A leading figure in risk management has urged brokers to discuss business continuity plans with their SME clients, saying most are underprepared for any significant disruption.

“Understandably, most SMEs, who are operating on tight budgets with limited time and resources, are too busy operating their businesses to take time out of their day to prepare a business continuity plan,” says Peter Emmett,  regional manager for WA at global risk management firm, Dynamiq.

“However, it’s almost more important for SMEs to have a business continuity plan in place because they’re often operating with such little margin for error,” he continues. “Many have a dependency on a handful of key clients, regularly experience cashflow challenges and the impact of increasing regulation and social pressures on their market.”

Despite SMEs being one of the market segments most in need of business interruption insurance, a recent study by Zurich showed that only 40% had such coverage in place.

Even with insurance, Emmett warns that many of these policies have exclusions that must be considered when creating a business continuity plan.

“Business interruptions can affect a business’s reputation, interfere with income or disrupt delivery of services to clients,” he tells Insurance Business. “Many of these outcomes may not be insured due to issues such as Force Majeure, therefore an SME may not have the financial or reputational strength to absorb such a business interruption.”

Worryingly, the same Zurich study also found that 23% of Australian SMEs not only had no business interruption insurance in place but had never even heard of it.

“Brokers have a key role in raising their clients’ awareness to the importance of business continuity planning,” says Emmett. “Their advice shouldn’t stop at insurance.”

Emmett also says that continuity planning can be an important differentiator for organisations, allowing them access to discounted insurance premiums and more favourable supplier contracts as well as operating efficiencies.

“It can also position the business to be more agile and to take advantage of market opportunities,” says Emmett.

 

 - Insurance Business