How Entrepreneurs Can Safeguard Personal Wealth Amid Business Risks

The essence of ring-fencing lies in proactive planning and protecting from potential risks

- Tarun Birani

Rajiv, who owns a mid-sized manufacturing unit in Pune, expanded his business and grew his wealth. However, a market downturn and an unexpected lawsuit exposed his financial vulnerabilities. His cash flows dipped, and personal savings were at risk due to a legal claim.

Rajiv's case highlights a key lesson for Indian entrepreneurs: the need to separate personal and business assets. Despite being successful in business, his financial strategies were reactive. His savings were tied to working capital, and his assets—properties, deposits, and investments—were linked to business liabilities.

Lack of segregation left him exposed, a common issue among entrepreneurs relying on short-term fixes over long-term financial safeguards. How can business owners avoid such risks?

A framework: To secure their personal and business finances, entrepreneurs must adopt structured strategies related to segregation, legal safeguards, insurance, and contingency funds.