Insurance as a Strategic Enabler

Understanding where a company wants to be in the future, identifying risks that might stop it getting there, and working with risk advisers and insurers to get the right risk management, transfer and mitigation strategies in place, all help build a resilient and sustainable business.

To realise this ambition, businesses should be asking their risk advisers and insurers to look beyond the existing insurance programme and examine the company’s short and long-term objectives, together with its risk register, to fully understand the wider range of risks it faces.

Protecting today

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Click to download the complete IoD Critical Business Insurance Guide

Insurance can be seen as a tactical purchase, with the decision on what insurance to buy (and from whom) sometimes coming down to cost and minimum compliance with legal requirements, as opposed to the quality of the cover. This is particularly true in the current competitive economic environment, where companies are squeezed and cost savings need to be made.

This approach, while appearing expedient in the short term, ignores the fundamental value of good quality insurance and its strategic importance in building resilience for the future.

Research around the world (including recent studies by the UK government and US audit and accountancy practice McGladrey) shows that 70-80% of businesses that suffer a major loss, and which do not have an effective business continuity plan (and adequate insurance), are no longer trading two years after the incident took place. This number rises to 90% for small businesses that suffer a data loss incident.

Insurance can be seen as a tactical purchase.

This highlights the importance of a business having the right incident management plans and insurance in place to get back on its feet. Appropriate insurance cover can help with everything, from rebuilding destroyed physical assets to providing compensation for business interruption; ensuring companies survive and thrive after what can be a catastrophic event.

The risks faced by companies, both large and small, are constantly changing and increasing in number, diversity and complexity. This trend is demonstrated by the growth in the digital economy and increasing reliance on sophisticated data, exposing businesses to potential cyber attack and loss of customer data.

In several high profile cases this has led to significant reputational damage accompanied by severe financial loss, much of which could have been avoided by businesses understanding the risks they face, how they might change in the future and implementing the correct risk mitigation strategies.

The importance of the right insurance and risk advice is clear.

Enabling tomorrow

70-80% of businesses that suffer a major loss, and don’t have an effective business continuity plan and adequate insurance, are no longer trading two years after the incident.

If the purchase of insurance and risk management advice is not a key strategic decision, a business cannot make fully informed choices about its future.

Forward-looking businesses understand that having the correct insurance and risk management strategies in place has a positive impact on the delivery of a company’s short, medium and long-term ambitions. Most businesses have a clear vision about where they would like to be in one, three or five years’ time, and will have strategic plans in place to help them achieve their aims.

These objectives can be diverse, ranging from new product launches, international expansion, moving into fresh distribution channels, or growth through merger or acquisition.

Achieving any of these goals will involve some element of increased business risk, for example, greater exposure to cyber crime, or risks associated with the ownership of overseas assets, the management of international supply chains, or the need to comply with unfamiliar legislation.

The importance of understanding these risks and how they might affect a business cannot be overstated and successful companies are those that place risk identification and mitigation, now and into the future, at the heart of their business’s strategic planning process.

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Ailsa KingGuest blogger Ailsa King is Head of Sales, Willis GB.  She has over 23 years’ experience and has been with Willis since 1993, originally heading up the Retail and Leisure and Hospitality Practices in the UK.

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