Answer to Question #287291 in Management for Babayagakid

Question

Discuss why insurance and risk management is important to businesses and the economy.

Answer 1

The significance of Insurance and risk management has increased in the modern world due to high rate of globalization that has heightened the risks faced by businesses as well as unpredicted climate changes that have resulted in more natural calamities. The practices are important to business and the economy because of:

1. Security- risk management helps in identifying the potential risks before their occurrence thus development of mitigation activities in advance. On the other hand, insurance offers security through compensation of damages after the happening of crises which protects the resources of businesses.
2. Restoration- Risk management and insurance are forces and restoration for organizations and the economy. They cover costs after crises which help firms to stay in business and people to rebuild their lives thus saving and growing the economy.
3. Reputation- having a good risk management plan and insurance creates a good reputation for the company. This is because both employees and customers will have confidence in the company due to its responsible and professional high standards which ultimately translates in the success of the business.
4. Empowerment- Due to the security that risk management and insurance offers, entrepreneurs are empowered to start businesses which creates employment opportunities for citizens.
5. Economic growth- with security and restoration provided by risk management and insurance, businesses operate smoothly and employment increases which means more taxes to the government that fosters economic growth.