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It's not just flooding

15 August 2007

Flooding and more importantly flash floods can occur at virtually no notice and leave homes and businesses devastated by a wash of unclean and murky water, writes Alan Johnson.

Businesses that are flooded face the demoralising task of not only cleaning up but claiming from the insurer for the damage and potentially the loss of business. Current thinking is that more frequent flooding is not the only risk facing domestic and commercial property owners. Climate change is heralding a whole new set of extreme conditions for the UK including susceptibility to minor earthquakes, tornadoes, coastal erosion and long periods of drought.

The Government is also concerned about the potentially devastating adverse effects of pandemics (e.g. Avian Flu), terrorist activities and large scale food or water contamination. We understand that Local Authorities are being asked to ensure they can continue to operate in all circumstances. These requirements are being cascaded down the supplier chain and it is likely that all businesses will be required to have published a robust disaster recovery plan.

A new British Standard (BS 25999 (Business Continuity Management [BCM]) is being worked upon by the British Standards Institute and will soon be available to provide more detailed guidance. This standard will specify the requirements for setting up and managing an effective Business Continuity Management System (BCMS). The draft of this standard is available for review and/or comment from the British Standards website. Some of the points it covers are:
..Anyone who complies with the standard will assure that its key suppliers and partners have an effective BCMS in place
..Training and assessment for all those with responsibilities under an organisation's BCMS, including assessing competencies, conducting training needs analysis and the provision and evaluation of training provided
..Making sure BCM is at the core of business values
..Communicating the importance of BCM to all staff with ongoing programs for awareness and information
..A minimum set of documentation for a BCMS and record keeping procedures
..Impact and risk assessment for the business and the process by which it may be carried out
..The incident response structure for an organisation as well as the plans that are to document how a business will deal with an incident
..Maintenance, monitoring, reviewing and improving the BCMS.

Although this may seem irrelevant to your own business it may very quickly become relevant if those you supply or tender business from, demand that you have sufficient business continuity management in place in order for them to comply with this new standard.

Some organisations may already have a comprehensive system in place and will find it easier to comply. Others however, may not have even considered it, or have put it back in the desk drawer as something to consider later. The importance that is being placed on BCMS is very high and should be something that every business has an awareness of, plus its potential requirements and impacts.From a commercial perspective even minor interruptions or incidents beyond a business' control can result in material loss of income. It is important that your business has adequate business interruptions (loss of profit) cover and that the sums insured are realistic. You should contact your broker or insurer for advice on such areas, many people do not fully understand their policies and exactly what risks they are covered for. This is an oversight that can be costly and devastating to a business.

If you have not considered external factors that can affect your business then the recent flooding should serve as an early warning, problems have arisen for many businesses that were not flooded themselves but their suppliers or supply chain were badly affected. If the businesses that were flooded did not plan adequately or have the correct covers in place then not only is the flooding problematic to clear up, but it could also be the end of their business.

....Alan Johnson is Technical & Broking Director at independent insurance brokers


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