By Mark Mukungu
If your business lost its stock, premises, or income tomorrow, would it recover or close? This is a question many Ugandan Small and Medium Enterprise (SME) owners rarely ask, yet it often determines whether a business survives.
Every entrepreneur begins with optimism, driven by opportunity, skill, and determination. However, beyond growth and profit lies a less visible reality: every business is exposed to risks that can disrupt or end operations without warning.
Uganda’s SMEs play a vital role in the economy. According to the State of Entrepreneurship in Uganda Report (2024/2025), SMEs account for about 90 per cent of all businesses and contribute approximately 75 per cent of the country’s gross domestic product. SMEs employ millions of Ugandans and drive innovation and local commerce.
However, many SMEs do not survive long, only about 8 per cent remain operational beyond 15 years. While high taxes, competition, and limited access to financing are often cited as the main challenges, poor risk management is a critical but often overlooked factor behind many business closures.
Recent events have demonstrated how quickly unexpected shocks can disrupt businesses. In 2025, heavy rains and flooding across Kampala exposed the vulnerability of many small enterprises.
In several commercial areas, including downtown arcades and basement shops, floodwaters destroyed merchandise, damaged premises, and forced businesses to temporarily close. Many traders lost stock worth millions of shillings and were left struggling to recover without financial support. These floods disrupted operations, cut off customer access, and in some cases wiped out years of hard work overnight. For businesses without financial protection, recovery depended entirely on personal savings or loans, even when the entrepreneurs were not fully prepared to borrow.
When an adverse event happens that impacts financial wellbeing, the consequences can be devastating. Risk is a constant part of doing business. SMEs face threats such as fire, theft, equipment breakdown, customer non-payment, the loss of a key person, and unexpected disruptions to cash flow.
Without preparation, even a single incident can erase years of progress. These events are not rare exceptions, they are realities that many businesses face.
Insurance provides an injection of funds that greatly reduces the financial burden and shortens the time needed to recover, beyond the immediate benefit of financial support.
Without insurance, people often resort to counterproductive measures such as selling income-generating assets, borrowing at unfavourable terms, or diverting funds meant for other essential needs. These decisions can weaken long-term financial stability and slow recovery.
Beyond individuals and families, a well-developed insurance sector plays a broader economic role by providing capital for investment, facilitating trade, and strengthening the overall management of risk within the economy.
One of the biggest misconceptions among SME owners is that profitability guarantees stability. In reality, many profitable businesses still collapse because they lack financial discipline and proper risk planning. Financial protection and planning solutions play a critical role in bridging the gap during uncertain periods.
Insurance helps businesses recover financially after property damage, theft, or business interruption, enabling them to replace assets and resume operations without starting over. Life assurance protects the business and the owner’s family by providing financial support if the business owner or key decision-maker passes away or becomes unable to work, ensuring continuity and preventing sudden financial collapse.
Medical insurance is equally important, as it protects business owners and employees from unexpected medical expenses that can drain business capital or disrupt operations.
Additionally, investment solutions such as unit trusts help SMEs build financial reserves during stable periods, creating a buffer that can support the business during slow seasons, economic disruptions, or unexpected downturns. These financial reserves enable businesses to continue meeting their obligations even when income temporarily declines.
The most resilient businesses are those that plan for disruption, not just growth. They recognise that risk management is not something to consider after a crisis but an essential part of everyday decision-making. Putting safeguards in place early enables SMEs to strengthen their financial stability, improve their credibility with lenders and partners, and position themselves for sustainable growth.
At Old Mutual Insurance Uganda, SMEs can access a range of financial solutions in an integrated and coordinated way.
As a one-stop financial services provider, Old Mutual offers general insurance to protect business assets, life assurance to secure business continuity, medical insurance to safeguard the health and productivity of business owners and employees, and investment solutions such as unit trusts to help businesses build financial resilience over time.
With a combination of protection and investments, SMEs in Uganda are better equipped to manage financial risks, recover quickly from disruptions, and sustain long-term growth.
The future of every SME depends not only on its ability to grow, but on its ability to withstand disruption. Businesses that survive are not necessarily the ones that avoid risk, but those that prepare for it. Uganda’s economic strength depends on businesses that endure, and endurance begins with preparation.
The author is a risk and compliance specialist at Old Mutual Insurance Uganda
