The widespread floods of 2009 had a serious impact on businesses across the country, leaving owners unable to return to their premises and therefore unable to function as normal and the economic downturn has seen arson return as business threat.
But, says David Armstrong, associate director at Belmont International, whilst such high profile events often help to focus attention on one cause, most UK businesses are failing to consider the wider implications of business interruptions.
“When it comes to floods, fires and similar events”, explains David, “it is important for a business to have considered not only the initial damage to their own operations and the recovery time required, but also the implications for customers, suppliers and surrounding businesses that may also have suffered.”
Some businesses under estimate the time needed for repair and rebuilding, and fail to consider the knock on effects of restricted access to their premises or breaks in the supply chain. Being unprepared and unequipped for a lengthy break in production can be financially devastating.
David continues: “Planning ahead and protecting your business from a potential break in income is essential - it’s easy to see how costs can mount up and it’s dangerous for people to think that it won’t happen to them. In addition, sadly, it’s equally risky to rely upon customer loyalty and continued support from business associates.”
For one company that Belmont encountered, confidence in their ability to bounce back proved to be sorely misguided.
Having traditionally purchased an indemnity period of 12 months for their business interruption insurance, they suffered a major fire that demonstrated the severe costs that can occur when certain business processes are taken for granted.
The scale of the damage to their building was such that it took almost nine months to finalise the rebuilding costs, designs, site clearance, planning and construction tenders. By the time the original 12 months indemnity period had elapsed, work on the new infrastructure had barely gone beyond the foundations. Needless to say, with the benefit of Belmont’s input, solutions for any future disasters are now in place.
David concludes: “Obviously, it’s impossible to prevent every possible disaster or cause of damage, but with well prepared Business Continuity Plans and carefully considered insurance programmes, preparations can be made to minimise the effects, and to make the recovery process far easier, quicker, and less costly.”
The indemnity period on a business interruption insurance policy starts from the time of the disaster. If the business is still falling far short of its pre-loss trading level when that period runs out, the financial consequences are down to the business and not the insurers.