Enhancing SMEs Resilience by the Implementation of Business Interruption Insurance: Relevance of ERM and Corporate Governance – A Comparative Study

Small- and medium-sized enterprises (SMEs) are widely recognized as particularly vulnerable to external shocks’ impacts. In this book chapter, we investigate the potential role of enterprise risk management (ERM) and corporate governance (CG) mechanisms as facilitators for business interruption insurance (BI) in SMEs. Our research aims to demonstrate how SMEs equipped with advanced ERM practices and robust CG structures may better comprehend the significance of business interruption insurance and its effectiveness during crises such as the COVID-19 pandemic. By analysing survey results from a large sample of SMEs operating in Poland and Germany, we explore the relationship between ERM and CG sophistication and their influence on SMEs’ perceptions of business disruptions caused by the COVID-19 crisis. The findings reveal that SMEs with higher ERM and CG maturity levels exhibit a clearer understanding of the implications of COVID-19-related interruptions and are more inclined to adapt their business interruption insurance policies accordingly to mitigate crisis effects. Our research proposes a comprehensive framework that offers valuable insights for consultants seeking to enhance ERM and BI practices in SMEs. By promoting a deeper integration of ERM and CG mechanisms, SMEs can develop a more proactive approach to managing risks and responding effectively to unexpected disruptions, thereby strengthening their resilience in future crises. This chapter contributes to the growing body of knowledge on risk management and insurance practices in SMEs, providing practical recommendations for SME owners, policymakers, and consultants to foster a risk-aware culture and secure the continuity of SMEs in times of crisis.