Officially, the definition of Business Interruption Insurance is ‘loss as a result of an event that interrupts the operations of a business.’ This includes things like mechanical breakdowns, fire and flood. But there are also other newer risks that some business owners might not consider. In today’s connected world, it isn’t just the physical items that we rely on for our business, there are digital items too. Systems that can be compromised through online attacks, making them inoperable and preventing your business from functioning. Any of these events could result in a business closure for many months or even years.
So what could these interruptions mean to you? Here are three examples of impacts that a business interruption could bring.
1. Costs to replace tools, computer systems, and office equipment, renting temporary spaces, paying existing leases, employee wages, and over-time to deliver on contractual obligations. The financial strain to the company is enormous, as the need to pay these expenses continues with little to no revenue.
2. The inability to deliver the agreed-upon product can lead to legal proceedings, adding financial strain and your customers and suppliers without the product your company is contractually obligated to provide.
3. Reputational damage with those who depended on your services. They can lose trust in your company, built over many years of service, and quickly find a replacement. This damage can be irreparable.
Some companies never reopen after suffering a catastrophic loss. With the end goal of getting your business back up and running quickly, properly managing your company’s exposure to BI losses is essential to recovery. Ensuring the proper insurance coverage is in place can help make this goal a reality.
Developing a disaster recovery plan is also a key component in minimizing the effects of BI losses. Compiling a list of equipment and suppliers, computers, backing up data, and have an employee disaster response plan will assist with identifying critical components required to get your company back in business, and reduce panic and uncertainty.
If you need assistance identifying hazards, assessing risk, and learning how to develop a disaster recovery plan, contact one of our experts today.