Insurance Philosophy for MSMEs

Insurance is a financial instrument for self-protection and risk transfer. However, this insurance philosophy can be adapted as MSMEs business strategy to welcome the end of the Covid-19 pandemic. The goal, of course, is simple for MSMEs, that is, don’t let another tragedy happen even if a crisis comes. In other words, if the crisis hits again, MSMEs will not immediately go out of business.

To adapt this philosophy, MSMEs need to apply strategic tactics to be resistant to any threats. First, MSMEs must transfer risk. This risk transfer can be done by owning a business in a different field, having multi-functional production equipment, having various distribution and sales channels. This tactic will help MSMEs not to rely on a single resource alone.

Second, MSMEs need to allocate emergency funds. This emergency fund is a fund that is prepared to be able to carry out 2-3 times monthly operational activities even without obtaining income. Even though it is heavy, emergency funds can give MSMEs time to think and make plans to deal with a crisis that occurs without immediately going bankrupt.

This insurance philosophy also allows MSMEs to understand the availability of free cash funds so they can invest without worrying about business operational conditions. The application of this philosophy also helps MSMEs entrepreneurs to act more wisely, rationally, and not reactively to situations that occur. Crisis may occur, but do not let it become a tragedy.