Westfield Insurance on continuity plans Featured

8:00pm EDT October 26, 2008

You know you need insurance to protect your business and recover your

real estate, material and equipment investments in case a large loss occurs. But

have you safeguarded your business against

all of the other costs that come in the wake of

an unexpected interruption in operations? If

you haven’t, your enterprise could struggle to

bounce back after a major unexpected event.

“There are numerous ways that a business

can be affected financially from a significant

loss, whether it is from a fire, wind or flood,”

says Tom Russell, senior risk control representative at Westfield Insurance. “Normally

the original cause of a loss is an insurable

event. The major problem for a business continuing operation after a significant loss is the

hidden costs associated with a loss.”

Smart Business learned from Tom Russell

about how to develop a business continuity

plan to minimize indirect costs and quickly

renew operations.

How can a business continuity plan diminish

uninsurable risk?

A proactive business owner will have a

business contingency plan in place to alleviate hidden costs such as expenses and loss of

income from losing key employees and valuable customers. This plan will provide a

means of producing or distributing a company’s product through the use of alternate

inside or outside resources to minimize

short-term and long-term disruption. A well-developed and executed contingency strategy will help a

company to maintain its customer base, retain key employees and continue a cash flow for the business.

How should a company develop this prevention plan?

The management of a company needs to

assess business operations, identify potential

loss exposures and develop a contingency

plan to mitigate the adverse effect of these

loss exposures to the business. This entails

identifying and evaluating critical operations

and formulating contingency plans using

internal and external resources. Once managers identify key outside resources, they

need to develop them so that they can be easily accessed when the large loss occurs.

What are the different types of plans?

There are basically four types of emergency

plans: action guides, response guides, emergency management plans and mutual aid

plans.

Action guides are normally in a checklist

format. These guides provide detailed procedures to follow in the event of a large loss,

including information on internal and external resources and how to access them.

Response guides describe the equipment

and facilities that will be required during an

emergency situation. Response type plans

only provide information on the actions that

must be implemented to limit damage from

an emergency.

Emergency management plans are comprehensive programs that include prevention, preparedness, response and recovery

that should take place before and after a

large loss. This plan will include response

plans for each area of potential loss that the

management identifies.

Mutual aid plans are developed through

the participation of companies that agree to

share resources in the event of an emergency

situation.

Can you give an example?

A cold storage facility could arrange for a

company to provide portable generators to

its facility in the event of an extended power

outage. This contingency strategy could prevent a company from having a food spoilage

loss. This cold storage company could also

arrange with another cold storage facility to

distribute product to its customers until it is

able to make its own deliveries.

The contingency plan should also include

the safeguard of vital records that will keep

the company operating and generating

income. These records would include:

  • Financial — account receivables 
  • Production — research, engineering,

    purchasing 

  • Sales — customer records, inventory

    control 

  • Personnel and general administrative —

    employee records, legal and tax records

 

How should these plans be implemented and

tested?

Regardless of which contingency plan is

developed by the company, it should have the

full support of management in both the planning and implementation stages. The contingency procedures should be reviewed on a

periodic basis. This review will verify that the

plan is current and up to date for the company’s present organization and operation.

Also, the contingency plan should include

provisions for sufficient funding and

resources so it can be properly implemented

when an unexpected situation arises.

Hopefully, through a well-developed prevention plan, the response and recovery planning sections of the contingency plan will not

have to be implemented or tested. As previously mentioned, a comprehensive, well-managed prevention program will reduce

expenses and disruptions to the continuation

of any business.

TOM RUSSELL is a senior risk control representative at the Cincinnati service office of Westfield Insurance. Reach him at (513)

985–9080 x218 or thomasrussell@westfieldgrp.com. Westfield Insurance provides commercial and personal insurance services to customers in 17 states. Represented by leading independent insurance agencies, the product we offer is peace of mind and our promise of

protection is supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.