SMEs and business risk: why it is important to make sure

The world today has profoundly changed. And this is not new. Progress and growth in the twentieth century were linear and constant, but in the 21st century nothing can be foreseen , nothing is clear. Especially if we talk about companies, today, the risk is very high and the questions that many entrepreneurs ask themselves are: are they able to deal with the damages for my responsibilities? To protect my employees? What kind of economic protection does my company have if production remains steady?

In short, there is no venture without risk, but not all risks are good. In fact, there are speculative risks that are physiological and good (ie those risks linked to future events that can increase or reduce the value of the company, eg launch of new products, new markets, financial investments) and there are risks pure that are, so to speak, bad (that is, non-competitive risks connected to sudden events capable of reducing the value of the company, eg fires, accidents, civil liability).

And it is precisely starting from the bad risks that companies have to acquire greater awareness and protect themselves . By unpacking the concept, protecting your business means:

•     Protect financial capital ;
•     Protect economic capital ;
•     Protect capital assets ;
•     Protect human capital ;
•     Protect cultural capital ;
•     Protect the fiduciary capital ;
•     Protect civil capital .

To protect all these aspects the entrepreneur needs to take out an insurance policy : but what are the arguments that drive him to secure his company? Insured SMEs can access credit with lower average rates and have a better credit-to-loan ratio . Moreover, for the companies that assure the production processes, the contingencies do not impact on the heritage , but only on production (but this can also be guaranteed).
On the other hand, unforeseen PMIs double their negative consequences, impacting both on production and on the ability to repay the contracted debt or require additional financing for the repair. It is clear, from this simple analysis, how important it is for entrepreneurs to insure their company and not manage contingencies on their own.

Specifically, there are 3 types of integrated coverage to protect business income. Let’s see them in detail.

Protection of invested capital

The protection of invested capital refers to the protection of material productive factors and of production continuity . In simpler terms, every entrepreneur relies on the machinery, on the various plants, on the logistics for the productivity of his company: in case of unexpected damage, how can he prepare the economic resources necessary to buy new machinery , or fix existing ones, and resume the production activity as soon as possible? Thanks to a protection of the invested capital, the company can cope with this need.

Protection against civil liability

The civil liability of a company refers to the responsibility that the carrying out of the activity has in respect of damage caused to third parties : for example, a mistake by employees , damage caused by a defective product, an unexpected product produced by the building. These damages are difficult to quantify , unlike the damages that affect the company assets, and without adequate insurance coverage they can represent a huge risk for the assets.

Protection of human capital

A company goes forward only and thanks to the resources that the entrepreneur decides to put in place for the achievement of business objectives. It is necessary to protect and  protect the workforce in order to face the situation if injuries , illness or death are necessary . The insurance on human capital also help to create welfare in the company, they manage to retain the employee and make him feel part of a reality that cares about its tranquility and its effectiveness on the job.

In conclusion, company safety is an important point not to lose the continuity of production that guarantees constant growth , both for companies and for workers.