According to the Federal Emergency Management Agency, 40 percent of businesses never reopen after a disaster. Implementing steps to prepare for and respond to disasters can help to reduce loss. In order to protect your business from unavoidable interruptions, it is recommended that you have a plan in place.
Having a plan in place serves the following purposes:
Here are six steps you can take to help minimize business interruptions:
When determining the potential risks for business interruptions, consider both environmental risks and human risks. Additionally, consider which risks are preventable and which are not.
Once the risks are identified, you can begin to understand all elements involved, such as the hazard itself, the assets at risk, vulnerability to the risk and the ultimate impact of the risk. In order to be best prepared, rank each risk according to the likelihood of occurrence and the severity of impact.
After the risks have been ranked, analyze the impact of each risk. In calculating cost containment, the following should be considered:
The next step would be to review your insurance coverage. Business interruption insurance generally comes into effect in the case of one of three circumstances:
Since business interruption coverage can differ significantly, it is important to understand the policy terms, such as exclusions, coverage limits and waiting periods. Coverage is provided for lost net income only for the duration of regaining operation.
There are three different approaches for controlling and containing potential hazards:
Create a crisis communication plan in order to provide employees and customers with updates and critical information. The communication plan should have the following:
An emergency plan should be prepared and in place before a hazard occurs. The plan should be practiced and reviewed to ensure the effectiveness of the plan. The plan should include the following elements:
Business income insurance (aka business interruption coverage), helps cover lost income and additional expenses when your business is shut down from a covered loss. Let's take a look at what Business Income Insurance covers and how to calculate it.
Business income coverage helps cover:
Now that you have a better idea of what is covered by business income insurance, you're probably wondering how to calculate your overall business income. Calculating your business income starts with reporting your gross receipts or sales. This includes all items and services you sell at your business. For example, say you sell computer equipment. Every item you sell would be included in this starting calculation.
To start your business income calculation, follow these steps:
The equation for business income is: Business Income = Revenue - Expenses
By taking these steps, it is possible to minimize potential hazards and to limit the impact of hazards. In order to be completely prepared, work with your risk management team or contact Top O' Michigan Insurance today for assistance reviewing and updating your emergency plan.
This Blog/Web Site does not provide insurance or legal advice. This site is for educational purposes only as well as to provide you with general information and a general understanding of insurance, not to provide specific legal advice or specific contract advice. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute a client relationship.
The information on this Blog/Web Site is not intended to be a substitute for professional insurance or legal advice. Always seek the advice of a licensed agent in your state pertaining to insurance and legal issues.
Provided by Top O' Michigan Insurance
This Risk Insights is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2015 Zywave, Inc. All rights reserved.
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