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Protecting Your Business against Risk

Are you prepared for the risks your business might face?

Gerald Mwandiambira

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Most Entrepreneurs are considered risk takers by having chosen a life of creating wealth on their own as opposed to creating wealth for someone else. It is therefore in the best interest of every entrepreneur to protect themselves and their business against all risks.

Business risk is not limited to just the going concern, but also the lives of all the business’s key personnel and even trade secrets.

Related: How to Hire Professional Advisors

Contrary to popular perception, many business risk products are affordable. However, the complexities of some of these products mean that you have to consult a professional to assist you.

Death, Disability and Illness Risks

The biggest asset of any business is the intellectual property held by the owners, partners, founders and even key staff in key positions.

When a small business loses a key individual, this can be disruptive and indeed in some instances lead to business failure.

Many business owners are unaware that there are policies that protect the business including:

  • Business overheads policy: When a key person becomes incapacitated due to illness, disability or death. Overheads and bills need to be paid. In the case of a small business where often the founder is covering these expenses, the impact can be devastating. This type of policy covers these business related expenses often for up to 48 months including overdrafts, long term loan facilities and potential liabilities. This policy is of particular important in trades where there is high risk of physical injury or illness. Eg: Plumbers, Restaurant Owners, Doctors and Construction
  • Business Contingency: Many entrepreneurs stand as surety for their business. In the event of death or disability, this policy will settle such sureties so as not to impact financially on the deceased estate, affecting the dependents or family of the deceased, or the disabled person in the case of disability.
  • Deferred/Preferred Compensation: A deferred compensation plan is a type of policy plan, which is often used as a key staff retention tool. Should the key staff member fall ill, become disabled or die, an amount is paid to pre-determined beneficiaries of the key employee. The employee can also take out an endowment policy, which will immediately be ceded in security to the employer, who will pay the premiums on behalf of the employee. After the policy has matured and the employee has served a certain number of agreed years, the employee can cash the policy out.
  • Key Man Assurance: Here, the business receives a lump sum pay-out on the death or disability of a key person that is nominated. Often this payment may allow your business to recruit a replacement or use it as an incentive to get similar skills into the business. Replacing a key person can run into millions of Rand. Even the founder of a business can take out a policy on his life so that the business can hire a competent replacement in order for the business to pay dividends to remaining dependents if business continuity is desired.
  • Buy and Sell Policy: In a partnership or shareholding structure it can be a nightmare is the shares of your deceased partner or shareholder go into their deceased estate, and the wife or family decide they want to cash out of the business. If the remaining partners or shareholders do not have cash at hand to buy out the deceased estate, the business may need to liquidate assets, be sold to competitors or may become insolvent or cease altogether. These policies allow cash to be available to buy out a deceased partner’s interest in the business and the shares be re-allocated to remaining business owners as per contract determined when all partners were alive.

Tax Implications

As simple as Business Assurance policies sound, the real complexity is around the various scenarios around taxation and the tax implications. It is highly recommended that any entrepreneur considering business assurance products engage a specialist Financial Planning Professional.

Related: Why Risk Management Matters

Business Risks beyond just assets

All entrepreneurs and business owners are well versed and easily accept risk policies to cover machinery, vehicles, buildings and inventory against theft or loss.

It is however equally important that the lives and the health of key persons in a business are protected. It is important that all entrepreneurs be well aware that death, illness or disability can lead to the fall of a thriving business.

Consult a Professional

To understand, nd for expert advice on business assurance, please consult your financial planner.

If you do not have a competent financial planner already, you should consider interviewing prospective financial planners and conducting background checks with their references.

You will also need to confirm their accreditation with the relevant professional body.

To verify if a financial planner is a CFP® designation or to find a CFP® professional near you, visit www.fpi.co.za or call 086 1000 374 / 011 470 6000.

Gerald is the acting CEO for the South African Savings Institute. He is a CFP Professional postgraduate, Financial Planning Law graduate and an Economics graduate. He has experience in banking, stockbroking, insurance and investments. He also has experience as a financial analyst and strategic planner. Gerald is a specialist in the technical analysis of all financial markets and has extensive experience in dealing with high net worth, institutional clients and the broader mass market. Gerald is the recipient of the Financial Planning Institute of Southern Africa Media 2014 Award, for his work in promoting financial planning in the media.

