June 22, 2009
Business Not Doing Enough To Protect Themselves
UK businesses are being hit hard by the recession but research from Scottish Widows reveals that businesses are not doing enough to protect themselves from the unexpected.
The research, which surveyed over 500 UK businesses, found four in five were dependent on a key employee whose loss would seriously impact the profitability and survival of the business. Despite this, 67% of businesses fail to have this key employee insured, leaving them exposed to a significant loss in profit as a result of any unexpected departure.
This lack of protection is surprising as the research shows three in five UK businesses without key person insurance fear they would not survive the loss in profit if a "key person" such as an employee, partner or director were lost, while 11% have not even considered how it would affect them.
For those businesses that have not taken out any insurance, such as life cover or critical illness cover to cover the cost of losing a key person, director or partner, a third don't see the value of it, 29% have not thought about it, 19% think it would be too expensive, and 5% didn't even know if they needed it.
Richard Jones, protection market director at Scottish Widows says: "Staff can be the greatest assets in a business but these findings paint a worrying picture. It is concerning that such a high percentage of UK entrepreneurs do not have financial contingency plans for their business in the event of losing key staff. The current climate emphasises how crucial it is for businesses to review their finances and in doing so improve their control over the future and security of their organisation.
"Having a business contingency strategy should be an early priority when people think about starting a business and should be reviewed as the business evolves. This will help employers get the maximum investment back from their company, successfully market their business to potential buyers and ensure their exit from the business, be it planned or unplanned, causes as little disruption as possible."
SOURCE: Scottish Widows, 14/06/09
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