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Small businesses are being crippled by escalating insurance costs and risk management, according to a national survey conducted by CPA Australia in July 2002. According to the survey, around 30,000 small businesses depend on one major customer for most of their income. Tony Martin, Advantage One Director, says: ?Diversification is the key to survival. The recent corporate collapses (eg Enron, HIH, OneTel etc) illustrated big business is not immune to failure. Many small businesses pay the ultimate price when they tie themselves to a business they have no control over.? In addition to the above, small business also identified an economic downturn in Australia, a drop in sales, failure of major customers? business and interest rate increases as some of the biggest threats to business. Two thirds of small businesses see lack of insurance cover as the biggest risk and over 60% think that insurance premium increases will hurt their performance. Managing the problem was taking more time away from their core business. Government needs to pursue its initiatives in this area to avoid a crisis situation among small businesses?, Mr. Martin said. ?Unless controls are put in place immediately to limit exposure, SME?s will continue to suffer. Their ability to drive their business performance will continue to be diluted. They are faced with rapid escalation of premium costs as well as being confronted with increasing levels of litigation and ever increasing liability payments. It's a lose-lose situation for SME?s. Even if litigation falls in their favour, it?s an enormously expensive exercise, both in terms of money and time?, Mr Martin said. Despite this, only one third of SME?s have considered strategies to deal with insurance problems, with some having no plans to cope with the crisis. One in two businesses would operate without insurance if they were confident they could protect their assets from claims. The survey also found that almost half would not do anything to prepare their business for interest rate rises. The most common response to rate rises is to increase prices. Few businesses considered options like business improvement techniques, re-financing, debt reduction or re-negotiation with their banks. Clearly it?s time for those at risk to get smarter, seek advice and take a good look at their business and seek to develop some fall back strategies?, advises Martin. |
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