Risk management for SMEs

It's a risky business out there, as research into SME attitudes to risk management planning conducted by MC2- commissioned by Norwich Union -has underlined.

According to the findings, most small businesses do not see contingency planning as a key part of running a successful business. This approach is typical among older, more established businesses, which believe they can handle things in-house if they go wrong.

In fact, disasters - such as terrorist attacks and forces of nature - were considered by many SMEs not to be classifiable as 'risks', as they were 'unavoidable'.

Proactive, structured disaster planning appears to be a rarity, with most small companies undertaking it in reaction to a specific requirement. Ultimately, businesses of this type see such methods as a luxury, or the concern of larger companies with numerous employees - until they experience a risk at first hand: the death of a director, for example, led to one business taking out key man insurance.

With an ad hoc approach to disaster planning being the most common among SMEs, brokers should be helping their SME clients to recognise the commercial benefits of seeking risk management services, while ensuring the recommended service is relevant and perceived as good value.

Continuing the risk management theme, the Health and Safety Executive has launched a voluntary, web-based tool to help businesses with more than 250 employees assess the effectiveness of their health and safety measures.

The Corporate Health and Safety Performance Indicator poses questions about health and safety and occupational risk management, resulting in a score out of ten for the organisation. The score is then made available to the public. The aim is to encourage organisations to develop health and safety policies which exceed the legal minimums.

Commercial motor

Government taxation has transformed the image of the company car as a 'perk'.

Providing 'cash for car' as an employee incentive has had increased take-up; but this complicates management of risk, as companies begin to realise that their own responsibilities are equal to that of company car drivers.

The task is an onerous one, as it is more difficult to monitor staff using their own vehicles, than with a fully managed fleet. This is even more critical with impending health and safety legislation and the proposed corporate manslaughter bill.

In many smaller organisations, particularly those with less than 40 vehicles, there is often no longer a specific fleet manager in place, so the responsibility of running the fleet is passed on to other departments, which have little or no specialist knowledge. The lines between departmental responsibilities for running fleets are often blurred, with many finance and human resources teams sharing the tasks.

In many cases, these departments don't have the relevant level of expertise to manage a fleet efficiently and responsibly. In fact, data from Norwich Union's 12,000 fleet policyholders found that 85% of the UK's motor fleets are failing to carry out even basic risk management processes. These findings were gathered over 18 months and revealed that only 15% of fleets are implementing 'fundamental' risk management such as licence checks, driver handbooks, accident investigations and pre-employment driver checks.

As fleet risk responsibilities grow, company directors need to be more aware of the issues their businesses face, which should influence the allocation of responsibility for fleet decisions within organisations.

Down on the farm

Tourism has been the unsung success story of the British countryside, supporting 380,000 jobs in rural areas more than making up for the loss of 150,000 jobs in the agricultural workforce - and contributing almost ?14bn to the rural economic output.

However, fanners should beware of seeing tourism income as 'easy money'. Self-catering accommodation is one of the most popular routes for farmers, hut is also the type of diversification most likely to fail.

If a farmer wants to create bed and breakfast facilities for more than six guests, he needs to comply with exacting fire regulations. Equally, farmers offering land for more than five caravans are obliged to seek a licence from the local authority.

On the upside, tourism can be run as a complementary sideline to the principal farming activities - perhaps by a less busy member of the family - and during the summer, before the demands of the annual harvest begin.

True crime

Might you be breaking the law without even knowing it? This is a threat facing insurers and brokers owing to the sophistication of money launderers targeting the insurance industry.

The regulations governing money laundering have led the FSA to regulate intermediaries selling insurance policies since January 14 this year. The market needs to address its susceptibility as brokers could be convicted and imprisoned for a serious money laundering offence.

Leisure Time

Retail and leisure sectors are being hit by declining consumer confidence. With the British economy expanding by only 0.5%, more than 1,000 businesses in the leisure industry are expected to fail this year - an increase of 16%.

Meanwhile, the Government is progressing its plans to ban smoking in public places. A proposal has been under consideration whereby smokers can be fined ?50 for smoking in outlawed areas. Consultation on the proposal will consider how smoke-free legislation would work in practice.