The financial impact of crime is still a huge concern for commercial SMEs, making insurance and security provisions a top priority.
According to Jonjon Smit, sales director at CIB Insurance Administrators (CIB), the company’s latest claim statistics indicate that commercial crime claims have increased in 2011.“With around two million small businesses in South Africa, employing just over half of the country’s total labour force, the SME market is crucial to the continuing growth of the local economy, particularly in the current economic environment.”
According to a 2011 International Business Report, half of local businesses surveyed cited the financial losses due to crime as a critical negative element affecting their businesses. 48% said the increasing costs of security affected their business operations and 56% of owners noted the high crime rate as the number one reason that would cause them to emigrate. Smit says that although the statistics confirm that crime is an ever-present risk to SMEs, a worrying trend has emerged whereby a number of businesses have cut back on their security and insurance protection in order to keep up with the costs associated with running a business.
Keeping correct cover in place
“Given the current economic climate it is understandable that many small enterprises feel that they are strapped for cash, however, in light of the alarmingly high rate of commercial crime, it is crucial that SMEs have the correct cover in place,” insists Smit, adding that security should be an integral part of the risk management procedure for any business. “The onus lies with the client to implement suitable security measures to contain a potential loss. In return, the client would pay a market related premium for the insurance cover. Failing to meet a certain level of security could have a negative impact on a claim.”
Smit also warns that a large loss would be detrimental to a business if it was not sufficiently protected. “Without adequate insurance protection, businesses would struggle to recover from the high costs to replace critical assets in the event of a theft related claim. The consequential losses of not being able to operate efficiently could also potentially affect an enterprise’s bottom line.”
He advises business owners to ask their broker or insurer to conduct a risk assessment. “The nature of the business, stock levels, nature of goods and equipment being kept on the premises and what security measures are in place must be taken into account as theft cover is done on a ‘first loss’ basis, which only covers the specific amount selected by a client. Every business is different and faces its own unique challenges.”
Smit’s advice to all SME owners is to be proactive by taking the time to identify any weakness in their company’s security systems and processes, thereby reducing key risks. “Security measures such as alarm systems that are fully operational and tested regularly, surveillance cameras, security gates and burglar bars, access control to and from the premises and changes in day to day routine can minimise the risks involved of a loss, due to a crime being committed,” he says.
“If stock or cash is stolen, or worse, a key member of staff is attacked on the premises, it can have a devastating impact on a business. It is therefore vital that owners regularly consult with a broker to ensure that their insurance policy covers all eventualities and is appropriate for their needs.”