What are the risks to small and medium sized businesses?

If you’re a small to medium business owner, time is precious. Even so, it’s worth investing some of that time to consider your business’ risk exposure and ensure you’re ready for all eventualities. Whether you’re working with a broker or tackling the task in-house, here are the essential questions you should ask to help identify risks – and most importantly, what to do to mitigate them.

Have you ever considered the risks that face your business?

If that seems like a strange question, it shouldn’t be: right now, small to medium enterprises face a heightened risk to their normal business operations. Due to a range of factors, from supply chain delays to high inflation to more frequent and severe extreme weather events, it’s more important than ever to take a moment to assess which could affect your business – and what you can do about it.

To make things easy, here’s a checklist of the various risks and what you can do to remedy any issues. Just a few moments now can improve your business resilience.

Question 1. Does your business own property and premises?

If so, appropriate insurance is vital. Allianz claims analysis shows that fire is the largest single cause of business interruption and corporate insurance loss – and new factors like lithium-ion batteries and energy storage systems add to the risk.

The good news is, you can mitigate some fire risk with adequate smoke alarms and sprinkler systems, for example. But it’s important to take a look at your unique circumstances to assess exactly what the best approach is – and how much insurance you need to address remaining risk, including other risks like flood and water damage.

The first step is talking to your insurance partner or broker.

Question 2. Does your business own vehicles?

If your business owns a vehicle – or multiple – that’s another risk you need to consider. It’s worth thinking about who drives your business vehicles. Are they a pooled asset that remains stored on business premises, or an individual one that goes home with an employee? Are there multiple sets of keys – and who has these at any given time? Are they fully owned, or does a finance or leasing arrangement apply?

You can reduce risk by garaging vehicles on site and tracking key access, but that’s not always a practical solution – so it’s best assessed within the context of your business needs.

Any of the above factors will either impact the likelihood of something going wrong, the magnitude of the impact, or both. Sit down with your insurance partner or broker to talk through what your situation is, and how you can best address the risks.

Question 3. Does your business rely on machinery?

You don’t need to run a factory or farm to be vulnerable to machinery breakdown. Something as simple as a fridge breaking down in a café can cost a hospitality business thousands, for example.

If your business runs with machinery that could malfunction or breakdown, you’ll need to both mitigate the risk with regular maintenance, and insure against it with a suitable insurance product. Again, your insurance partner or broker will be the best guide as to what you need, and how to implement it.

Question 4. Are you covered for public liability?

Does your business interact in any way with the general public, or their property? Depending on your sector, there’s a high chance the answer is yes.

If so, you’ll need public liability cover to address the risk that someone gets injured, or someone’s property is damaged in the course of your work. These are circumstances where you may be legally liable to pay compensation.

Of course, it’s also essential to reduce the chances of an incident happening in the first place with appropriate safety measures. Conduct a safety audit on your premises, to highlight any potential issues.

If you’re unsure where to start, talk to your insurance partner or broker. “ brokers don’t just understand insurance,” explains Jason Hawksworth, Allianz General Manager, Distribution. “They understand the environment their clients operate in.” This wholistic understanding is invaluable – so it’s smart to take full advantage of it.

Jason Hawksworth, Allianz General Manager, Distribution

Question 5. Are your employees covered?

Do you employ staff? And do you have workers' compensation insurance? If you answered ‘no’ to the second question, you could be subject to penalties for not meeting your legislative obligations to hold a current workers' compensation policy.

Just one employee’s workers' compensation claim could cover medical expenses for physical or mental injury, rehabilitation, and lost wages, and have a financial impact on a business.

The exact requirements vary between Australian states, so check with the relevant regulatory body in your jurisdiction of operation to ensure you’ve got sufficient cover.

At the same time, it’s vital to take measures to reduce the risk of harm to your employees. There are many ways to do this, and the best course of action will depend on your industry and the nature of your business. Talk to your insurance partner or broker if you’re unsure where to start.

Question 6. Do you know what happens if your business is interrupted?

Imagine if a disaster, accident, or another of the above scenarios meant your business had to cease trading for a period of time. How would this affect your bottom line?

Business Interruption Insurance covers you for consequential loss of profits, and it can be essential if your cashflow relies upon regular trading or operations.

Talk to your insurance partner or broker about the best way to ensure you’ve got this risk covered.

Question 7. Finally, do you know if your business is insured for enough?

If you answered the questions above without concern, that’s great news.

But it’s good to be aware that many businesses are underinsured – especially in today’s high-inflation environment, where building material and rebuild costs have skyrocketed. It’s essential to check your insurance is fit for purpose on a regular basis.

“Insurance is not a set and forget; it’s an ongoing process,” explains Basil Taylor, Head of Risk Consulting, Allianz Australia. “Ideally, that needs to be managed with an insurance partner or broker.”

Your insurance partner or broker will be alongside you as a long-term partner for your business – making sure your assets are both valued correctly and covered sufficiently as your business circumstances, and the wider economy, changes. This means you’ll be ready, whatever transpires.

The next step is speaking to your insurance partner or broker about assessing your risk exposure.

Basil Taylor, Head of Risk Consulting,
Allianz Australia

Disclaimer

This article has been prepared by Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL234708 ("Allianz"). In some cases, information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.

Any opinions expressed constitute our views at the time of issue and are subject to change. Neither Allianz, nor its employees or directors give any warranty of accuracy or accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in this article.

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What are the risks to your SME business – and how can you reduce them?