Only uncertainty is certain
In the era of 24-hour news it's never been easier to keep informed of our world's splendours and tragedies. We're all global citizens now, living in a global village.
From political instability in Catalonia to Caribbean hurricanes, the uncertainties and risks of life are laid bare. Closer to home, the devastating fire in May in one of Ballymena's busiest retail streets brought those risks into sharp focus for a number of our customers.
Running a small business can be all-consuming at the best of times without these unwelcome external shocks.They are, however, part of life. As the ancient Romans said “the only certainty is that nothing is certain”. The question then, is how should business prepare?
Unexpected disruptions – particularly fire, storm and water related claims – can severely hinder or halt commercial operations. Even less dramatic events, such as a power outage which cuts off phone access to your sales team, can be financially painful.
To provide cover for this financial loss the insurance industry offers Business Interruption (BI), usually as part of a combined policy. Take-up, however, has been historically low and, of those who do have BI, up to 75 per cent are estimated to be inadequately covered.
Perhaps one of the reasons for that is that BI is one of the most misunderstood policy areas. Many business owners believe that buildings and contents policy will ‘put everything right' in the event of a fire or flood. That is not their purpose. These policies are designed to rectify physical damage -they will not cover financial losses that your business suffers as a result of an interruption to trading.
What if your premises were unusable for six-months or more following a fire? If you couldn't trade for that long, would the business survive? For most SMEs, the answer is no.
BI will, however, cover income loss and can also cover increased costs of renting alternative premises or staff overtime. It can also cover the impact of misfortune with a key supplier or neighbouring businesses. There is even the option to cover the eventuality of staff winning the lottery (I've already bought my ticket!).
Selecting the right level of BI cover requires careful consideration. Every business is unique. Do you operate from a number of premises, which reduces risk, or from just one? Do you use specialist equipment that would take a long time to replace? How long would it take to restart operations after an unexpected shutdown?
These issues should be discussed and considered with your insurance broker. They should also encourage you to put a detailed business continuity plan together outlining specific risks and how the business will respond to a crisis. These should be worked out methodically, well in advance of a disaster, with action plans and responsibilities clearly mapped out.
Such plans can help reduce premiums, but more importantly, they will also give your business a better chance of survival in the event of a loss.
There is nothing new in this advice, but as a recent survey found, over 40 per cent of UK SMEs have no contingency plans, despite almost 70 per cent claiming that they would be resilient in a crisis. Sadly, resilience is not a state-of-mind. It requires planning and preparation, and ideally, adequate cover.
Diane Johnston is head of SME at Autoline Insurance Group (www.autoline.co.uk/business)