Risk And Insurance - BAZS Company - Case Study Example

Name Course Instructor Date BAZS Company BAZS Company is a profit making limited company operating in the UAE. The company has just lasted a period of about five months thus it is still considered new in the market, this makes it to be vulnerable to many risks especially in terms of competition from more established companies in UAE. The company focuses on providing services to the tourist who visit the region through its transportation services and even places for the tourists to spend their vacation, thus the company is seen as venturing into the hospitality sector. BAZS is a private limited company being owned by a partnership of five individuals, the major shareholder being Mr. Tomkins with a majority share of 41%, he is seen as the owner of the company as he is the senior shareholder of the company, it was formed with an agreement of the five people with and aim of making profit from the readily available market due to the spread of tourists in the region. The company has so far employed about 100 people to help in its operations and this is seen as a positive trend towards managing the market considering the high competition available. Activity of the company It is presumed that the start of the business depends on the availability of the demand towards certain service (Bridge Pg 125. 2012). Every company is seen to take advantage of a situation to be solved in the society and use it as a business idea, BAZS company is not left behind, the company has taken the high number of tourists in the UAE region to start a business towards helping this group of and at the same time make profit out of it. The profit made form the company is distributed in terms ratio considering the individual’s contribution to the start of the company, the five members are the shareholders of BAZS Company limited. The company provides vehicles needed for the transportation of the tourists from one region to the other, the region being dry; the company provides services like water and meals as part of the transportation for the tourists visiting various parts of the UAE region. In addition, the company has engaged itself in provision of the necessary facilities for the visitors at night, that is the hotels and guest rooms where the visitors are able to refresh themselves after a long day tour, this is a added advantage as the company is able to reap also from the hospitality sector through the provision of rooms for refreshment and relaxing. Market and competition Every market has its participants who are always active in taking the market control to prevent other potential competitors coming in. the UAE region being a tourist center especially during the Muslim’s holy month, it is considered to be a hub for firms providing tourism related services to compete adequately in providing the services needed by the tourists (Sigala et al., Pg 101. 2012). This in itself suggests that BAZS Company has to face competitive challenge in the market especially from more established Firms like Sundial tourism LLC, which has a large operation base in several other countries, the company is based in Dubai and has its operation in UAE. Competition is at times a positive factor in business and at times is negative, it is positive in that it enables the company to for the best staff to provide the best services to the customers, thus benefiting the customers in terms of quality products and the business in terms of improved profits. It can also be a negative business tool in that stiff competition may prevent some good companies from entering the market and others may use dubious means in bid to lure the customers to their products which may thus negatively affect the customers. BAZS Company therefore has to take keen interest of the competitor’s way of doing things and find the best possible way of competing favorably to stay put in the field of tourism service provision. Though there is competition, the market in UAE region for the hospitality services is promising year in year out due to the region’s locality and favorable weather conditions especially during the winter for the western people (Sigala et al., Pg 101. 2012). As also discovered, the region receives a large number of visitors during the holy months for the Muslim society. The company’s main product or its main concern is in the field of hospitality, therefore the company provides transportation for its visitors, security needed by the visitors, the place to rest during the night and food other hotel services for the visitors during their stay in the country, all these are services provided by the company and are thus not products that can be said to be produced rather they are finished goods to the customers. Company’s products The company engages in different processes in delivering its services to the tourists. The company has agents who receive the customers who have booked its services in advance; the customers are first received from the airport or from their points of interests then taken to their rooms to relax according to their wish. All the necessary requirements by the customers are provided by company; they are then taken to their points where they have interest in visiting with the company’s transportation services, and then returned at their chosen time, this is done until the customer’s contract booked with the company expires. During this process the company encounters so many risks that may affect the daily business by affecting customer thereby affecting the income flow for the company. A risk in business is known to be anything or uncertain event that may stand in the way any organization achieving its stated objectives, insurable risks are thus events that can be protected by an insurance company to avoid financial loss (Drennan et al., Pg 31. 2014). The possible outcome of a risk in business is a loss. BAZS encounters various risks during its operations, some of the risks may be accident on roads during transportation of their client, fire in the premises, health related issues for both employees and the clients, and theft cases for the company’s properties. Insurable risks in the company Risks in business cannot be avoided but rather can only be protected to avoid financial loss (Drennan et al., Pg 59. 