Mr Kibati addresses a Top 100 event last month. PHOTO | DIANA NGILA

Sanlam Kenya Group CEO Mugo Kibati has said that the adoption of risk management solutions remains a critical factor for business growth.

Mr Kibati expressed fears that SMEs may have lost more than Sh50 billion last year, based on the volume of claims paid out under the general insurance class. 

“For me, the volume of claims paid out is a good indicator of the level of risk exposure given that only three SMEs for every 10 tend to hold risk solutions.

Adoption of comprehensive risk solutions provided by local general insurers, Mr Kibati said, will help to shield SMEs from unnecessary exposure to various liabilities, including cybercrime.

Notwithstanding the tough economic climate and fewer resources, SMEs, he said, are still held to the same standards of business management by their stakeholders and are therefore expected to maintain a good mix of risk mitigating and management solutions.

He expressed regret that the adoption of risk management solutions in Kenya is growing slowly due to poor financial literacy among upcoming entrepreneurs.

Such slow growth is manifested in the low insurance and related penetration rates for products designed to protect the SME’s assets, employees and liabilities against day-to-day business operation risks.

“It’s a worrisome scenario to note that most SMEs do not have comprehensive risk and asset management solutions which leaves them heavily exposed to manageable risks,” Mr Kibati noted, adding that, “sadly, SME businesses built on blood and sweat rarely recover from threats such as fire and burglary due to lack of risk coverage.”

He explained that the retention of bare minimum risk solutions such as third party insurance for motor vehicles and public liability insurance covers provides negligible relief to entrepreneurs.

Entrepreneurs holding minimum statutory covers, Mr Mugo noted stand a slim chance of recovering their business in case of a risk event than those with comprehensive covers.

Due to low financial literacy, Mr Kibati noted that risk solutions had been ignored in the local market as they are considered as an unnecessary overhead.

“However, the reality is that business continuity and competitiveness today rests on an entrepreneurs’ capacity to hold an optimum mix of risk management solutions,” he advised the Top 100 entrepreneurs.

Medical cover

In most instances, Mr Kibati noted, entrepreneurs retaining risk solutions such as medical covers and pension for their employees stand a better chance of attracting quality staff than their peers offering a better salary and poor perks.