Wikipedia defines Business Continuity Planning (BCP) as identifying an organization's exposure to internal and external threats and synthesizes hard and soft assets to provide effective prevention and recovery for the organization, while maintaining competitive advantage and value system integrity.
A BCP is also a roadmap for continuing operations under adverse conditions such as a storm or a crime – and something that insurance brokers need to specifically tailor to each of their small to medium business clients.
“Small-to-medium business owners need to develop a BCP with risk management incorporated to ensure the financial health of their organization,” says James W. Grieve, a commercial lines manager with James W. Kloepfer Insurance Broker Ltd. in Brooklin, Ontario. “With small business firms representing 98 per cent of businesses in Canada and employing 48 percent of the total labour force, their survival is also vital to our economic stability. A BCP will help guide each employee/team member to continue operations as much as possible to minimize the adverse effects of a disaster.”
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Insurers need to remember that a proper BCP needs to take into consideration the client’s entire organization, says Grieve, and beyond that, the suppliers and connected firms that contribute to the economic health of that company. (continued.)
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“A BCP needs to incorporate everyone in the organization including employees, suppliers, the company's accountant, IT personnel and HR manager/consultant,” he says. “The role of the insurance broker and insurer are to identify risk exposures and potential coverages that the client can use to recover some of the costs associated with a potential disaster. Any of the firms that will help keep you in business or ensure your survival post-disaster should also be part of your BCP. They may include – but are not limited to – your IT company, key suppliers, bank and landlord.”
Larger companies understand the need for a contingency plan to safeguard the business, says Grieve, and have the resources to put such insurance in place. But for small-to-medium-size businesses, the broker may need to walk them through and educate the client – to explain the potential risk.
“We try and educate our clients as to the exposures they might have as a small-to-medium business owner, and attempt to quantify a loss through historical data and claims examples,” he says. “More often than not, clients quickly realize that as a smaller organization their tolerance to a financial loss is much less than a larger firm. It is important to also point out to clients that their ability to ensure business is continued is also easier for them to control as a smaller organization.
“A large business has the resources to create a committee to develop a BCP, but small-to-medium business may need to solicit the help of an expert/consultant. This is no different for our smaller insurance brokerage. We rely on outsourcing our BCP services to our risk management partners.”
Roberta Zurrer, also a commercial lines broker with McDougall Insurance & Financial in Belleville, Ontario, says a good BCP can provide not only for the owners, but the employees too. (continued.)
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“Any small or medium business needs a plan in order to continue in the event of a loss or disaster, even in the case of water damage to close down for repairs,” says Zurrer. “You want to make sure your employees are looked after – say if there was a strike by a supplier or some form of work interruption. The client has invested a lot of money training an employee, you don’t want to lose them because the payroll isn’t covered by insurance.”
Beyond the premises of the business, many clients forget that they are exposed to loss if they are storing inventory offsite.
“Each risk is unique to the client,” says Zurrer. “We ask a lot of questions, and one that we ask is if they have anything that is stored off premises? There are a lot of things that the client may overlook that need to be incorporated in comprehensive coverage.”
The challenges faced by small-to-medium business owners can be limited resources to properly assess what risks to the business are out there. That is where insurance brokers can lend their expertise, says Grieve.
“A large business has the resources to create a committee to develop a BCP, but small-to-medium business may need to solicit the help of an expert/consultant,” he says. “This is no different for our smaller insurance brokerage. We rely on outsourcing our BCP services to our risk management partners.
“We try and educate our clients as to the exposures they might have as a small-to-medium business owner, and attempt to quantify a loss through historical data and claims examples. More often than not, clients quickly realize that as a smaller organization their tolerance to a financial loss is much less than a larger firm,” adds Grieve. “It is important to also point out to clients that their ability to ensure business is continued is also easier for them to control as a smaller organization.” (continued.)
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One of the elements that can be incorporated in BCP is kidnap and ransom coverage – one of the unfortunate realities businesspeople face while travelling abroad, says Zurrer.
“There is kidnap and ransom coverage too,” she says, “with more clients travelling abroad, working in other countries outside of North America, there is a chance of that happening. We are seeing more and more cases of kidnapping and ransom demands. Just look at the news.”
The important of a proper BCP can be lost or overlooked by a small business owner, which makes it more important than ever for insurance brokers to stress to their commercial clients the need to have coverage in place.
“I think smaller businesses sometimes do not realize the importance of a BCP or take the time to develop one,” says Grieve. “The BCP can help the client reduce the effects of a disaster, as well as the amount of a potential insurance claim. However, more often than not clients rely heavily on insurance to recover the majority of disaster costs and do not consider operational issues, the potential loss of staff, or the damage to their reputation.”
