E-Business Claims Scenario
Radpro Inc. is an Internet-driven worldwide distributor of radiation shields. Nolons Inc. is a state-of-the-art radiation shield manufacturer that sells its product exclusively online through the Radpro web site.
On Monday, Nolons is attacked by the NIMDA virus and production is halted. Radpro, too, is attacked by the virus, which stops shield distribution.
Three days later, Radpros system is patched and back online after $75,000 in lost revenue (25 units sold per day, at $1,000 per unit). But Nolons doesnt get its system up and running again until Sunday, six days after the attack, so Radpro has no product to distribute, which costs another $75,000 plus $50,000 in extra expenses.
A customer then sues Radpro for $500,000 because it could not purchase and receive the shield it wanted during the six-day outage, and consequently lost a major sale. It costs Radpro $50,000 to defend against the lawsuit.
As a final blow, the resulting bad publicity within the radiation shield industry trade press forces Radpro to launch a $35,000 public relations campaign defending its business. Radpros total potential losses add up to $785,000.
The above example is fictional, but the problems and potential losses it mentions are anything but. This is a very plausible loss scenario that could affect almost any company, and that could be mitigated by cyberinsurance.
To determine the amount and type to purchase, make sure to:
Get buy-in from all department heads and dependent business partners
List all your exposures, including actions and ramifications of outside providers.
Specify and quantify the results of your exposures. Remember to count the expenses (technical, operational, legal, etc.) youll need to get back into operation, not just direct business income loss.
Create and implement an action plan to mitigate expenses you have control over.
Transfer the risk on exposures you cant control.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 7, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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