Why Small Business Owners Must be Master of Risk Analysis

Risk Analysis is a financial process and technique largely ignored by business owners, particularly SMEs. Given the current business clime and precarious conditions that currently face the local and international economies, it becomes imperative to learn and master the rising odds by getting acquainted with the subject of ‘Risk Analysis’ in business.

Umashime Oguzor Doghro, Head, General Insurance Retail, Leadway Assurance attempts a deep dive into understanding the role of Risk Analysis in business growth, survival, and success and how the former is a major determinant in value creation.
Small and Medium-Scale Enterprises (SME) growth in Nigeria has been phenomenal. PWC reported that the sector has been responsible for about 48% of the country’s GDP. They also constitute 96% of the country’s businesses, employing 84% of her total workforce. With a rising population, which is predominantly youthful, we continually see a spike in entrepreneurship with youths venturing out and taking the risk to create opportunities, value, and jobs for different stakeholders.

Having been the Head of Retail at Leadway Assurance for close to three years, I know without a debate that a handful of business owners face several challenges, ranging from financial incapacity, damages or losses to improper workforce structure. A lot of entrepreneurs struggle with risk management; hence, the challenges.

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As a responsive business, Leadway has always been at the forefront of supporting SMEs’ growth in the country. Over the years, we have evolved our service offerings to provide a robust risk management structure for the different perils/threats facing businesses, based on their services’ peculiarity. We are committed to helping these businesses mitigate their risks effectively because we understand the impact risks play in business survival. While we recognise that SMEs have lesser financial backing than most large corporates, we have designed cost-effective but strategic tools to help them manage their risks and prevent losses that would otherwise threaten the survival of their businesses.

A publication by the Association of Chartered Certified Accountants (ACCA), titled “Risk and the SME”, defines risk, as the “effect of uncertainty on objectives”. It reflects the reality of an uncertain future that SMEs must navigate to succeed, including events that threaten financial loss. To succeed, SMEs need to put measures in place to constrain threats while exploring their respective industry opportunities.
An integral part of risk management is acting when opportunities present themselves, based on a thorough assessment of all the circumstances. As an entrepreneur, you must identify and evaluate your business’s risks to provide essential insights for sound decision-making.

It is critical for a business to analyse its entire offerings and the possible exposures in different areas where they can portend loss should any identified risk crystalise.
So, what is this Analysis? Typically, SMEs go through different stages in their growth. They need to manage their risks appropriately at the various stages of their transition to enable them to put in place adequate means to cater to these risks as their businesses expand. At Leadway, we take a needs-based approach which entails analysing the enterprise to enable us to proffer solutions, based on their potential risks. This step is taken periodically to cater to changes in the business, especially at a growth phase to ensure that the risks are appropriately valued to prevent undervaluation that may result in a loss to the business.

Have in mind that, in mapping out a long-term plan, implementing a robust risk management structure is a critical foundation to growth and expansion for any business. An exposed risk crystalising can set a company back by five years in terms of loss volume. Many companies have gone under due to a risk incident from which they never recovered from its impact. Having learnt from the unforeseen uncertainties of 2020, entrepreneurs should start taking smarter steps to ensure they do not fall victim of similar experiences this year.

In the five decades of our underwriting experience, Leadway Assurance has a proven commitment to working and partnering with SMEs to provide risk solutions. We have a comprehensive bouquet of offerings for small businesses that cover business assets, third-party liability risks, and the lives of individuals within the company. This offering also includes free professional advice and consultations for the SMEs.
In the same vein have gone on to partner various SME-focused organisations to offer robust financial education critical to helping them succeed by making smarter decisions from identifying risk, and effectively managing and mitigating them from impacting scaling businesses.

One of the smartest decisions you can make for yourself and business this year is to invite us to partner with you through your unique entrepreneurial journey.
Call our professional advisors today via our virtual communication channels – 012800700 Social Media handles @LeadwayAssurance on Facebook & Instagram and @Leadwayinsure on Twitter or send an email to Lcs@leadway.com. You can also request a call back from our experienced advisors by visiting www.leadway.com/call-me