Executive Summary
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Small and medium-sized enterprises (SMEs) are a major pillar of the market economy and an essential building block of economic development in the Gulf Cooperation Council (GCC) region.
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Banks in the GCC region are reluctant to lend to SMEs due to higher risk and applicants’ failure to meet loan conditions, meaning that 55% of SMEs do not have credit available to them.
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Effective risk management enables the avoidance of losses and maximization of the potential of opportunities. Both business and nonbusiness risks can be protected against by insurance.
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In order to assess the effect of the risks impacting your business, an internal risk audit can be performed. The benefits of this are increasing revenue, saving time, improving safety, and protecting company value.
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Risk management can be a business enabler and aid business value creation by delivering more stable earnings, resources during an emergency, and a tighter grip on the value drivers of your business.
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Implementation of these practices by SMEs will impress bankers, demonstrating a reduced risk profile, and can result in wider access to capital and/or lower cost of funds.
Introduction
Small and medium-sized businesses (SMEs) across the Gulf Cooperation Council (GCC) region, many of which are family-owned enterprises, bear the same risks as Fortune 1000 companies. A common definition of a SME is a business with fewer than 250 employees and revenues below US$68 million (Dhs 250 million), whereas the real difference lies in scale and complexity. We have found in working with many types of business that most business owners in the Middle East do not fully comprehend insurance and the importance of risk management. Yet, every day, these business owners confront risk—both business risk and nonbusiness risk. This article explores what, in the SME context risk is and some methods to better manage nonbusiness risks to yield sustained cash flows and boost SME profitability.
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