SMEs advised to embrace risk solutions for growth

Sanlam Kenya Group CEO, Mr. Mugo Kibati

Small and medium enterprises (SMEs) seeking to grow have been advised to prioritize risk management to guarantee their business sustainability.

Speaking during a KPMG TOP 100 Mid Sized companies’ forum, Sanlam Kenya Group CEO, Mr. Mugo Kibati said the adoption of risk management solutions remains a critical factor for business growth.

Alongside Mr Kibati, the forum and panel discussion under the theme “Staying relevant in a changing world” also featured Nation Media Group CEO, Mr Joe Muganda, KPMG CEO, Josphat Mwaura, industrialist, Dr Manu Chandaria and DTB Group CEO, Nasim Devji.

Kibati expressed fear that SMEs may have lost more than Ksh. 50 Billion in 2015 based on the volume of claims paid out under the general insurance class.  “I feel the volume of claims paid out is a good indicator of the level of risk exposure given that only three out of ten SMEs tend to hold risk solutions.”

He further said that the adoption of comprehensive risk solutions provided by local general insurers will help shield SMEs from unnecessary exposure to various liabilities including cybercrime.

Notwithstanding the tough economic climate and fewer resources, SMEs are still held to the same standards of business management by their stakeholders and are therefore expected to maintain a good mix of risk mitigating and management solutions.

Kibati expressed regret that the adoption of risk management solutions in Kenya has continued to suffer slow growth due to poor financial literacy among upcoming entrepreneurs.

Such slow growth is manifested in the low insurance and related penetration rates for products designed to protect the SME entrepreneurs’ assets, employees and liabilities against day-to-day business operation risks.

“It is a worrisome scenario to note that most SMEs do not have comprehensive risk and asset management solutions which leaves them heavily exposed to manageable risks,” Kibati noted, adding that, “sadly, SME businesses built on blood and sweat rarely recover from threats such as fire and burglary due to lack of risk coverage.”

He explained that the retention of bare minimum risk solutions such as third party insurance for motor vehicles and public liability insurance covers provides negligible relief to entrepreneurs.

Entrepreneurs holding minimum statutory covers stand a very slim chance of recovering their business in case of a risk event than those with comprehensive covers.

Due to low financial literacy, risk solutions have been ignored in the local market as they are considered as an unnecessary overhead.

“However, the reality is that business continuity and competitiveness today rests on entrepreneurs’ capacity to hold an optimum mix of risk management solutions,” he advised the Top 100 entrepreneurs.

Kibati noted that in most instances, entrepreneurs retaining risk solutions such as medical covers and pension for their employees stand a better chance of attracting quality staff than their peers offering a better salary and poor perks.

As part of Sanlam Kenya’s business development plans, the firm has managed to rollout a full menu of SME focused financial business services including life assurance, general insurance, banking, credit, health, bancassurance and asset management products.

He added that the firm is also tapping heavily into the Sanlam Group capacity to provide specialist solutions including maritime, cargo handling and related asset management solutions locally and seamlessly beyond the borders.