Nearly all businesses that involve shipping begin with a few cartons. When an entrepreneur creates or finds a product with strong demand, they place an order with a supplier overseas, pay for shipping, and wait to receive the goods.
After the first shipment arrives safely, they sell the goods. If customers are happy, there is more demand, so the next order is bigger.
Effective sustenance of this pattern is how a small business grows into a huge importation operation, with larger orders, more suppliers, more customers and more money tied up in goods moving across borders.
This is precisely why growth changes the nature of risk.
Losing a shipment can be detrimental, however, the severity of the loss depends on the size of the business. As a business scales, losing a shipment can threaten cash flow, customer relationships and the ability to place the next order.
The more goods a business moves, the more pertinent it becomes to think beyond getting products from point A to point B and start thinking about how to protect them along the way. Goods in Transit and Marine Insurance are vital tools for this.
Big Shipment, Big Exposure
Growth brings opportunity, but it also brings concentrated risk.
Importation involves several moving parts. Goods may travel from a supplier’s warehouse to a port, spend time at sea, arrive in Nigeria and then continue by road to a warehouse or distribution centre. There is an element of uncertainty at every stage
Goods can be damaged in transit. Cargo can be lost through an insured event. Accidents, handling incidents and other unforeseen circumstances can turn a profitable shipment into an unexpected financial burden.
This is significant for importers because the value at risk exceeds the purchase price of the products. Shipping and logistics costs, customs-related expenses, warehouse commitments and pending customer orders must be considered.
For instance, an importer who has built a business selling home appliance may decide to expand from importing a few cartons at a time to bringing in a full container after months of steady growth.
Although it is a major milestone that signifies better purchasing power and potentially better margins, it also means a significantly larger amount of capital is tied up in one shipment.
Scalable Protection is Essential
One of the common mistakes business owners often make is believing that insurance is only necessary after something goes wrong. Insurance works best as part of the planning process, not as a response to a loss.
Goods in Transit Insurance provide protection for goods while they are being transported within the country, subject to the terms, conditions and exclusions of the policy.
Marine Insurance, particularly marine cargo cover, protect goods against insured risks during a journey, including international transportation by sea and, depending on the details of the policy, other modes of transit.
An importer moving products from an overseas supplier to Nigeria requires protection for the international leg of the journey, however, protection for the movement of the goods from the port to a warehouse or a customer’s location is also necessary.
With Good in Transit and Marine Insurance, the financial impact of an insured loss while the goods are traveling is cushioned.
Product Replacement is Only the Starting Point
Capital is the engine of an import and export business. When too much of it is wiped out by an unexpected event, it can tank a thriving business’s growth swiftly.
This reinforces the fact that the value of insurance transcends replacing lost and damaged products.
For instance, the home appliance importer might have customers who pre-ordered items and are waiting eagerly.
If a significant portion of the shipment is damaged during the commute due to an insured peril, the products are no longer available for sale. However, the ripple effect can be more dire and persistent.
The business owner in this situation may combat delays with customer deliveries or processing refunds, finding replacement stock, absorbing additional logistics costs which may tie up more capital in another order.
If the business relies heavily on a single shipment to generate revenue, one incident can disrupt an entire sales cycle.
Having insurance protection such as Good in Transit and Marine Insurance helps businesses recover financially from covered losses and protect the capital it has committed to inventory.
Scaling Requires More Than Bigger Shipments
An importation business’s risk management should evolve with the business. A business owner who previously managed five shipments annually may scale to an average of seven shipments quarterly.
Each shipment might have different suppliers, shipping routes, freight forwarders, ports, warehouses and delivery partners can introduce new layers of exposure. This is why businesses must consistently review their insurance policy, ensuring it is airtight.
Thorough vetting is essential to understanding the quantity and value of goods in each shipment, the frequency of transit, the nuances of the chosen mode of transportation, and the chain of custody from departure to arrival.
The answers to these questions help a business owner and their insurance provider determine the appropriate protection and avoid relying on a policy that no longer caters to the scale of the business.
Give Your Business an Unfair Advantage with Coronation Insurance
Scaling an importation business takes more than finding the right products and increasing order volumes. It takes the confidence to make bolder, calculated moves, backed by the right systems and protection.
At Coronation Insurance, we understand that every shipment represents more than goods in transit. It represents capital invested, customer commitments and another step towards building a bigger business.
With our Goods in Transit Insurance and Marine Insurance, you can protect your goods against covered risks as they journey from supplier to destination. More importantly, you can give the business you are working so hard to grow an unfair advantage
To learn more about Goods in Transit Insurance, Marine Insurance and our other products, contact us via email at info@coronationinsurance.com.ng or call 02-01-2275475 | 02-01-2275476.
Explore more articles from Coronation Insurance Plc, at https://coronation.ng/insights/
