The first quarter of the year is often one of the most financially challenging periods for South African businesses. After absorbing year-end expenses, navigating delayed customer payments and contending with slower trading conditions, many companies enter the new year under significant cash-flow pressure.
According to Ryno de Kock, Head of Distribution at PSG Insure, this period frequently prompts short-term cost-cutting decisions that appear sensible at the time but can unintentionally increase a business’s risk exposure. “Year after year, early cash-flow pressure forces difficult choices on business owners. Unfortunately, what we often see is that risk management and insurance considerations are deprioritised, even though this is when businesses may be most vulnerable.”
Common examples include postponing equipment maintenance, reducing security measures, delaying compliance-related upgrades, or reviewing insurance purely through a cost lens. While these actions may offer temporary relief, de Kock cautions that they can have far-reaching consequences if they create gaps in cover or alter the assumptions on which a policy is based.
“Policies are underwritten on the expectation that vehicles, equipment and safety systems are properly maintained, agreed security measures remain in place, and regulatory standards are met,” he says. “Where these conditions are not met, it can affect how the claim is settled.”
Cash-flow pressure may also lead businesses to make changes directly within their insurance policies, such as increasing voluntary excesses to reduce premiums. “If you can’t comfortably afford the excess amount when it comes to a claim, you may find yourself unable to access your insurance payout at all – and at a time when you need it most,” says de Kock. “This is a classic example of a decision that looks like a saving but can backfire in the worst way.”
Chasing cheap premiums or cutting cover can also leave businesses underinsured, a common problem in South Africa. “Underinsurance means the level of cover is insufficient to make up for losses when unforeseen events occur,” explains de Kock. “While cheaper premiums may be tempting, these policies often have stricter conditions, limited cover or punitive exclusions.”
Another risk arises when operational changes are made without being disclosed to insurers. “Early in the year, businesses may see a need to diversify income streams, change trading patterns or store additional stock to generate revenue – all of which should be communicated to your adviser,” says de Kock. “If the insurer is unaware of these changes, cover may not be guaranteed when a claim arises.”
He emphasises that insurance should be viewed as a proactive safeguard, especially during financially constrained periods. “Rather than cutting protection, businesses should use this time to reassess risk exposures, validate sums insured and confirm that policy conditions still reflect operational realities,” he says. “Regular reviews help ensure assets remain adequately covered at their correct replacement value, avoiding costly surprises at claims stage.”
He adds that advisers play a critical role during this phase of the business cycle. “A strategic conversation early in the year can help identify pressure points and find ways to manage risk without compromising cover. This might include proactive risk mitigation, reviewing extensions or prioritising the most critical protections.”
As businesses work to preserve cash and stabilise their balance sheets after the festive season, de Kock concludes that adequate insurance protection remains essential. “Early-year financial pressure is typically temporary, but the consequences of a poorly managed risk decision can be irreparable. Insurance is not an optional expense in tough times; it’s a tool that helps businesses stay resilient when margins are under strain.”