
According to him, despite contributing 48percent to the nation’s gross domestic product, GDP in 2019, SMEs are hugely impacted by factors including inadequate power supply, bad road network, insufficient infrastructure, multiple taxations, managerial skills among others.
He noted that insurance is the only platform that can serve as security for the business owners in ensuring that business goals are fulfilled.
He argued that insurance is an investment and an expense because it secures the future of businesses going forward.
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