Why Do We Need Business Insurance in This VUCA World
For many years, the term VUCA is gaining popularity as it covers various factors of this uncontrolled environment. VUCA stands for volatility, uncertain, complex, and ambiguous. Let’s deep dive into understanding this term and how it is affecting the businesses.
A brief of the four elements of VUCA
Volatility – Volatility is the speed of change in the market, industry, or the world in general. If a market is volatile, the price of goods and services may rise and fall tremendously in a short period. The direction of the trend may change suddenly.
Uncertainty – Uncertainty is a situation where the outcomes or events are unpredictable. For example, a business is always at threat from uncertain situations like natural calamities, theft, Bulgari, etc.
Complexity – Complexity is a multiplicity of various factors out of which some might be interconnected.
Ambiguity – Ambiguity refers to a lack of understanding or difficulty understanding what exactly the situation is.
VUCA originated with the United States Army War College to explain the conditions arising out of the cold war. Since then, the concept has been widely adopted by businesses and industries to guide leadership and strategic planning. The VUCA model has helped businesses mitigate risks through proper crisis management.
Importance of business insurance in VUCA
Few vendors and lenders might require insurance
Many business contracts make it a compulsion to have business insurance before signing a business deal. This is because, in case of a misfortune, the business is well-prepared to face the losses that the liability is reduced. Also, lenders want proof of insurance before you buy or build a new building. Hence your business model won’t get funding if you do not buy business insurance.
Insurance gives peace of mind
An intangible feature, insurance grants peace of mind. Business owners can fully shift the risk, thanks to business insurance. Also, the opportunities of an entrepreneur to explore increases as a lender does not hesitate to provide funds for expansion or other business-related activities.
Insurance keeps the business moving
During times of uncertainties like sudden disasters, a business might lose its vital income. This might lead to shutting down of the business operations for a while or forever. Business insurance makes sure you are provided with enough funds to continue the day to day working of the business in case there is a natural calamity or theft, forgery or other unexpected events. It will help you continue daily operations until your business is back on track completely.
Business insurance is the right thing to do
Some business owners do not consider business insurance an important aspect. However, the real test comes with the business being hit by some major drawbacks. This is when business insurance helps mitigate risks.
Insurance ensures business stability
Insurance is a safety net when things take a turn. Business insurance protects a company from various factors like lawsuits, staff injury expenses, death of a major board member, damage to property or equipment, etc. Since all these factors are taken care of, the owner can focus solely on the business operations which will in turn bring more stability.
Insurance protects small businesses
When you look at a particular industry, there are big and small businesses. If something goes wrong, the big ones will survive however, the small ones will take a hit. Therefore, there is more risk involved. Sometimes, they sell off to big business. When small businesses buy insurance they get the necessary funds which help them survive for longer. Insurance helps prevent the formation of monopolies.