Unfortunately due to the nature of risk no matter how carefully you assess your business sometimes the unforeseen misfortune such as a fire or flood can occur.
Have you considered how your business would cope if:
- It suffered a fire?
- It suffered a flood?
- It had to close due to an escape of water?
- A devastating fire occurred at one of your customers or suppliers premises?
Unplanned events can result in increased workload and, if not managed effectively, can lead to lost customers, ultimately affecting profitability.
A business interruption scenario
A reputable high street florist, sharing a property alongside other businesses with residential flats above, suffered a devastating fire. The fire left the building in need of significant repairs. A complex and extensive rebuild was required and all within a tightly controlled conservation area, meaning a lengthy reconstruction period.
After investigating the extent of the damage, it was evident that the rebuild would take up to 24 months. This time was required to allow for the complexities of planning the reinstatement program, resolving different ownership rights and the number of insurers involved.
Thankfully, the florist had business interruption cover for a maximum of 24 months. Business Interruption cover aims to maintain a business’s gross profit even if it is temporarily unable to trade. It also helps a business get back to the same trading position it enjoyed prior to the incident, by incurring legitimate and economic increased costs of working.
Business Interruption insurance can include compensation for the loss of gross profit that would have been earned, based on previous financial records, had the disaster not occurred, that would allow you to pay:
- ongoing operating expenses, such as utilities, that still requires payment even though the business is temporarily out of action.
- economically incurred increased costs of working, including in certain circumstances the expense of operating in a temporary location while repairs take place.
However, despite this cover being in place there was still a significant risk that they could lose customers. The question on everyone’s lips was, would their customers return after two years once the repairs were complete?
Achieving the optimum outcome
The florist was a client of Hamilton Bond Ltd, now part of the Jelf family (Jelf Claims Consultancy,) and our consultants identified that a nearby florist was for sale and in a great location. A business case was prepared and the “increased cost of working” section of the business interruption cover was used to buy the competitor florist. Moving the clients business to the new site to resume trading within a much reduced interruption period.
The client was back to business within seven months of the fire and it had also bought into a completely new customer base. Importantly retaining old customers as well as winning new, to help the overall recovery of the business.
No one wants to believe a disaster could happen to them but unfortunately for some businesses it does. Being prepared can be one of the best forms of defence. Why not get in touch to find out about our business continuity resources. And start putting in place steps to ensure your business can survive a business interruption.