2014). Insurance is thus a way of ensuring the unpredicted events that may lead to financial loss in business are protected, this is done through the insurance cover. The company has to sign a contract known as the insurance policy with the insurance firm to ensure that the necessary details about the terms under which the compensation can be done is clearly stated by the insurance company and agreed to by the insured firm. Any unforeseen event that can be quantified can be insured. This thus shows the wide area of risks that can be insured in the business, the business insurance can take many forms depending on the financial risk that may impact the business in case of the occurrence of the loss. In relation to BAZS Company, some of the risks that can be insured include vehicle insurance, health insurance, casualty insurance, life insurance, and property insurance. Types of insurance Insurance in the business is the primary form of risk management. Insurance cover to be taken by the business depends on the uncertainty surrounding a certain business activity predicted that in case of any occurrence of a risk there will be financial loss. The risk to be insured depends on the premiums that are paid by the insured which depends on the possibility of the risk occurring (Dobbyn & Christopher pg 2 2015). Vehicle or auto-insurance is an insurance cover that protects the company against financial loss in case of an incident that may involve the company’s own vehicle. This may be in terms of accidents like head on collision of the vehicle with another on the road, injury to others that especially to customers that may be caused by the company’s vehicle getting involved in the accident, loss of the company’s vehicle through theft (McNeil et al., 2015). This is a common insurance cover that must be taken by BAZS Company considering its line of operations. Health insurance is another cover for the company; this one will protect both the customers and the employees in terms of cost of medical treatment. This insurance cover is part of the employees’ benefits and is necessary for the success of the company, it can also act as an incentive to the customers and hence make BAZS Company compete favorably. BAZS operations are wide and thus the possibility of encountering various risks cannot be ignored. The need for casualty insurance cover in this company is to cater for its wide spread activities, it protects against accidents that are not necessarily linked to any property of the company. Casualty insurance can cover such losses from terrorism activities, political insurance to cover for losses caused by political interference or protection against kidnapping which considering the area of operation being risky for the clients and the employees (Dobbyn & Christopher pg 6 2015). Lastly the company should protect its property through property insurance, this deals with everything related to the loss of company’s property due to Svarious events like riots or fire that may make the company to experience financial loss. The company’s property varies as it may mean the loss in income, interruption during business operations, and also destruction of company’s buildings or electronic equipments. Selection of insurer For any given economy, insurance company is an important component that needs to operate within the economy (Drennan et al., Pg 59. 2014). The success of any given economy also depends on the success of crucial departments to operate within the economy and such a department is the insurance sector. The company protects the various businesses and individual operating within the economy against any unforeseen events that may disrupt the operations within the economy. UAE as an economy has several companies operating in insurance field, these include; Alliance insurance company, Oman insurance company, Alico insurance company among others. The company therefore has a responsibility chose Oman insurance company as its insurer (Al-Amri et al., pp362. 2012). The company has a good record, having been established in 1975 and being owned by one of the UAE’s leading bank shows its ability to be trusted due to large pool of capital. The company has large operations through its 13 branches thus can accessed easily (Al-Amri et al., pp362. 2012). Financial position of BAZS company for the period ended 30th march 2016 (5 months in operation) ITEMS AMOUNT($) Assets Buildings Vehicles Office equipments Cash at bank Total assets Liabilities Bank loan Net Assets Capital $ 15000 $ 10000 $ 8500 $ 9500 $43000 ($3000) $40000 $40000 Assets to be insured by the company For the daily operations, BAZS Company deals with a variety of different items to deliver their services. Some of these items are vulnerable to unforeseen events that may lead to their damage making the company to suffer financial loss due to the damage (Sadgrove 2015). The thus protects such losses by insuring assets such as, vehicles, its buildings including the offices and the customers rest rooms, its employees are also insured as they are part and parcel of the company’s operations. Company’s annual premium and payment method The company views its premium for insuring its properties to be $10000 annually. The company is expected to pay the amount by the end of the year, thus the company has taken quarterly payment method which is among the options of payments given by the insurer. In this method, the premium is divided into four installments, a deposit of 25% is paid and the rest is paid in an interval of three months for the whole year. Conclusion BAZS Company is a limited company with five shareholders operating in tourism service provision in UAE. The company is still new in the market having operated for only five months and is receiving competition from more established companies like Sundial tourism LLC (Sigala et al., 2012). The company insures its properties against risks like losses and accidents and has chosen Oman insurance company as its insurer. It pays its premiums of $ 10000 in quarterly installments making it easy to pay. The company is enjoying a good financial position in its new market despite the high competition from big firms. References Al-Amri, Khalid, Said Gattoufi, and Saeed Al-Muharrami. "Analyzing the technical efficiency of insurance companies in GCC." The Journal of Risk Finance 13.4 (2012): 362-380. www.researchgate.com Bridge, Simon, and Ken O'Neill. Understanding enterprise: Entrepreneurship and small business. Palgrave Macmillan, 2012. Dobbyn, John, and Christopher French. Insurance law in a nutshell. West Academic, 2015. Drennan, Lynn T., Allan McConnell, and Alastair Stark. Risk and crisis management in the public sector. Routledge, 2014. McNeil, Alexander J., Rüdiger Frey, and Paul Embrechts. Quantitative risk management: Concepts, techniques and tools. Princeton university press, 2015. Sadgrove, Mr Kit. The complete guide to business risk management. Ashgate Publishing, Ltd., 2015.www.ashgate.com Sigala, Marianna, Evangelos Christou, and Ulrike Gretzel, eds. Social media in travel, tourism and hospitality: Theory, practice and cases. Ashgate Publishing, Ltd., 2012 Read More