Pardon the interruption
Many smart business owners have ensured that they are adequately insured for material damage, liability and wages cover in the event of a disaster at work, such as a fire, flood, natural disaster or severe technology breakdown. There will also be a small percentage of businesses that are very well prepared, have contingency plans in place and have considered insuring lost earnings and the costs and time required to restart a business. Unfortunately, most businesses learn the hard way that Business Interruption insurance can be the difference between success and failure.
A recent survey of 2,500 small businesses in the US suggests that over 70% did not have a disaster plan in place, almost two-thirds felt contingency plans were unnecessary and over 60% were confident that business could be resumed within 72 hours after a natural disaster 1. Common sense and factual studies have shown 72 hours recovery time to be highly improbable in most cases.
A window of 72 hours is a substantial underestimation given that disaster recovery may result in one or all of the following scenarios:
- Rebuilding of premises or acquisition of new premises (either short term or long term)
- Replacement of specialist goods, parts and /or machinery (allowing time for manufacture and delivery)
- Awaiting outcomes of any investigations into the disaster, legal, criminal or otherwise
Consider also the elements that are more difficult to quantify: emotional stress for the owner, disruption to the staff and potential customer loss of confidence. The increased cost of operating under these circumstances and the effect on your cash flow, with or without a contingency plan, is likely to be substantial.
In fact, studies have shown that of businesses suffering a major crisis, such as a fire, as many as 70% could not return to their pre-loss form within three years after the crisis occurring 2.
Given that recovery time may realistically take as long as eighteen months it is crucial to understand if your business could sustain trading with disruption over such a timeframe. PBI have valuable experience in this field and are happy to discuss your business to understand what kind of Business Interruption insurance you may need to ensure a safe future for your business, your staff and your profits.
- Childs, D.R. (2008) "Prepare for the worst, plan for the best: disaster preparedness and recovery for small businesses", John Wiley & Sons
- Knight, R.F. & Pretty, D.J. (1998) "The impact of catastrophes on shareholder value", The Oxford Executive Research Briefings, Templeton College
“This article provides a factual summary only of the product(s) we offer. It is not intended to be advice and you should not rely on it as a substitute for any form of advice”
