When last did you do a risk assessment for your business?

Is your business covered for those unexpected curveballs? You know the ones that hit you out of the blue and severely cripple your operations, exposing vulnerabilities you never even knew existed? The truth is, many businesses only find out after a major event occurs that there are gaps in their short-term insurance policy - and then it's too late.

The most common reason for this is that businesses, their operating environments and the prevailing risks change each year, but their policies aren't updated accordingly.

There are also other factors that can negatively affect operations that often fall off the radar, such as contingent business interruption. This is where your operations are affected by a critical supplier's failure to produce the required stock, say for example, due to theft or a fire at their premises. This can cause a serious cashflow disruption on your side as a result of an unforeseen event on a supplier's side.

Other issues like riots, strikes, civil commotion and public-disorder risks fall outside of conventional short-term insurance protection. For this reason, all businesses need additional special risk cover from the South African Special Risks Insurance Association (SASRIA), which specifically covers these types of risks.

Sasria cover is not just an add-on or extension of your conventional commercial policy but rather a layer of protection for the risks your underlying policy deliberately excludes. The value of Sasria cover must match the value for which the business's assets are insured. Failure to do so leaves those assets outside of your special-risk protection, and therefore uninsured in the event of riots or public disorder.

General underinsurance remains a serious blind spot for businesses too. The assumption that underinsurance simply means some assets may not be covered in an event isn't true. In reality, insurers apply the 'condition of average principle' when calculating their liability after an insured event.

This principle is essentially a penalty for clients being underinsured. If the sum insured is less than the actual value at risk when a loss occurs, the insurer can reduce the claim proportionately. For instance, if a sum insured is R4 million less than the actual R10 million value of the property, and the loss is R2 million, the business is effectively only insured for 60% of the actual value. The insurer could decide to settle only 60% of the claim (i.e. R1.2 million), leaving the client to absorb the remaining R800 000.

Such a shortfall can have serious financial consequences and impair a business's ability to bounce back after such an event.

The best approach to countering these common short-term business insurance challenges is an annual risk assessment.

Unlike generic, off-the-shelf insurance schedules that leave gaps in your cover, a formal risk assessment by an authorised corporate broker uses specialised risk-assessment frameworks to holistically review your business. This enables them to design physical and operational risk mitigation strategies that not only protect your business, its assets and its operations, but can actively lower monthly premiums too.

At Reliance Insurance, our annual risk assessments ensure your policy decisions are directly aligned with your business's actual operational needs.

Don't rely on automated baselines. Schedule a comprehensive, face-to-face risk assessment with us this month to ensure your business is fully covered for the end of year holidays and the start of the new year.