Vulnerability, Essay Example

Vulnerability means being susceptible to the impact of one or more events that may be within or external to your control of influence.  For example : one of the biggest risks that an individual faces is that of the personal mortgage on your property. If you fail to maintain the regular monthly payments, then the Bank or Finance company may foreclose upon you. As such they may seize your property and place this for sale in order to redeem their investment.  This has two immediate impacts on you as an individual (1) You are suddenly homeless and without a place to live (2) Your credit rating is adversely impacted making it very difficult to obtain another mortgage or personal loan.  This may even make it difficult for you to obtain a rental agreement owing to the poor credit rating.

Most small businesses have what is termed as “Limited Liability” meaning that the business owner has predefined limited liability for the debts and actions of the Company. “Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities” (IRS.gov). This has a significant advantage over the personal liability situation as the creditor has legal remedy only against the personal assets of the business.  Hence the risks and liabilities of the owner of the business are contained within the financial administration of the business.

The key issue here is that the small business owner is to an extent more vulnerable than the employed person.  He/She is taking a greater risk for the potential of increased benefits and wealth accumulation.  The business income is often the major component and source of the individual’s income.  Hence if the business is not doing well it may become unstable and eventually fold. Often the business portfolio is neither flexible nor divisible and the personal household may have debt on the business losing asset value.  The business owner also lacks the freedom and mobility of the individual in the labour market workplace. “The concept of diversification is particularly important to small business owners” (Michael S Gutter).   In order to minimize risk it is necessary to have diversification over your business portfolio in order that you are not fully reliant upon one particular segment of business.  This goes towards protecting cash flow and the overall income of the business.  Here the small business can gain an advantage over the individual employee.  Employees are often reliant upon a single source of income i.e. employment from a single job.  If that employer has bad times or is the result of a merger or takeover you may lose that job and as such your single source of income.  This can be particularly vulnerable with large car manufacturers or other manufacturing industries.  Owing to the fact that your skills may be limited to that specific employment arena e.g., an Assembler at a car manufacturing plant, you may find it extremely difficult to find another job.  This situation is compounded in a recession or downturn in the economy. This predicament leads to the inability for the individual to pay his large debts, often items like Car Loan and Mortgage.  The end result is extreme vulnerability often causing extreme social pressures and life changing situations.

Another aspect of personal vulnerability is that of a lack of personal household insurance. This is a means of protecting your assets from a series of unforeseen events. In the business you can have what is known as key man insurance that protects the key income earner from loss of revenue due to personal injury or accidents. Similarly the individual needs to examine his portfolio of assets and provide appropriate insurance coverage.  In particular the car and the employment income.  Although insurance premiums might be deemed as expensive they are mild compared to the consequences of inadequate or no cover at all.  The individual income earner also needs to protect his family by having adequate life assurance and critical injury insurance.  The business owner equally needs to pay attention to adequate insurance coverage of the key assets of the business and particularly the consequences that might result from fire, theft, flood or accidental damage.  This prevents serious disruption to the business and subsequent loss of income.

Works Cited

IRS.gov. Limited Liability Company (LLC). 2010. 4 9 2010 <http://www.irs.gov/businesses/small/article/0,,id=98277,00.html>.

Michael S Gutter, Tabassum Saleem. “Financial Vulnerability of small business owners.” Financial Services Review (2005): 133-147.