When disaster strikes, is there a plan?
When it comes to disaster, how prepared is your business to cope? It’s an important question and one, which many SMEs in particular, possibly haven’t put as much thought into a s they should, suspects Insurance Council of New Zealand chief executive Tim Grafton.
“Larger businesses with larger resources, governance and planning capabilities tend to do a business continuity plan. It’s SMEs that typically don’t have the time and resources to think about this stuff but 95% of businesses in New Zealand employ less than 20 people,” he says.
And it is developing a business continuity plan that is the first step in risk management for business when it comes to disaster, says Tim.
He advises businesses sit down and think of the possible scenarios that might occur in the event of a disaster such as an earthquake or ﬂood to identify the unique areas of risk for the particular business.
And what the risks are will vary considerably depending on the business and can include factors such as material damage to premises and equipment, ability to access suppliers and to deliver goods to market.
“For example, if your business depends on tourists, such as many in Kaikoura did, then if the tourists can’t access your business that is a risk. For a manufacturing company that has had damage to premises or equipment then the loss of ability to manufacture is a big risk.”
Once risks are identified the next step is to work out how you could mitigate or manage those risks in the event that a disaster occurs and put a plan in place, says Tim.
For example, could you have a second site you may be able to work from if you need to or could you have a backup of important equipment? Once you have done everything you can to manage risks, the final step is to engage an insurance broker for cover for the risks you can’t manage.
Tim says a broker will help a business to identify those risks and then match the best products to provide coverage to help remove the risks from the business.
There are a wide variety of products available – commercial property, commercial motor, business interruption and liability.
It can be a complex topic, which is where a broker can provide real value to help assess the particular requirements, knowledge of the range of products and solutions that are available and assistance to understand the various solutions.
Once the correct insurance is in place the business has an on-going duty to ensure it adheres to the policy agreement so it is important to read these properly and ensure you understand the obligations, says Tim.
He advises good accounting records as key and to ensure copies are kept in more than one location.
It was a lesson hard learned by some businesses in the Christchurch earthquakes as red zoned buildings could not be accessed making it difficult in some cases to access such records, says Tim.
“When you need to claim on insurance for business interruption, for example, the insurer needs to see your accounts. This enables a quick settlement,” he says. If your business changes or grows you also need to notify your broker.
“For example if a business employs more staff or buys new equipment it might be necessary for the policy to be updated to reﬂect these changes to make sure these things are covered. Keeping up to date with premium payments is also important to ensure continued coverage,” he says.
The right insurance can also give a business the ability to grow as coverage provides peace of mind allowing the business to forge ahead.
For example indemnity insurance can allow businesses to engage in riskier activities but still be covered, says Tim. And insurance is a market that is constantly changing.
For example, a newer product being offered to businesses is cyber insurance to assist with the financial costs associated with a cyber event – something that is increasing as a risk, says Tim. “Cyber insurance can cover first and third party losses.
First party losses are losses suffered by the insured. Third party losses are losses suffered by a third party because of the actions of the insured, and for which the insured is (or may become) legally liable to compensate the third party for.
Some insurance policies also provide enhanced benefits such as a retained response team of IT, legal and public relations professionals, who are on standby to respond to an event as soon as it happens,” he explains.
When it comes to disaster risk management planning and being proactive rather than reactive is key.
“Taking the appropriate steps now to help reduce risk and having the correct insurance in place can really help to save your business in the event of a disaster.”
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