What can you do to mitigate a ‘business-stopping’ event? Simply plan ahead.

Owning or managing a successful business can mean wearing many hats, from sales to HR and everything in between. One of the aspects of management that can be overlooked, or not regularly reviewed, is how the business would continue to operate following a ‘business-stopping’ disaster such as a fire, flood or cyber breach.

Every corner of the UK is vulnerable to our ever changing climate, fire risks can be reduced but not eliminated, and as we’ve all seen in the news there’s no restriction to the size of business a hacker won’t try to penetrate. One of the smartest ways a business can continue to operate under such adverse conditions is to plan for it, and insure themselves adequately. Many companies unknowingly underinsure their business and its assets, and can be left exposed when they need cover most.

• A 2015 study by Aviva showed that one in five small and medium sized enterprises (SMEs) aren’t confident that they have the right level of insurance.
• Research undertaken by The Chartered Institute of Loss Adjusters found that 40% of business interruption policies are underinsured, with the average shortfall being 45%.

A business continuity plan is forward thinking of what, in the absolute worst case scenario, could affect your business. It is about identifying any possible risks, and preparing a plan to be put in place that would alleviate the damage. It is crucial for a business to identify the parts of the organisation which it cannot afford to lose (for example information or premises), and deciding how best to protect them if an incident occurred. The risks considered should be very broad, and could span from anything such as natural disasters to terrorist acts, so it truly is crucial to be prepared for the unexpected or else risk your organisation having to stop trading. The continuity plan is there to maintain business in the event of an emergency. It is crucial that all employees (new and existing) are aware of such a plan, and are able to access it at any given time. Regular reviews are critical to maintaining good preparation.

Alongside a continuity plan, an organisation should be aware of business interruption insurance. This valuable form of cover is able to compensate for the loss of income an organisation may suffer as a result of disaster. Many business owners are mistakenly led to believe that other insurances they hold will be at hand to help continue operating, but this may not be the case. Typically, buildings and contents policies will help in the long-term, to restore the business back to original specification, but financial losses a business will sustain as a result are likely to be excluded from these policies. Although business interruption insurance cannot be purchased on its own, added to another form of insurance it can ensure that the cost of damage is minimal. It helps to quickly get an organisation back on its feet minimising the loss of revenue and staff as a consequence of the damage (for example, by funding an alternate, temporary place of work, or additional staff costs).

The benefits of having business interruption insurance are many, as it essentially enables a business to continue to operate following an insured ‘business-stopping’ event such as a fire. Having such insurance means being able to pay employees consistently, therefore allowing them to continue working with the organisation. It also helps to maintain relationships with clients, as insurers can assist by paying to quickly restore production or services in a variety of ways, so they are not driven to find other businesses that are able to help. It also keeps a business established, as it reduces the risk of loss of earnings, so that once the damages are repaired, the business is still working at the same standard as when disaster struck. There is no need to start again from the beginning. One in four businesses that face disaster are never able to reopen, and this may be partly due to not maintaining income and clients in the months following an incident.

When combined, a continuity plan and interruption insurance forms a robust business continuity management (BCM) programme, which in essence is the plan to deal with a disaster in its entirety. If a business has a well constructed BCM programme, then it is more likely to survive and thrive after an emergency. Insurance brokers are able to provide confidential business audits, advise and arrange adequate cover for times when your business will need it most. A good broker can offer businesses of all sizes the peace of mind that they will be able to continue trading whilst its premises are repaired.