Insurance is key to protect Vietnam’s SME’s – WTW

Survey results showed only 18% are confident to take risks.

Amidst the geopolitical shifts, Vietnam’s small and medium-sized enterprises (SMEs) are in need of insurance protection to face risks, according to My Thien Nguyen, Country Leader and Head of Corporate Risk & Broking, at WTW Vietnam.

In a recently released survey by advisory and insurance brokerage firm, WTW, only 18% of enterprises said they are “ready to face current and future risks” which corresponds to a lack of strength amongst Vietnamese SMEs.

“While most organisations recognise the importance of insurance, the challenge now will be to develop an equitable approach that allows them to identify and fill the gaps where they are un- or under-insured while at the same time balancing the cost of their coverage. Addressing the lack of data to assess the operational risks and their impact will be key to achieving this,” Nguyen said.

Other than emphasising the need for risk protection, only 32% of the organisations said their typical insurance products are not enough to meet the business risks.

“Organisations are also challenged by pricing, with close to half (48%) considering pricing unpredictability and high cost as the major weaknesses of their current insurance products,” the WTW report added.

Covering 100 Vietnam-based companies, results also showed that half of the organisations (44%) possess only a basic understanding or face challenges in comprehending their current risks and their financial implications. 

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“With SMEs forming the backbone of the economy, Vietnam is also uniquely placed to take advantage of increasing multinational corporations (MNCs) expansions in the country as a result of the ongoing geopolitical shift. As manufacturing activities ramp up to meet increasing demand, building resilient supply chains is a business-critical priority,” Nguyen said.

The number rises to 58% when it comes to emerging or new risks expected within the next two to five years.

The main hindrance to better risk comprehension is the lack of relevant empirical data, identified by 58% of the organisations as a potential weakness in their risk assessment process. 

Additionally, 42% of the companies lack a defined methodology to quantify the financial impact of risks, leading to inadequate risk management measures. 

Further, a quarter of the organisations (26%) don't have a formal process in place to establish risk appetite or tolerance.

When ranked, intense market competition (39%) is cited as the top risk source, followed by macroeconomic uncertainty (37%) due to ongoing inflationary pressure, and communicable diseases (35%) as companies adjust to the post-pandemic business environment.

“Companies need to work with their risk advisors using data, technology and analytics to support proactive risk management and smarter decision-making so that they can be better prepared with sufficient insurance coverage to keep their businesses afloat and resilient to future risks,” Nguyen added