The manufacturing business is a complex type of business, involving complex business operations that can put capital at risk. The challenges that business owners face are unique and vary depending on the size, scope and nature of their business. Each industrial business has different processes such as purchasing, warehousing, production, shipping and export, and each one involves some risk or another. The little negligence or mismanagement of these operations shows a negative impact on the company’s income. Therefore, ensuring different business processes is an important aspect to consider for all manufacturers.
In this article, we’ll look at the most common risks associated with manufacturing companies and why insurance is a must for them.
Risks that can affect the manufacturing business:
- Loss or damage of raw materials / inventory: Manufacturing companies keep large stocks of raw materials, goods in process and finished goods in their inventory. Unforeseen events such as fire, theft and natural disasters can cause significant losses due to physical impact on materials. In addition, companies that manufacture perishable products such as food products and products that must be stored in cold stores are more vulnerable, even if a simple breakdown in the refrigeration machines can spoil the entire inventory.
- Machinery breakdown / damage – Manufacturing plants contain expensive machinery and mechanical equipment, which can be seriously damaged when exposed to malfunction or short circuit. The repair and replacement of damaged equipment not only interrupts the production of finished products, but also creates a financial burden for the company.
Business interruption: There are many unforeseen factors that can cause business interruption. Natural disasters, machine breakdowns and theft are some of the main causes. Any of these could cause dangerous business interruptions and therefore prevent the company from doing business.
Liability Claims – Various types of third party claims, such as general liability, product liability, and worker’s compensation, can cause inconvenience to the company at any time. For example, many business owners often ignore the importance of product liability believing that injury or property damage will only occur due to the negligence and mistreatment of the user. But it won’t happen the same way in all cases. The victim can claim compensation and can also sue the company, which not only leads to financial losses, but also affects the reputation of the company.
Risk management methods, which prevent the emergence of risks, help the survival of the organization, but only up to a point. Accidents cannot be predicted. It can happen at any time despite the security measures. To mitigate the effects of risks, the best approach is to insure the business with a correct policy that covers almost all potential risks related to the type of business.
A comprehensive manufacturing insurance policy designed for a specific type of business not only protects the company from potential risks, but also provides peace of mind to the industrial business owner.