The British Insurance Brokers’ Association (BIBA) is calling on the Government to do more to ensure that small businesses survive a major incident such as a fire, flood, act of terrorism, or a pandemic such as swine flu, particularly during the current economic downturn.
Independent research commissioned by BIBA has revealed that 45% of businesses have no, or at very best, rough plans to deal with the effects of flood or storm damage. This is despite the £3billion of flood claims from 2007 and that 80% of businesses affected by a major incident close down within 18 months
The research has revealed that the number of small businesses who claim it would take more than six months for their business to recover has nearly trebled. BIBA believes that small businesses must have adequate plans in place to cover business resilience and is concerned businesses are putting themselves at risk.
Steve Foulsham, BIBA Technical Services Manager, said: “There have been slight improvements since our previous research in 2006 but we still have concerns that businesses are still not adequately protected. Every business needs to be properly prepared for a major incident. I urge every small business to urgently speak to their broker to ensure they are properly covered.”
Steve Foulsham added: “It is vital to raise and maintain awareness of the need for businesses to prepare for the potential impacts of a natural disaster or terrorist attack. The Buncefield Oil Depot fire, 7/7 bombings and continued incidents of flooding illustrate the need for all to plan for the unexpected.
“BIBA will call for the support of the Government in campaigning for all businesses to set continuity plans in place.”
The research also reveals that few (15 per cent) of the directors interviewed were aware of BS25999 in relation to Business Continuity Management – this is the British standard to help minimise work disruptions.
As an essential first step, BIBA advises businesses to:
- Have plans to replace machines, equipment and stock
- Consider what would happen if your computer or telephone system were down for three days
- Organise how you would cope in the first hour following a disaster
- Consider the effects upon your business if a major supplier or customer suffered a disaster
- Plan for continued operation of the business if 50% of staff were off sick
- Discuss Business Continuity Planning with your insurance broker
Research key findings from 200 small businesses:
- Businesses are most likely to plan for the loss of physical equipment; loss of IT, premises, telecommunications and plant are the risks most likely to be covered by Business Continuity Plans (BCPs).
- BCPs are least likely to address negative publicity and the loss of overdraft and loan facilities.
- Only 37 per cent of businesses have credit insurance protection in terms of their suppliers and / or customers.
- The number of businesses saying a disaster or serious disruption on their premises would “significantly impact” their company within an hour has increased slightly, from 19 per cent in 2006 to 24 per cent in 2009. However, the number saying the impact would occur after an hour but within the day has decreased by a corresponding number – from 31 per cent to 27 per cent.
- Businesses are now more pessimistic about their ability to operate without their office than in 2006. The number saying that if a disaster left their office unable to operate they could recover in less than a week has dropped from 39 per cent in 2006 to 28% in 2009.
- The numbers who claim it would take more than six months for their business to recover has nearly trebled – from 4 per cent in 2006, to 11 per cent in 2009.
- Few (15 per cent) of the directors interviewed were aware of BS25999 in relation to Business Continuity Management – this is the British standard to help minimise work disruptions.
- There has been a slight rise in the number of businesses with comprehensive business interruption cover; from 84 per cent in 2006, to 88 per cent in 2009.
- Of the businesses who have rough or no Business Continuity plans, 66% felt that they could cope without a written plan, 34% felt that a putting a formal plan together would be too time consuming and 26% had never thought about it or would not know where to start.
- 43% of businesses have no protection against denial of access to their business premises. This is available as an extension to Business Interruption insurance.
- Of the businesses who were affected by the 2007 floods, 60% were affected by loss of plant or equipment, 30% were affected by loss of premises and 30% were affected by sudden significant decrease in trade or demand.
- 61% of businesses felt that the financial security rating of their insurance company was important