Talk About Disaster Planning
While the vivid images of Japan's tsunami and the tornados that devastated America's southland are still fresh in our minds, it bears a moment of reflection for both on the shear scope of tragedy and commerce disruption. As business people, we often think that the un-thinkable cannot happen to us, to our businesses and to our families. But it can, and it does.
The decision to purchase insurance occurs for a variety of reasons, but at the heart of the matter remains a tipping point of risk that has unbearable financial consequences. In other words, we simply cannot afford a bad day - or a bad decade, which would cause so much of the security that we have worked so hard to create to disappear - and so we transfer that risk to an insurer so that if the sky truly falls, we can mitigate the certain hardship.
The smartest buyers, (and I am encouraging you to reflect upon your own decision process), do not take completion of the Business Income worksheet lightly. And, they look beyond themselves. They carefully examine their sales and supplier chain to ascertain what would happen should one of their primary business relationships incur a disaster that would impact their own ability to perform. The solution might be a carefully bonded relationship with a friendly competitor or it might be additional insurance through Contingent Business Income.
And, the smartest buyers go further by complementing their Business Interruption coverage with astute Disaster Planning. They build useable plans that look past the classic scope of a fire, for example, and structure them to pre-identify which company they will retain for immediate remediation response, reconstruction sources, alternative site selection and set-up, e-document retrieval and employee deployment. The smartest buyers understand that what they may forecast to happen may not end up happening at all. In other words, they prepare to be prepared.
Even the best laid plans may not exceed the long reach of a disaster's impact. One outcome of the tsunami was the disruption in the flow of auto parts to US domestic auto suppliers. Without critical parts, those plants here in the US could not sustain production. On face value this was a classic contingent business interruption and yet in reality it was far more complex. Companies impacted in the US would have had to purchase both Foreign Earthquake and Foreign Flood insurance as part of their insurance program. Imagine if your broker was trying to sell you those coverages for Japan before the event occurred? Would you have considered it? At what point does the farfetched really come in to play and where does your checkbook say stop? But, 24 hours can change our whole perspective when the sky does fall.
These are complex and hard discussions to make the time for. Encourage yourself and your management team to take that time, to ask questions of yourselves and to seek collaboration from your Brown & Brown broker. If that bad day does come, your business will meet that challenge better prepared to survive, and thrive, in the future.
Brown & Brown of Detroit