Buffer For Hard Times
In his classic work, The Art of War, Sun Tzu declared:
"Those who will win, compute a great number of factors before a challenge.
Those who are defeated, compute a small number of factors before a challenge.
Careful planning will lead to victory. Poor planning will lead to defeat. Worse, if there is no planning at all."
In the matter of insuring a business enterprise against unforeseen risks, this passage remains relevant even to this day.
At the beginning of the year, a business enterprise usually draws up financial projections and forecasts its operating expenses. If funds used to purchase equipment and inventory are borrowed, arranging for ample protection against all imaginable perils to ensure recovery is clearly a battle-tested idea.
Philam Insurance Executive Vice President and Chief Operating Officer Ernesto Valencia however notes that unless required by lenders, most companies at present do not seek insurance. “Protecting your investment should really be a part of the cost of doing business,” he emphasizes. “Otherwise, the likelihood of the business getting affected by adverse circumstances is very high.”
He observes small and medium-scale enterprises (SMEs) continually exposed to the hazards of trade are particularly vulnerable. “More often than not, entrepreneurs opt to mortgage their house and lot to secure capital for investment. If a fire hits their business, even their residences are compromised”.
He goes on to say that coverage should extend to the entrepreneur. “The best course of action is to protect the asset, as well as the life and well-being of the owner to guarantee continuity of the business.”
He enumerates the following potential liabilities facing SMEs in the course of daily operations.
Types of Risks:
- Loss or damage to factory or office premises, machinery, equipment or stocks/inventory caused by the fire, earthquake, typhoon and other natural calamities
- Loss of auto and other mobile equipment
- Loss of goods in transit
- Death or bodily injury to employees
- Legal liability to 3rd parties due to property damage or bodily harm arising from the use of products
- Failure to comply with contractual obligations to customers and suppliers
- Employee dishonesty
- Criminal acts by 3rd parties
While the repercussions of these hazards could create a crippling impact, Mr. Valencia remarks it need not to be a severe financial burden because the purpose of insurance coverage is precisely to soften the blow to SMEs.
Towards this end, Philam Insurance developed the Business Protection Plus, a comprehensive insurance package catering to the specific requirements of companies with asset bases of 40 million and below.
An annual insurance policy, the product provides coverage against damages caused by fire, burglary, inland marine loss, accidental death, signage destruction, and general liability such as food and drink poisoning, among others.
“We aim to help clients get back on their feet right away, so we are the only company that provides an immediate P 300,000 emergency allowance”, he declares.
Philam Insurance is a part of the Philam Group of Companies. With assets of over P 10 billion, it is one of the largest non-life insurance companies in the country. It is also a member of the American International Group, a leading US insurance and financial service organization operating in 130 countries.
With the help of insurance company partners like Philam, entrepreneurs have a greater chance of emerging victorious in any business environment. After all, business like war needs leader with foresight and flexibility.
Just ask Sun Tzu.
Source: Business Line Vol. 1 No. 2 2003