Risk management is a bit like planting a tree: the best time to do it was yesterday, and the second best time is today. While a lot of businesses are struggling to make it through this year, there are a number of options available for business owners who want to manage future risks.
Managing Risk During COVID-19
What is Risk Management?
Risk management is a broad discipline that incorporates a wide variety of tactics and strategies to decrease the chances of something bad happening to your business, and to reduce the negative impacts should something bad occur. Most risk management can be grouped into four steps: identifying and assessing risks, identifying solutions, implementing solutions, and monitoring the outcome.
Insurance is an important part of risk management because it helps decrease damages in the case of catastrophic loss. Controlling the consequences if a risk should occur is as important as trying to lower the chances of that risk occurring in the first place.
Preventing Infection
We’ve had occasions where we’ve watched risk management on a vast scale as governments around the planet have attempted to control the pandemic. We can see quite clearly how individual actors can affect risk management, and how different controls can be put into place to reduce risk.
Business owners have numerous options for controlling infection. These include:
- Telling team members to stay home if they’re sick
- Offering remote work options
- Encouraging hand washing
- Sanitizing their spaces
- Mandating the use of masks
- Maintaining social distancing guidelines
- Limiting the number of people who can be in their building at any given time
- Offering curbside pickup/delivery
- The use of PPE
Business Continuity Planning
Business continuity planning is an essential step in risk management – it’s used to identify steps you might take should your business be impacted by a disaster, and how taking those steps might impact business operations.
There are a number of steps that go into business continuity planning, like identifying the risks to your core business interests. During the pandemic, an obvious risk is government imposed shutdown, be it total or partial.
When planning for business continuity, recognize that members of your team may not be able to work, either because they are sick, otherwise physically incapable of working, or because you won’t have the funds to pay them. Consequently, it’s important to establish which services are essential to your business, and to imagine a skeleton team of employees who you could rely on to keep those essential services running.
Of course, shutting down non-essential services will impact your profitability, so you’ll need to adjust expected revenues during periods of distress. It can be helpful to plan for best and worst case scenarios (weeks of partial shutdown versus months of total shutdown), and to run war games to establish the potential consequences of actions taken by other actors.
Insurance During COVID-19
Understanding Your Existing Policy
The first thing to do is review your existing business insurance policy. Currently, there aren’t many policies that will respond in the case of pandemics. There are two reasons for this: First, insurance is generally designed to insure physical risks to your business, while pandemics fall somewhere between a physical and social risk.
Second, pandemics are global events. If insurance companies were to include pandemic insurance automatically with every policy, they’d all fail as soon as a pandemic hit. Insurance companies failing is a very bad thing for many reasons.
That said, some insurers did offer pandemic coverage post-SARS, and some business owners purchased that coverage, so have a conversation with your insurance Agent if you wish to evaluate your options.
Business Interruption & the Civil Authority Clause
Many business owners have business interruption insurance – it’s incredibly valuable, because it can cover the loss of profits, not just the loss of property. Some business interruption policies have a civil authority clause which says that if the business is interrupted because governments have barred the business from operating due to disaster, the business interruption policy will pay out.
While many of these policies stipulate that a physical risk is required (such as a flood or earthquake), some do not. Again, it’s important to fully review your policy with your licensed Agent.
Purchasing Insurance During COVID-19
Work with your broker to find the best way to manage your risk – there are still a number of excellent solutions available, including business interruption insurance. What’s more, there are new products coming on the market all the time, and we can anticipate that a new slew of coverages will come out post pandemic to offer insurance that reflects new realities.
To highlight this, our friends up north at Reider Insurance shared a story about how they’d commissioned a blog about travel insurance. The writer of the blog said that travel insurance was impossible to purchase during COVID-19. Between the time they wrote that blog and the time it was published on their website, travel insurance became widely available – and now it does cover for interruptions due to COVID.
That story is in service of an important point: insurance is a rapidly changing industry. Stay in touch with your broker, have an honest conversation with them about the needs of your business, and you’ll be astonished at the incredible solutions they can offer to protect your investment.
Harris Insurance is “COVID Compliant Certified”
Your health and safety is important to us so we are taking every measure possible to ensure that we can stay open to serve you. We are encouraging business transactions over the phone, email, and our website but will welcome you in our office. Just remember to bring your mask! Last week, Debbie Dodge, a representative from The Greater Fort Walton Beach Chamber of Commerce, stopped by and inspected our office and our procedures and determined that we are a COVID Compliant Business Partner. You can read more about Fort Walton Beach, Destin, and Niceville/Valparaiso’s Chamber’s efforts on the COVID Compliant program here.
Stay safe and please let us know how we can help you during this season and as we move forward into 2021!
LEGAL DISCLAIMER
Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
