Business insurance specialists Alan Boswell Group examines recent events and disasters, and the impact this can have on your business.
While BP’s oil spillage in the Gulf of Mexico is not the sort of event that is likely to threaten many UK businesses, the disruption resulting from the volcanic eruption in Iceland is a good example of why businesses should plan for the unexpected.
When Eyjafjallajokull erupted in April, it was at first expected to be a matter of only local inconvenience; but as the dust cloud spread – even faster than the Gulf oil spillage – businesses throughout the UK and Europe rapidly started to suffer the effects.
It was not just the airlines and airports that suffered disruption, however; many thousands of small- to medium-sized businesses are thought to have suffered the financial consequences.
How businesses were hit
There were three principal ways in which UK businesses were hit by the events that led to temporary closure of our airspace – and therefore airports. For most businesses, the greatest impact was that employees who were on holiday abroad were unable to get back to the UK and were therefore unavailable for work. Even in quite large organisations, the loss without notice of part of the workforce for a week or more can have a significant effect on operational effectiveness. It was not just ‘cover’ that was affected, there were also complications relating to holiday entitlement and related issues. While employers may wish to be flexible, this could cause resentment amongst those who had to shoulder the burden of carrying on for a sustained period.
The other effects relate to interrupted business travel and even a temporary suspension of trade, where this involves imports and exports by air.
The implications for other events
While it is to be hoped that such an event will prove to be rare, the fact remains that its very unpredictability makes it essential that businesses should consider the likelihood of similar – or dissimilar – events causing interruption to their operations. In general, there is little that your business insurance can do to help, except where a specific insurable event, such as a fire or explosion, occurs.
This makes it essential to look at your business and consider what might happen to disrupt it. Events can be classified as from low probability/low impact, through high probability/low impact or low probability/high impact to high probability/high impact. Clearly the higher the impact or probability, the greater the need for planning.
Planning for the unexpected
While it is not possible to predict the unpredictable and every business interruption, a robust “business continuity” plan will involve deciding what action will be taken in the event of the loss of, for example, power, premises, personnel or IT support. These are the obvious losses your business could suffer from, but will be applicable to just about every business: leisure and hospitality industries, pubs, restaurants, hotels, healthcare industries, charities and non-profit organisations, etc.
The key factors are:
- Involve your employees in the planning process – they are likely to be much closer to the day-to-day operations than you;
- Allow them to think outside the box, in terms of what might happen and possible solutions – they could have ideas that will help you;
- Appoint a coordinator other than the chief executive and communicate your plans with all employees – they will be reassured to know you have a plan and understand what to do in the worst case.
Image courtesy of Bjarki Sigursveinsson