Helping small- and medium-sized enterprises realize their full potential

Suppose a tech startup is in the business of providing companies with managed services, including maintenance, integration, and IT support for their digital networks. While this might help clients be more efficient and reduce costs across their operations, the startup is also gaining access to clients’ networks, and therefore potentially exposing its own business to cyber risks and other liabilities related to the services it provides customers.

Addressing such risks early on is important for many businesses in Sub-Saharan Africa (SSA)—particularly small- and medium-sized enterprises (SMEs) with limited resources, says Roxanne Griffiths, AIG’s Head of Financial Lines in SSA. She and her team service clients in Johannesburg, Nairobi, and other parts of the region.

“SMEs play an important role in many economies, and they deserve to be in a position to thrive and prosper,” says Roxanne, whose team helps businesses manage liability risks through a range of products, such as commercial directors & officers (D&O), commercial professional indemnity (PI), and cyber liability coverage.

Innovation is at the core of many of today’s growing SMEs. According to the World Bank,  SMEs account for most businesses worldwide, representing about 90% of businesses and more than 50% of employment. Incorporated SMEs contribute up to 40% of gross domestic product in emerging economies. 

When doing business, Roxanne adds, there are many liabilities for SMEs to consider, such as fiduciary duty and employment practice risks. In addition, founders or owners of SMEs could be held personally liable for not properly addressing risks linked to the services the SME provides a client.

“Liability claims can disrupt any business,” Roxanne says. “That’s why it’s so important for SMEs to manage the risks early on so they can conduct business knowing that they have taken steps to help protect their business and personal assets when an insurable loss occurs.”

What’s at stake for founders or owners of SMEs

Because many SMEs are private companies, they may not realize their need for D&O coverage. Shareholders represent only one potential party that can sue SMEs. Board members, executives, and senior management—as well as other parties such as employees, customers, creditors, vendors, competitors, and regulators—can also bring suit against them. Breaches include fiduciary duty, misuse of company funds, failure to comply with regulations, lack of corporate governance, and employee-related issues.

For example, Roxanne explains, an employee who names company senior management in a discrimination or harassment lawsuit can expose both the senior managements’ personal assets, as well as those of the company. Even if a lawsuit is without merit, the company will still need to fund a defense, which is often costly.

Appropriate D&O coverage can help companies manage such risks, Roxanne says. Moreover, such insurance protection can help attract executive talent and investors because of the protection it gives them.

“The more senior leaders are aware of the risks at play, the better positioned they are to effectively lead and manage the companies they oversee.”

Helping SMEs innovate and grow

SMEs will also need to manage the financial and reputation risks of innovative new products and services they develop, Roxanne adds.

AIG SSA is working closely with broker partners to support business leaders in technology, media, and other key industries to help them grow their business. For instance, PI insurance can help business leaders manage the risks of launching a new product or service in case of defaults or errors impacting clients or customers.

“Risks are evolving in PI, especially with technology clients,” Roxanne says. “We strive to be creative in finding sustainable solutions to meet their specific needs.”

Roxanne adds that technology companies increasingly need insurance coverage that combines PI and cyber liability elements, since the risks these policies cover tend to overlap. For example, a cyber-attack could trigger liability in both cyber and PI coverages.

To meet these needs, AIG SSA designed “ProfessionalEdge,” a modular-based policy for technology industry-specific exposures that address the complex risks of both PI and cyber. Clients who have this policy have the benefit of AIG’s expertise in both lines, as well as having a single company working to resolve claims.

“Our holistic approach starts with mitigating risks and putting together appropriate policy terms to help meet clients’ needs,” Roxanne explains. “If a cyber crisis does occur, we are able to help provide support for our clients.”