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Insurance and Business Resilience

How insurance can help shape your business’s resilience

Running a profitable business might be your biggest focus, but in an era of uncertainty, business resilience is also an important part of safeguarding your financial viability. Business Resilience refers to a business’s ability to recover from and bounce back after experiencing an unfortunate incident. Consider the range of things that can go wrong and ask yourself how well your business would be able to bounce back from them. For example, how well would your business cope if it suffered a cyber-attack? Or if a severe storm was to cause damage to your business’s physical premises and equipment, how long would it take you to get back up and running? Insurance plays an important role in supporting business resilience by helping to cover the financial losses you might suffer as a result of such incidents. Let’s consider some of the incidents you might experience as a business owner and examine how insurance can help your business recover from the resulting consequences.

Allegations of negligence

Allegations of negligence can happen to even the most cautious businesses – sometimes minor oversights can eventuate into major issues and end up having substantial financial consequences for your business. If you provide professional advice as part of your business, the possibility of a client alleging professional negligence is one that is very real and can happen unexpectedly. Such allegations can escalate quickly, and the resulting legal fees and compensation costs can be overwhelming. This is why Professional Indemnity Insurance (PI) is an important policy to hold if you’re a professional service/advice-based business as PI can help to cover some of the costs associated with having allegations of professional negligence brought against you.

Allegations of negligence can also come about from a third party alleging you are responsible for bodily injury they suffer, or damage to their property. For example, someone visiting your office might slip and injure themselves, and seek to hold you accountable. Public Liability (PL) is intended to provide cover for the legal costs and settlement you might incur. Although PI and PL are completely different policies, they may both help to alleviate the financial burden you might be faced with if legal action is commenced against your business. They could prevent your business from falling into severe financial hardship as a result of claims brought forth against you and can assist you in getting your business back on track.

Damage to your business equipment

Whether you work out of an office, or remotely, you probably rely on some form of equipment to keep your business running. If you were suddenly unable to use this equipment due to an event like a storm or theft, not only would your ability to keep performing your service be impacted, but the cost to repair or replace your items would likely also be an unwelcome surprise. A Business Insurance Pack is designed to protect your business’s physical assets and equipment and can help in these cases, by covering the cost to repair or replace your items if they suffer damage as a result of and insured incident. Without this cover, if your equipment or business premises were damaged, the cost to repair or replace your items could set your business back significantly.

 A cyber attack

Suffering a cyber-attack can have devastating consequences on your business, and with 62% of small businesses having experienced a cyber incident, simply hoping it doesn't happen to your business may not be enough. Recovering from a cyber-attack can be costly, especially if you end up with third party liability costs (for example, if the attack you experience leads to a clients’ details being leaked, and the client suffers a financial loss as a result). Cyber Insurance is a form of cover that any business with a digital footprint should consider. It can help cover some of the costs you might incur as a result of a cyber-attack. By covering costs such as incident response, system damage and network security, it plays an imperative role in the resilience of your business.

 Suffering a personal injury/accident

While you’re busy planning for the various mishaps that can happen to your business, keep in mind the most important asset to your business – yourself. If you were to suffer an accident leading to an injury and were unable to work on your business for a period, your own income would likely also be impacted. Personal Accident insurance can therefore be another important form of insurance intended to provide you with financial assistance with lump sum payments if you suffer certain injuries. Having this type of cover helps make sure you’re able to maintain a sustainable income as you recover.  As a result, you can get back to operating your business quickly after you recover.

 Business Travel

You’re probably already aware of all the things that can go wrong when travelling, and business travel, by you or your employees, is not immune to these mishaps. If something unexpected happens when you or your employees are required to travel for your business (for example, to meet clients), it could lead to lost opportunities for your business, and other incidents or losses can have serious consequences for the ongoing operation of your business. An annual business travel insurance policy is something that should be considered by any business whose employee’s travel. It allows you to estimate the number of trips you may take on an annual basis, and take out a policy for the entire year, and covers events such as loss or damage to baggage & equipment, rental vehicle excess, lost deposits and evacuation expenses.

 Allegations of mismanagement

Running a business comes with a variety of risks, and in all the decisions you make in the running of your business, sometimes a minor lapse in judgement can be enough to have allegations of mismanagement brought against you. In addition, while your employees can be your biggest asset, in some cases they can also be a source of financial risk. For example, an employee may allege wrongdoing on your part such as bullying, discrimination, or unfair dismissal. Allegations such as these can impact your business finances and could lead to you quickly accumulating large costs such as legal fees and compensation. Management Liability is designed to provide cover in the event of alleged or actual mismanagement. It typically offers the option to include Employment Practices Liability, which provides cover in the event an employee alleges wrongdoing on your part as an employer.

Make your insurance work for you…

With insurance playing such a key role in your business’s resilience, it’s also worth keeping in mind that taking out a policy is not the end of the story. To ensure your insurance does in fact fulfil its role in helping you recover from unfortunate incidents, it’s important to review your insurance in line with your business’s needs. As your business changes, so too may your coverage need, so reviewing your cover should be something which is done regularly. Also remember that there is also no substitute for appropriate caution and risk management. While insurance may help rebuild your business and reputation after an incident, there are also many steps you can take when running a business to prevent incidents from occurring in the first place. (Risk management)

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