Entrepreneurial Risks and Their Impacts on Business: Strategies for Protection
- ByStartupStory | June 23, 2023
Startup Story Media recently had the privilege of conducting an exclusive interview with Mr. Saurabh Verma (Managing Director), Ms. Puja Parekh (President), and Ms. Rashmi Iyer (Principal Officer & Director) from Global Insurance Brokers (GLOBAL), a leading Indian composite broker licensed by IRDAI that provides comprehensive insurance and reinsurance services to large corporates and communities. With 450+ employees in 17 locations, they offer customized and innovative solutions with impartial advice. In addition, they take pride in efficiently handling complex claims in India and are also the registered broker at Lloyd’s.
Impact of Entrepreneurial Risk on Businesses
Entrepreneurial risks significantly impact businesses, ranging from financial losses to reputational damage, operational disruptions, legal liabilities, and emotional stress. Proactive risk identification, assessment, and mitigation are crucial for safeguarding businesses and ensuring long-term success. Effective risk management strategies, such as insurance coverage, contingency planning, and proactive risk mitigation measures, enable entrepreneurs to navigate challenges and uncertainties.
During the interview, Mr. Verma said, “Risks can arise from various dimensions, including assets and people. When we categorize assets, they can be property damage, liability issues, and business interruptions arising from assets. Risks can also come from the people working for you, such as health benefits, including health insurance and group life term. Any risk that arises, whether related to people or assets, can end up costing entrepreneurs out of their pockets. Therefore, it is crucial to have insurance to cover these risks.”
For startups, it is important to prioritize business growth and minimize risks. A robust insurance program can provide entrepreneurs the necessary protection to pursue their business goals without worrying about potential losses. Additionally, insurance serves as a valuable tool that cushions businesses from potential damages and liabilities, allowing entrepreneurs to focus on their primary activities. Therefore, insurance is indispensable for safeguarding entrepreneurs’ assets and mitigating risks.
Challenges Faced by Startups in Understanding and Utilizing Insurance
Startups often fail to consider business risks at times due to a lack of awareness or skipping proper risk assessment processes while keeping their focus on business growth. This approach may overlook potential risks and miss a 360° perspective. Consequently, most startups may not have a required understanding of insurance products, and the stakeholders may need to educate them. As a result, startups may have limited market knowledge and experience in handling claims, leading them to prefer retaining risks rather than taking suitable insurance cover.
Ms. Iyer states, “In the startup ecosystem, there is a disconnect between insurance product demand and availability. It is crucial to educate startups about the significance of insurance in safeguarding their financial stability. Fund providers and banks have a role in promoting insurance and closing this gap to ensure startups have adequate coverage for their business risks. By raising awareness and providing guidance, startups can make informed decisions and protect their financial future.”
Ms. Parekh added, “Startups often underestimate the importance of insurance, leading to a lack of awareness about its benefits. This puts them at risk of significant financial losses. Transferring risk through insurance is a prudent approach, but many startups remain underinsured due to limited awareness. Additionally, they are unaware of the valuable consultation services provided by insurance intermediaries. Brokers such as GLOBAL can help evaluate risks, minimize exposures, and navigate insurance complexities. Utilizing broking services enables startups to make informed decisions, protect their business, and mitigate losses. The role of brokers is crucial for startups to secure their financial well-being.”
Collaborative Efforts of Insurance Providers and Startups for Improved Cybersecurity
Mr. Verma emphasizes the importance of data protection and cybersecurity for startups, highlighting the potential penalties and severe impact on businesses in case of data breaches. He suggests that startups should prioritize cyber risk management and implement robust processes, with cyber insurance as an effective solution to mitigate risks.
Ms. Iyer said, “The lack of industry standards and a regulatory framework for startups, leading to underutilization of cybersecurity insurance in India. She emphasizes the coverage it provides for damages, reputational harm, and government penalties, along with its role in mitigating financial, reputational, and regulatory risks.” Further, Ms. Parekh added, “Start-ups should not underestimate their vulnerability to cyber-attacks and should prioritize cybersecurity measures.” She emphasizes the importance of selecting vendors who comply with security regulations.
Thus, the significance of cybersecurity for startups, the need to address regulatory and industry standards, and the value of cyber insurance in providing comprehensive protection. By acknowledging the risks and taking proactive measures, startups can safeguard their business against cyber threats and ensure the security of customer data.
Risk Assessment and Consulting Services
GLOBAL’s experience, customer-centric approach, and commitment to risk management make them a trusted choice for startups and businesses seeking comprehensive insurance solutions.
Ms. Parekh highlighted, “We effectively help clients mitigate emerging risks by employing various practices. Clients are consulted to understand their uniqueness and industry-specific risks, enabling us to design appropriate coverages and provide comprehensive protection.”
GLOBAL comes with expertise in various industries and commitment to understanding customers’ needs. They invest in training staff and have a strong understanding of industry risks, enabling us to advise startups and businesses on risk management and insurance solutions.
Ms. Iyer mentioned, “We prioritize quality over quantity and have a track record of customer satisfaction. We have invested in specialist centers of excellence and technology tools to enhance customer engagement. Our commitment to efficiency, accountability, and transparency reflects the excellent customer service and building long-lasting relationships.”
Strong Reputation and Track Record of Success
The key differentiators of GLOBAL include their track record of successfully settling claims, their growth model based on governance and ethical practices, and their ISO 27,001 certification for data security. GLOBAL is committed to providing the right advice and transparency to its customers.
Mr. Verma emphasizes the importance of technology, “We have invested in robust technology for it to become the backbone of our services. We are able to provide real-time services to meet the industry’s current requirements and demands.” Further, Ms. Iyer added, “We are adhering to high standards of governance and practice Growth with Governance.”
The same principle has been imbibed among the staff. Our Indian roots with global approach set ourselves apart from the competitors.
Developing a Comprehensive Risk Management Framework for Startups
The entrepreneurs need to identify the potential risks, allocate ownership to stakeholders, and address risks through retention or transfer. Developing a risk register helps document and assess the impact of risks, enabling effective management and recovery from adverse events.
Ms. Iyer highlights the importance of engaging with a reliable broker in the startup ecosystem. “A broker acts as a one-stop shop, providing guidance in due diligence, suggesting appropriate insurance covers, and managing the entire insurance portfolio, including claims. Brokers are licensed by regulators, ensuring transparency and compliance with regulations. The cost of engaging with brokers is covered by insurance companies, making it a cost-effective solution for startups.”
Startups can reduce the impact of business loss by identifying risks, maintaining a risk register, and working with qualified brokers who offer cost-effective insurance solutions. These measures give startups a strong foundation for managing risks and ensuring long-term success.
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