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How to Guides

(Podcast) Phone Calls Often Solve Email Problems

Irate customers can become your most ardent supporters, but it’s important to treat your clients like people. People like people, and phone calls are more personal than emails.

Nicholas Haralambous

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Emails solve problems – but they also create them. When a real problem arises in your business, is an email the best way to solve it, or should you pick up the phone and give your customer a more personal experience?

Irate customers can become your most ardent supporters, but it’s important to treat your clients like people. People like people, and phone calls are more personal than emails.

Listening time: 3 minutes

Related: (Podcast) Being An Entrepreneur Is Painful

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Company Posts

Why Choose ISO 90012015 As A Starting Point For Your Business

Implementing all elements of the standard can help your business, but what parts of the ISO 9001:2015 standard in particular should prove to be of most beneficial for yours? We’ve listed a few below.

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Ask for any Entrepreneur’s to-do-list, ISO Implementation and certification may not always be at the top of it. Businesses are constantly faced with financial, operational and socio-economic pressures, while business owners must make decisions on projects related to “cost vs the benefits”. But here’s why ISO 9001:2015 is a reasonable investment.

If your businesses is certified under ISO 9001:2008 you had three years to transition to ISO 9001:2015, if you don’t transition, your certification will become redundant. The three‑year period started on the date the new standard was published in September 2015. Don’t wait, your Day 1 of 365 days starts now.

Related: How ISO Certification Can Help You Access Market Tenders

Implementing all elements of the standard can help your business, but what parts of the ISO 9001:2015 standard in particular should prove to be of most beneficial for yours? We’ve listed a few below. It may also protect your business (against big business)

How can ISO 9001 make the difference for my business?

Start by viewing the costs as an investment that allows you to better assure your clients, improve your productivity and raise your ability to compete.

Your certification to the standard, can attract reputational benefits and establish a ticket to levels of business that non-certified companies certainly cannot obtain. This may be the most practical time to implement ISO 9001 for your business.

As the full process can take up to 6 months, you need time to plan and execute your transition to the new standard and it will require work, commitment and changes to the habit of doing things.

This is why it’s vital to begin early and hire consultants with a 100% certification record with any SANAS (South African National Accreditation System) or International Accreditation Body. It gives the guarantee and expertise you need.

iso-process

Your 6 steps to getting ready for ISO 9001:2015

1Establish Processes

  • Documenting and Implementing processes in your business can yield great benefits as your business grows. Setting common processes in the beginning will result in consistency in the products and services, this sets a sound foundation for expansion and future growth.
  • Save time, cost, and ensure delivery. This takes place when you have new employees and point them to processes that are well established and well documented.
  • It allows your staff to feel confident in doing their job, knowing there is a process to follow and with the help of the Document Control Process, you can always re-engineer the process to adapt to change, this results in Continual Improvement.

2Formulate PDCA cycle (Plan-Do-Check-Act)

  • The fundamental basis of the ISO 9001 standard is based on Edward Deming’s PDCA Model. If implemented effectively it can benefit any type of business however large or small you are, it’s practical. The Method is also used by fighter pilots.
  • You build a culture of “careful planning, monitoring, and adjustment of actions” this speaks volumes to your employees, and your clients benefit in return.

3Increase your sales by using ISO 9001

  • By using valuable customer feedback, you build up information to monitor and review your client’s perception of your products and services, this feeds into a corrective action process, which results in a continual improvement to create relationships with existing clients and attracting new clients.
  • Most Tender Requirements from Government, Local and International Companies require ISO 9001 as a qualifier to their procurement process. This gives them the assurance that a Third Party Auditor is auditing an effective Quality Management System aligned to International Standard that has effective process control and will measure client satisfaction.

4Develop an attentive mindset to risk and opportunities

  • Risk and opportunities is the latest introduction to the ISO 9001:2015. This allows businesses to identify potential and current risks in their process and mitigate them before it’s too late, the fundamentals of a successful business.
  • By cultivating a culture where your team have a sharp eye for risk and opportunities will serve your business well.
  • Profits will be maximised while risks are spotted early and can be minimised.

5Take control of change management

  • As the saying goes, “Change is the only constant in the 21st century”. The inability to handle change and adapt accordingly is one of the main reasons that many businesses do not survive through the first two years of existence.

Related: 7 Steps To Achieving Our Higher-Level Goals

6Setting goals and objectives

  • Goals and objectives are key fundamentals of the ISO 9001:2015 standard, these are tools to assist in attaining your companies Vision.
  • When you get into the habit of setting, reviewing, and taking action against objectives, the end results is growth and driving improvement.

