Essays on Manage the Risk and Have a Special Interest from Insurers Case Study

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The paper "Manage the Risk and Have a Special Interest from Insurers" is a great example of a Management Case Study. Risk management (RM) can be described as the process of safeguarding the company’ s assets against risks or losses that arise while conducting business activities, by means of different types of instruments (insurance, retention, prevention, and so forth). Risk management can also be defined as the process of controlling, organizing, planning, and directing resources in order to realize the set objectives when events (bad or good) happen. A risk management strategy is one that allows business organizations to succeed in all their business operations.

When a business does not have a sound RM strategy, it is likely to put its operations at risk and limit business expansion opportunities. Rather than offering suitable compensation and protection against damages or losses, insufficient insurance cover can lead to multifaceted issues. Ultimately, this will make the business entity to experience a higher financial loss. All small-medium enterprises (SMEs) should understand the significance of taking insurance coverage and its value as a mechanism for transferring risks.

Therefore, insurance, as it will be evidenced in this piece, can be used by all SMEs to safeguard their business operations against risks as well as ensure the operations are sustainable. SMEs can be defined as companies that do not surpass the threshold values of the total assets, annual sales turnover, and the number of employees. Insurers play a crucial role in helping SMEs to protect their business operations from risks such as natural disasters, financial crises, and so forth. Insurance can be defined as a contract whereby there is an agreement that one party will compensate (indemnify) the other party in case of damages or loss attributed to risks specified within the contract.

However, the insured entity must pay the insurer a certain amount commonly referred to as ‘ insurance premium’ . The majority of SMEs business owners in the UAE normally consider insurance as an unnecessary expense and somehow a luxury rather than a necessity. Still, some consider it to be very crucial, a necessary investment that helps them protect their business operations from different forms of risks. The focus of this case study is to examine how SMEs in the UAE can manage their risk and have a special interest from insurers. Discussion In Brau et al.

(2011, p. 437) study, they observed that it is imperative to pay attention to the various sources of risk; which includes the risks associated with community-based safety nets and government while designing suitable programs. Risk diversification attributed to exogenous shocks which can influence both NGO systems as well as government programs, for instance, have to be integrated into the micro-insurance products. In addition, microinsurance program development has attracted strong interest from the public with the view to SMEs’ under-investment in insurance cover despite the existing risk.

Brau et al. (2011) suggest that the development agencies, regulators, policymakers, and donors have to collaborate in order to ensure the effectiveness as well as the solvency of the micro-insurers to prevent the undermining of individuals’ ability to transfer risks effectively and also generate more uncertainty sources. The SMEs have to cautiously examine the benefits and costs of taking insurance to protect their business operations. As mentioned by Pozen and Vinjamoori (2015, p. 253), the majority of SMEs do not have sufficient resources to manage the financial volatility associated with related to the self-funded plans.

Even though this volatility could be reduced through the purchase of reinsurers’ stop-loss policies, Pozen and Vinjamoori (2015) posit that most SMEs have no interest in controlling costs associated with health-care. The need for SMEs to use insurance as a way of transferring risks is increasing day-by-day. Failure to manage risks can result in financial and economic losses. As indicated by Verbano and Venturini (2013, p. 187), risk infuses every human action, management area, and business type.

In many cases, however, the prediction of risks is based on experience.

References

Ang, C., 2016. RM a vital link in SMEs' business strategy. [Online] Available at: http://www.meinsurancereview.com/Magazine/ReadMagazineArticle/aid/38387/RM-a-vital-link-in-SMEs-business-strategy [Accessed 20 January 2017].

Brau, J.C., Merrill, C. & Staking, K.B., 2011. Insurance Theory And Challenges Facing The Development Of Microinsurance Markets. Journal of Developmental Entrepreneurship, vol. 16, no. 4, pp.411–40.

Falkner, E.M. & Hiebl, M.R.W., 2015. Risk management in SMEs: a systematic review of available evidence. The Journal of Risk Finance, vol. 16, no. 2, pp.122 - 144.

Jadi, D.M., Manab, N.A. & Ahmad, S.N., 2014. Insurance as a risk transfer mechanism in Small and Medium Enterprises (SMEs). In International SME Conference. Kuala Lumpur, 2014.

Jayathilake, P.m.B., 2012. Risk Management Practices In Small And Medium Enterprises: Evidence From Sri Lanka. International Journal of Multidisciplinary Research, vol. 2, no. 7, pp.226-34.

Menon, P., 2015. Thinking Ahead: The Importance Of Insurance For SMEs. [Online] Available at: https://www.entrepreneur.com/article/252429 [Accessed 20 January 2017].

Nezeritis, A., 2016. SME Claims & Risk Management in the UAE. [Online] Available at: http://www.theintelligentsme.com/2016/06/sme-claims-risk-management-uae/ [Accessed 20 January 2017].

Panigrahi, A.K., 2012. Risk Management in Micro, Small and Medium Enterprises (MSMEs) in India: A Critical Appraisal. Asia Pacific Journal of Marketing & Management Review, vol. 1, no. 4, pp.59-72.

Pozen, R. & Vinjamoori, A., 2015. Self-Funding Of Health-Care Plans By Small Firms: Risks And Reforms. Risk Management and Insurance Review, vol. 18, no. 2, pp.243-54.

Saksena, S., 2015. Rewards outweigh risk for UAE SMEs. [Online] Available at: http://www.theintelligentsme.com/2015/08/risk-and-reward-for-smes-in-the-uae/ [Accessed 20 January 2017].

Verbano, C. & Venturini, K., 2013. Managing Risks in SMEs: A Literature Review and Research Agenda. Journal of Technology Management & Innovation, vol. 8, no. 3, pp.186-97.

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