CEOs, CFOs and risk managers, regardless of industry, buy insurance. They buy insurance to protect their company from losses, sometimes catastrophic losses.
Many times these losses have nothing to do with the ability of the company to continue to do business. A slip and fall, a bit of property damage, an accident at a client's office; these incidents, these losses hardly impact business. In fact, many times property and casualty insurance is the disaster preparedness plan or the business continuity plan. Something happens outside the normal course of business, insurance provides the resources to pay for it. That is the plan.
For clarification, let us go over the difference between business continuity (BC) and disaster recovery (DR). Business continuity, in its essence, aims to manage all strategic corporate assets, vital facilities, supply chains, human resources and day-to-day business processes proactively to ensure that business functions are performed in either an optimal or acceptable form.
Disaster recovery's main objective is to ensure that information technology procedures, responses and plans are in place to resume business operations as usual and as soon as possible after an emergency, disaster or crisis. In fact, disaster recovery acts as an enabler for the whole business continuity plan and plays a vital role in its practical execution. A business continuity plan and its development will include a disaster recovery plan, insurance plans, supplier management plans and system recovery solutions.
Insurance by itself will not suffice as the only risk mitigation strategy. In New Jersey alone, nearly 19,000 small businesses sustained damage of $250,000 or more, with total business losses estimated at $8.3 billion, as a result of Hurricane Sandy. The power outages alone were enough to have significant impacts on business continuity.
Losing a key supplier to a flood and understanding what you can do about it and what your next move will be; where is the insurance for that? You lose your key sales person who has relationships with 30% of your customers and is great at collections. A tenant in the building where your office is located causes a fire, and the building needs a one-month cleanup where does everybody go? Hurricane Sandy should have been a huge lesson to many businesses. Most insurance companies did not adequately compensate business owners for their entire losses.
As Sylvester Stallone said so eloquently in Rocky, "It's about how hard you can get hit and keep moving forward; how much you can take and keep moving forward. That's how winning is done!" It's about how fast you get back up.
For most risk managers, the good ones, that money alone hardly makes up for what is really at stake. As an insurance broker or consultant is it your only job to support your client with the ability to provide resources for every loss and every claim? The real opportunity for every insurance broker is to be a partner in every client's risk strategy.
However, some losses, although they are measured in dollars, cannot be adequately supported by a claim. That is why so many companies are asking their suppliers and contractors for copies of their business continuity plan or some certification that they have a plan.
Moreover, regulatory agencies, such as FINRA, are demanding that information.
So, a business continuity plan, just like a certificate of insurance, is becoming one of the requirements for many customers. We know that many times your clients are just getting that extra insurance, that umbrella policy, simply as a reaction to the demand from their customers.
As a partner in every company's risk strategy, this is a tremendous wake-up call to get involved in supporting and providing the expertise for your customers to produce a business continuity plan.
What you may not know is that business continuity plans are not static, they are organic. In order for them to be effective, they must be updated. As companies hire people, build offices, take on new locations, add new suppliers, grow and change, the business continuity plan must adapt. It is a service. It is an ongoing policy. And, it will either be done right by someone in-house at the company or an insurance provider will work with a continuity/resiliency expert to make sure it gets done.
Here is where it gets even more interesting. The idea of maintaining business continuity planning services as part of an insurance brokerage firm or risk consultancy makes sense. Why? Because updating policies and understanding how to get resources and what needs to happen in a crisis changes with each new policy that is written. As policies are renewed, these should be updated in the business continuity plan. It is all part of the "emergency manual."
As Mike Tyson once said, "Everyone has a plan until they get punched in the face." Insurance brokers know this all too well. If you had a copy of a client's plan, if you understood exactly what needed to be done in a crisis, you could stand with your client, with that plan and walk them through the emergency.
Business continuity and disaster preparedness are important insurance concepts. They insure a business has a plan to mitigate the risk of a disaster. Providing insurance brokerage, analyzing risk and providing a strategy to activate resources when a disaster hits don't just involve making sure data is protected or phones work. Those jobs require a thoughtful understanding of exactly who to call, what actions to take, where to go, and who has the authority to continue to do business.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.