When major interruptions hinder businesses from accomplishing everyday tasks, major expenses are incurred. This was never more apparent than during the Sept. 11 aftermath. Many companies in the vicinity of the World Trade Center Towers suffered disruptions and could not begin business as usual for weeks or months. Some larger companies were able to pickup the pieces more quickly, but several smaller companies have never reopened.
Catalysts for business interruptions are not necessarily as devastating as Sept. 11. They could be everyday occurrences, such as a neighboring building catching on fire that causes your company to close temporarily. Or, the office computer system could crash, causing you to lose valuable employee records and clients' billing information. Whatever the scenario, it is important to have business continuity strategies in place and to analyze insurance coverage before a crippling event occurs.
Business interruption coverage is not as widely distributed as fire or personal liability insurance. Companies typically do not purchase separate business interruption policies or other comprehensive insurance programs. However, it is important to find out what type of business interruption coverage is offered under your current policy. Likewise, it is important to understand the types of interruption coverages and the circumstances under which they offer protection. Also, evaluate your company's risk for interruptions.
There currently are insurance coverages that protect businesses from the results of physical damage to customers or suppliers, disruptions in utility services, and electronic media or e-commerce disruptions. Some provisions also may cover extra expenses to ensure business operations get up and running. For instance, the expense of renting temporary office space or equipment would be covered.
According to a recent survey, 57 percent of CFOs have reported that their companies have a business continuity plan to help recover from interruptions. The survey, conducted by Robert Half Management Resources, Menlo Park, Calif., includes responses from 1,400 CFOs based on a random sample of U.S. companies with more than 20 employees.
Developing a recovery plan can be a time-consuming process, but answering a few simple questions may help a company get started:
What areas are most vulnerable to a disruption?
How do you backup and store important data or information?
What equipment and supplies are necessary to keep business activities running?
What alternative work space does your company need if employees could not get into the office?
Today, businesses have a need and an opportunity to create comprehensive continuity programs that protect physical and financial assets and employees. It is important for companies to evaluate vulnerabilities and to map a plan to minimize disruptions.