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Weather events can cause significant disruption and loss to a business. In the midst of Atlantic hurricane season, companies need to ensure they understand the risks and have an effective plan in place.
Corporate Risk and Insurance spoke to Arnold Mascali (pictured), president of Procor Solutions + Consulting, about how risk managers can build business resilience and respond to risk and disruption.
Mascali is an attorney and risk management professional with 30 years of experience. He was previously managing director of Aon’s Global Property Risk Consulting group and a member of the broker’s Global Risk Consulting US Operations Board. In that role, he managed the response to some of the largest property and business interruption claims in history, arising out of catastrophes such as the September 11th terrorist attack, Hurricanes Katrina and Ike.
What are some surprising areas that financial impact stems from, and how can risk managers prepare?
A frequently overlooked reason for income losses is failure to consider how disasters impact your employees. Risk managers tend to focus on the company itself and omit any planning around the impact that employees may face. Consider this: if a hurricane damages a manufacturing facility, the storm may also have caused damage to the surrounding areas, where employees live. If those employees are displaced or need to relocate, there could be a significant impact on the organization, as well.
Some companies are creating ‘Employee Disaster Recovery Programs’ to assist employees with insurance-related matters by providing current information on where they can find relief. These programs can help support your most valuable assets while helping them return to normalcy, and work with a clearer focus.
How can risk managers quantify business interruption?
Protecting a business’s income stream is one of the most important risk management responsibilities for any company. While business interruption (BI) insurance affords some protection, it does not provide complete relief and claims can be complex.
A well-prepared risk manager or business owner can avoid protracted delays in resolving BI claims by completing a business interruption valuation prior to any event. The valuation would consider probable and foreseeable interruptions, as well as the predicted period in which the business would be impacted. With timing in mind, you can make reasonable financial projections and estimate the amount of income that could be lost. You should also consider extra expenses that are likely to be incurred in a full or partial shutdown of operation.
Your valuation and methodology can then be used to purchase the right amount of business interruption coverage, and will also help any claims to be resolved as quickly as possible.
How can businesses become more elastic pre-storm, and how can that help you bounce back faster?
Elasticity in disaster planning means to think outside of the organization. When disaster strikes, outside vendors or suppliers may not prove as reliable as anticipated, or your company may be placed at a lower priority when it comes to emergency responders.
Restoration companies are in high demand following catastrophes and having a pre-event contract with a reputable firm can make all the difference. A simple way to ensure a timely response is to have a pre-existing business relationship in place with a restoration contractor that ensures they respond to all events for the company, no matter the size or complexity.
What are the key players when it comes to understanding your disaster plan as a business?
Stakeholders vary by organization, but typically include finance, risk management, facilities, and procurement. When it comes to disaster planning, risk managers should aim to unite all stakeholders and avoid ‘silo driven’ plans. You don’t want each stakeholder to have its own plan based on its own priorities, without considering how it may interact with other parts of the organization.
Additionally, disaster response information should be easily available to all employees and team leaders should be trained on how to support and reinforce the organization’s commitment to the plan.