It is clear that implementing ISO 9001 can take your business to the next level that benefits startups to established corporates. We stress again the vital importance to begin early and hire consultants with a 100% certification record with any SANAS (South African National Accreditation System) or International Accreditation Body.

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Company Posts

How ISO Certification Can Help You Access Market Tenders

Want to leap-frog your competitors by building your business credibility?

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ISO Certification

2017 has been a challenging year thus far. A decline in exports, slower growth in private consumption and fixed investment has caused the economy to contract in Q1 and enter into its second technical recession since 2009. This means that it is now more crucial than ever to break away from your competition to survive in this economy.

The question we as businesses are all asking, is how can we become more competitive during these tough times?

The answer is ISO Management systems and certification.  The implementation process allows organisations to streamline their processes and benchmark to international standards that have worked for the likes of Toyota, Coca Cola, MTN SA and many more.

The ISO Certification gives your clients the national and international credibility that they are looking for, in you as a business.

What are ISO Standards?

ISO is not an acronym, it is derived from the Greek word ISOS, which means equal and is interpreted as The International Organization for Standardization, which comprises of various National Standards being superimposed into one International Standard. There are approximately 21500 ISO Standards, from Quality, Health and Safety, Information Security, Environmental, Energy and many more. (The International Organization for Standardization)

The ISO standards set a precedence for companies to create a Management System which comprises of Policies, Objectives, Processes, Risk Assessments and Procedures with the aim of being able to provide a consistent service.

The standards requirements can assist a one-man tuck shop to large corporates such as Google.

Think about it this way, when you buy a house, does your insurance company grant you a policy without an Electrical Certificate of Compliance? Do you buy a brand new laptop, mobile device or any other electrical device without a warranty or guarantee? Will you send your child to a hospital that does not have standards in place? Will you buy vegetables that have not undergone the necessary food safety controls?

We, as consumers, have all become cautious, hence the birth of ISO Certification. An independent body (Watchdog) such as the SABS, BSI, TUV, and Bureau Veritas conduct regular audits against your processes and the International Standard to create the assurance you are looking. How ISO Standards And Quality Management affects SMMEs

That is why your company must invest the time and money to implement the value adding systems with the right consultant. This in turn will provide your current and potential clients the assurance that you have the relevant processes in place to deliver what is required and will provide you with the competitive edge. You are not too small to become ISO certified.

Where do I start if I want to become ISO Certified?

where-do-i-start-if-i-want-to-become-iso-certified

ISO Management systems work on a four-phase approach to develop, implement, train and assist organisations through certification.

The following will give you an overview of how the process works:

Phase 1: GAP analysis & Identification of processes

  • GAP Analysis Audit on the choice of your ISO Standard
  • All Staff to undergo awareness training on the ISO Standard (Requirements)
  • Analyse & identify current systems (Policies, Objectives, Risks, Processes and Procedures) within the company and gather information.

Phase 2:  ISO Management System Development

  • ISO Management systems manual (Policies, Objectives and Mandatory Procedures)
  • Process documentation and Standard Operating Procedures
  • Risk assessments and tools to assist in Monitoring, Measuring and Analysing. 

Phase 3: Implementation

  • Coaching and change management of Top Management and attaining Leadership Values.
  • On the job training with all staff and workshops on the ISO Management Systems
  • Internal Auditor & Maintenance Training
  • Internal Audit, non-conformances, corrective actions and reviewing of risks
  • Management Review Meeting and Review of all Statistical Analysis.

Phase 4: Certification

  • Stage 1 Desk Study Audit with the Certification Body
  • Stage 2 Certification Audit, Non-conformances and Corrective Actions completed
  • Annual Surveillance Audits to justify continuous improvement.

ISO standards aren’t rigid rules, but rather a set of generic requirements and guidelines to what we as a business should be following.

It’s the basics of business, we tend to overlook the basics and focus on profits, which jeopardies our quality and service.

Your clients are becoming more advanced, better informed and their expectations are growing. Having ISO Management Systems provides organisations with the competitive edge over their competition, by gaining National/International recognition.

In fact, any organisation, whatever their size or industry sector can give themselves a secure future by introducing ISO Management Systems. Remember to look for management systems that can guarantee 100% certification with any certification body such as SABS, TUV, BSI, Bureau Veritas, DEKRA etc.

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