With anticipation of a more positive second half of 2022, Australian small business owners may benefit from reviewing their business risk profile along with their business insurance as they scale up as business confidence returns.
- In June 2022 the average number of people employed by Australian SMEs increased 28.9 per cent.
- Retail, hospitality and tourism are the best performing sectors in terms of increased employee numbers.
- SME business owners may need to review and update their business insurance policy if their circumstances change as their business recovers.
As SME business owners look forward to a positive second half of FY2022/23, they are encouraged to review their business insurance if their business circumstances change as business confidence returns.
Business risk management and business risk mitigation can provide a safety net to help protect your business in the event that things don’t go according to plan. Because try as you might, in business there will almost always be an element of risk.
“As a business changes, its risk profile may change with it,” says Jane Mason, Head of Product, Channels & Risk at business insurance comparison website BizCover. “It’s always good practice to factor in how your risk levels may have changed and review your business insurance accordingly, because business insurance is not a set-and-forget product.”
Four tips for managing business risk
Risk management helps SME business owners to identify, evaluate, and prioritise risks to their business, with the aim of minimising risks wherever possible. SME business owners can follow these four steps to manage their risk.
Risk identification
Risk identification assesses your strategic risk management plan, while also considering market assessments, industry forecasts and competitor analysis. Information gathered from these sources can be used to identify potential risks to your business.
Risk assessment
Risk assessment evaluates the types of risks that your business may be exposed to. It’s a set method aimed at assessing the likelihood of a risk occurring and its severity, should it occur. SMEs can run risk assessments for various purposes, including product labelling, community planning, and producing environmental impact statements, to name a few.
Risk monitoring and control
Risk monitoring and control helps SME owners to identify risks that could directly impact their business. Once identified, monitoring and control strategies can help avoid or minimise losses from unforeseen events by understanding their causes and planning how to manage them.
Risk transfer
Risk transfer is a process where, by payment or agreement, one party takes on the risk of loss from another party. Risk transfer is transferring risk – whether by insurance, negotiation with suppliers, or through other means such as contract provisions that provide compensation. Risk transfer can be direct or indirect and may occur before or after the loss event.
“An easy way for SME business owners to avoid being underinsured is to review their business insurance as their business risks change,” says Mason. “Simply renewing your existing policy at EOFY or at the annual renewal date may not provide the adequate cover for your business if your business circumstances have changed.”
*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.