Business interruptions can occur after an anticipated or unanticipated event that delays or disrupts a business’s normal operations. Natural disasters, fires, cyberattacks, or the loss of a critical supplier can halt operations for an extended period of time, leading to a cash-flow imbalance that could force a business to close for good.
In this article, we’ll discuss some ways to minimize business interruptions. Let’s get started!
What’s Business Interruption Insurance?
Business interruption insurance protects your company from closures caused by things such as natural catastrophes, equipment failure, and destruction of property. The objective is to minimize your company’s financial loss if you are forced to shut down for an extended period of time due to a covered peril.
Most business interruptions will be covered under this policy:
- Revenue that your company would normally generate if it were open
- Office space rent payments
- Loan payments
- Employees salaries
- Relocation expenses if you must move locations temporarily or permanently
- Operating expenses and utilities
- Employee training costs
Here Are Six Ways to Minimize Business Interruptions
- Determine the risk. Take into consideration environmental and human risks, as well as which risks are preventable and which are not. After the risks have been identified, the elements involved can be understood, such as the hazard itself, the assets at risk and the potential impact of the risk.
- Calculate the cost. Analyze the impact of each risk by considering the cost of lost sales or income, increased expenses, regulatory fines or contractual penalties.
- Understand insurance coverage. Review the organization’s insurance coverage to understand the policy terms, exclusions, coverage limits and waiting periods.
- Implement steps for prevention and mitigation. Control and contain potential hazards by implementing prevention, deterrence and mitigation strategies.
- Create a crisis communication plan. Provide employees and customers with updates and critical information by creating a crisis communication plan. Determine the chain of command, write key messages and scripted responses and establish bidirectional communication networks.
- Prepare an emergency plan. Practice and review emergency procedures to ensure the plan’s effectiveness. Include IT and data recovery, contracts and resources in the plan.
According to the Federal Emergency Management Agency, 40% of businesses never reopen after a disaster. By taking the above precautions, business leaders can prepare and strategize for interruptions. For more information, contact Atlanta Insurance today.