Businesses are just like investments, with some even being the vehicle of an investment. Therefore, just like how we would manage our investment portfolio, businesses should also have a proper risk management in place.
Insurance for risk transfer
While there are many techniques for risk management in businesses, the most commonly employed technique is risk avoidance. However, as doing so may compromise the quality of business, this is less commonly used. Instead, businesses usually manage risk by retaining risk or transferring risk.
This transfer of risk can be done through the use of company insurance. By purchasing an insurance policy, businesses are effectively passing on a specified risk of loss to the insurer. This allows businesses a solution to manage their risks and is an encouraged method for risk management.
Some examples of company insurance include cargo insurance, project bonds and professional indemnity policies.
Is insurance an unnecessary cost?
The Ministry of Manpower (MOM) has made having Work Injury Compensation Act (WICA) insurance and Foreign Worker Medical insurance compulsory; while landlords would require you to have office insurance with public liability in order to rent from them. As a result, some businesses may view insurance as nothing but unnecessary costs.
However, this is not the case as insurance is meant to provide protection and security in the event of unforeseen circumstances. Take for example the three different Geylang shop house fire incidents last year. With the fire burning through the roofs of affected shop houses, not only did these shops lose their goods to the fire but they would also have to undergo major renovations in order for business to resume. This disruption in business could result in substantial losses for the affected businesses.
However, if the shops had the right type of insurance coverage, they would have been able to make a full claim from their insurer. Not only would their insurance pay for the property that was damaged and lost in the fire but it would also cover the cost required for the business to resume operations.
Insurance as protection against the unexpected
Did you know that the average cost of a cyber-security attack in Singapore is approximately S$1.7 million per breach?1 While the businesses involved might not be at fault for the breach, they would still have to bear the cost and consequences of such breaches. In such instances, having insurance could come in handy by helping you to mitigate the risk.
With data protection and IT security breaches resulting in heavy legal liabilities to businesses, consider getting protected with cyber insurance on top of the typical director and office insurance or the professional indemnity coverage.
Fundamentals for a successful business
The fundamentals for a successful business should be to improve the potential gains and credit worthiness of the corporation. This can be done through the proper management of business risks where potential losses are limited.
If you are interested in finding out how you can get more competitive premiums for your business insurance or would like advise on how to better manage your company insurance and employee benefits, speak to our experts today.
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