Managing Risks in the Current Environment: Top Risks Impacting Small to Medium Enterprises

The COVID1-19 pandemic has had a significant impact globally, resulting in emerging risks that affect people, businesses, economies and livelihoods. South Africa has felt the impact of this global disaster as risks continue to put pressure on the sustainability of businesses, especially Small to Medium Enterprises (SMEs). 

SMEs generally operate on limited reserves and from smaller customer bases, and as a result have less capacity to absorb external pressures compared to a larger business or corporate.  An SME that isn’t able to operate will not be able to generate revenue and therefore cannot pay for business expenses, salaries, or cover potential financial losses. It is therefore critical for SMEs to consider some form of risk mitigation or transfer by purchasing the appropriate business insurance coverage.

The most prominent risks that SME’s face in the current environment are:

• Reduction in customer activity from aspects such as:
  • Legislation or regulations limiting capacity and/or operating times of your business
  • Customers fear of infection, reduced disposable income, inability to travel, lack of transport

• Reduction in revenue from aspects such as:
  • Stock issues from supply chain disruption
  • Reduced customer activity
  • Economic impacts resulting in rising operational costs

• Reduction in operational efficacy:
  • Workforce losses from illness or lay-offs
  • Reduction in employee productivity and potential mistakes due to low morale, mental health, engagement

These risks have financial and operational impacts on SMEs as they could potentially disrupt or halt their ability to operate for a specific period, resulting in significant financial losses.

SMEs need to proactively work on reinventing their business and look for opportunities to reduce and mitigate these risks in the current environment.

• Adapt and be Agile - adapt your business and your value proposition to meet your customers’ needs during the pandemic such as offering services via online platforms or looking at ways to diversify your offering.
• Update your operating model – streamline your operations to more effectively service your customers during the pandemic, allow for flexible workforce strategies and prioritise the needs of your employees, ensure constant and open communication with your employees and your customers.
• Ensure that you are properly insured – make sure that you are adequately covered in the event that your business suffers damages, losses, or interruptions that could have significant financial implications on your business and your bottom line.

In the current environment, SMEs should be proactively seeking ways to protect their business and avoid placing additional strain on their employees, supply chain, and revenue. Speaking with a qualified and experienced broker can significantly help SMEs make the right choices for their business and gain peace of mind that they are appropriately covering their business against risk.

Contact us now to speak to a Marsh consultant