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PLEASE PARDON THE INTERRUPTION

 

Unfortunately, fate is never so polite and when your business suffers damage and incurs losses as a result. It is generally recognised that the number of businesses that fail within 18 months of a major catastrophe befalling their business is between 50% & 80% and this is usually due to two factors. Prudent managers should be asking the question “How prepared are we for the aftermath?” And looking at the following 2 questions:

 

1. Is the Business Interruption (Loss of Profits) Insurance adequate and robust enough for their needs

 

2. Do you have a full Disaster Recovery/ Business Continuity plan which extends beyond just keeping IT back-ups off site?

There are 2 main items to consider with regard to Business Interruption Insurance, the first being the Indemnity period required. This is the period for which you will require compensation following an Insured Loss. Most Policies provide for a 12 Month Indemnity but in many cases this may not be adequate to put the business back into its pre-loss trading position. Important points to consider are:

1. How long will planning permission take before the premises can be reinstated

2. If you lose a major customer during the Interruption period how long will it take to replace them or win them back

3. If you use specialist machinery, what is the delivery and installation period for replacement items ( it is not unheard of for there to be a 12 month lead in time for purpose built equipment to be reinstated)

4. If your business is at all seasonally biased, this may well mean that it will take you longer than 12 months if the loss affects your seasonal window of opportunity.

Once you have decided on the most prudent indemnity period, you must ensure that the sums insured chosen are adequate to reflect the losses that could occur over the chosen period, whilst building in a percentage increase to allow for increasing trends in the business.

Although Insurance can deal with the financial loss if correctly insured, a robust and fully planned Business Continuity Plan is essential to aiding the settlement of the Business Interruption claim and covering areas that would not normally be dealt with by Insurance.

Such a plan should include the following:

1. Contact details and responsibilities of the crisis team members

2. Procedures to implement the plan

3. Procedures for reinstating communications, notifying all staff, customers and suppliers.

4. Floor plans stored off site showing the location of critical items

5. Details of off-site storage of data and pre-determined reinstatement of IT facilities

6. The details and contact numbers of all key business contacts including your

Insurance Broker, Accountant, IT suppliers, alternative production facility and any other outside agency that can support you.

You should not under estimate the importance of Business Interruption cover and a Recovery plan. These are the things that will ensure that the business that you have worked so hard to build survives that 18months critical period and will also ensure that the business can continue meeting loan and mortgage payments without recourse to personal guarantees.

If you would like any further information about Business Interruption cover, please contact Stephen Greenfield on 01489 579808.