WE are living in the age of small and medium enterprises (SMEs). One of the key areas of growth in Malaysia, SMEs are expected to contribute up to 41% of Malaysia’s Gross Domestic Product (GDP) by 2020. Currently SMEs are recognised as an important contribution to the Malaysian economy, responsible for almost 36% of the country’s GDP.
While SMEs continue to have a bright path in our country, one of the most misunderstood things about SMEs is the tendency to overlook the need for business protection.
Often, SME owners tend to overlook the need to manage risks with fewer resources, while dealing with the various concerns of running a day-to-day business.
Running a business always involves financial risks, but Business Insurance can assist entrepreneurs in reducing uncertainty while ensuring a protection plan is in place to protect the core elements of an SME’s business.
Let’s take the example of Daryl who has the goal of establishing his own independent digital and creative agency. After spending a decade in the corporate world, Daryl knew it was time to follow his dreams by starting his own business. With strong determination and a gift for strategising, Daryl started small, slowly working his way and expanding his agency.
Over the years, Daryl’s agency grew with a strong revenue sheet and hiring record, boasting a client record of some of the top international brands in the world. It seems almost impossible to believe that this agency started in Daryl’s bedroom, while he worked with friends, part-timers and freelancers.
One of the first things that Daryl did when he expanded was to seek counsel on protecting his business. Daryl has a young family and is the sole breadwinner, hence, his business is his family’s lifeblood.
If something unfortunate were to happen to him, his business would suffer and in turn impact his family.
With this in mind, he saw the need to have his business protected to ensure that his loved ones would still be cared for should an unfortunate circumstance arise.
Prudential Assurance Malaysia Bhd (PAMB) recently introduced a business solution called PRUbiz beyond that focuses on protecting SMEs against uncertainty and risk. While the majority of SMEs will typically have insurance to protect their assets, such as their premises, stock, and vehicles, the human asset of the business is often left uninsured, potentially threatening the future growth of a business.
PRUbiz beyond is a specially designed proposition for SMEs. It provides them with a comprehensive protection and support solution that goes beyond business insurance – with tailored life insurance solutions to protect the business continuity, offers professional advice to help SMEs to work more efficiently, and rewards them with exclusive business lifestyle privileges.
In the case of Daryl’s business, PRUbiz beyond is able to provide business protection against three main scenarios.
This business-specific life insurance can compensate a company for the financial loss and other consequences of the death of an important member of the business. Keyman insurance can provide additional security to Daryl’s business as it safeguards against the loss of a key employee (which also includes himself and/or his partner), which may result in a disruption to sales, creditor’s confidence or customer relationships.
As an employer, he has peace of mind knowing that his business is protected from any financial fall-out due to death or incapacity of a very important member of his staff.
Credit risk protection
Should an unfortunate loss happen to Daryl or his partner, it could affect his business’ ability to repay loans or personal guarantee that could put the business’ profitability at risk. By taking up a credit risk protection, it would help pay off the borrower’s debt if the borrower dies thus, protecting both the company’s credit lines as well as the deceased borrower’s personal estate.
This will prevent disruption in business operations and provide creditors, customers and other stakeholders the assurance of a smooth transition.
Business continuity protection
Daryl’s agency continued to expand as he merged forces with another boutique agency to become a one-stop consulting agency that uses different and novel approaches to engage consumers in a two-way communication. This enabled Daryl’s agency to double in size and expand their client list in months, proving the profitability and far sightedness of the partnership.
With the merger, Daryl’s agency now comprises of three partners. With most of the partners being the main breadwinner in their families, they all agreed to consider taking up the business continuity protection, also known as, partnership protection.
With this protection plan, it allows the partnership to continue without the involvement of their next of kin. If one of the partners dies, the financial security and stability of the partnership may be jeopardised.
The remaining partners may be obliged to pay a capital sum to compensate the deceased’s estate for his stake in the partnership.
With business continuity protection, a lump sum will be released, allowing the deceased’s share of the partnership to be bought from their next-of-kin in the highest value.
Prudential’s SME protection plan comes with various added values through partnerships with established partners such as RHB Trustees, Baker Tilly, Cycle & Carriage Bintang, KDU University
College, CIT Travel and Oris. These partnerships complement and support Prudential’s SME proposition by providing customers with a business solution through access to various services be it tax advisory, trustee services and lifestyle privileges.
Ultimately, business insurance protects business interests and forms a major part of the overall wealth value. It is important that SME protection plans ensure that businesses are properly protected through a wealth maximisation plan that ensures smooth transition and succession of business under any unexpected circumstance.
This promises to instil confidence into employees, suppliers, customers, and banks ensure that your SME continues to prosper.
SME owners need to evaluate certain factors as they consider protection plans for their businesses.
First it is important to assess the value of the assets and content of the business before understanding the limits and liabilities. This allows the owner to identify the perceived and probable risks before recognising and identifying the mandatory requirements for employers and employees protection and benefits.
To learn more about Prudential’s SME protection options, please visit www.prudential.com.my/en/our-services/prubiz-beyond/