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Risk in Context

The Plan Before the Storm

Posted by Duncan Ellis April 21, 2015

When looking at their potential business interruption losses, most companies have not taken the critical step of evaluating what could happen under various circumstances, according to a survey taken during a recent Marsh webcast.

Nearly 250 risk professionals replied when asked to respond to the statement: “My organization has undertaken a pre-loss business interruption review that included in-depth scenario planning.” The final tally showed:

  • 30% said yes.
  • 39% said no.
  • 31% said they don’t know.

For those who have taken the step: Well done.

Take Advantage of a Controlled Environment

For those who have not: Undertaking such an exercise is time well spent. A scenario planning exercise will help companies understand and quantify exposures in a controlled, pre-loss environment. The value in having done so can become readily apparent in the wake of a windstorm, earthquake, or other catastrophe, which will be anything but a controlled environment.

Many risk managers may find a business interruption review to be a tedious procedure. However, a facilitated, well-organized discussion can identify potential problems and help you create more effective response plans.

Checklists are fine, but involving operations, finance, human resources, and insurance in scenario evaluation is imperative. Scenario planning and other pre-loss measures will help expose your weaknesses before the unexpected happens. It will also play well to insurers, potentially instilling more confidence in the sustainability of your business and thus reducing uncertainty about what will unlock a carrier’s capacity and pricing.

You can download or listen to a replay of Marsh’s New Reality of Risk webcast, The Future of Business Interruption: From Supply Chain to Cyber. And we encourage you to read a recent report from Marsh’s BI Center of Excellence, Business Interruption Insurance Efficacy: Five Key Issues.

Related to:  Property , Flood Services

Duncan Ellis

Duncan is a managing director resident in the New York office and is the leader of Marsh’s US Property Practice.