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Don’t Let Business Interruptions Cripple Your Business
As every business owner knows, your ability to service customers depends heavily on your suppliers and your ability to keep your doors open and your business running. A weak link anywhere can mean the difference between keeping your promises – and letting your customers down.
When we hear the words ‘business interruption’, property damage is usually the first thing that comes to mind, whether it’s from a natural disaster like floods, or a fire.
The reality is that business interruption is the result of many different things going wrong, including:
- Supply chain failure
- Industrial action
- Product recalls
One or many of these events can interrupt your business’s ability to run smoothly and profitably.
The good news is that you can protect yourself against them. You need to determine where your vulnerabilities are, take out insurance where it makes sense, and safeguard your business and your supply chain where you can.
Business interruption and supply chain risk
Most businesses don’t operate in isolation. It’s likely your business’s success is based on someone else’s ability to deliver their service to you. This can mean anything from a reliance on the Internet and your ability to access your server and company data, to a transportation partner or a third-party manufacturer.
This means you need to carefully evaluate where your risks lie:
- If one of your suppliers cannot deliver on time and to budget, what happens to your business?
- Who are you reliant on?
- How can you protect yourself?
What business interruption and supply chain risks do growing businesses face?
Business interruption reached number one in the top 10 global business risks in the Allianz Risk Barometer in both 2017 and 2018.
After conducting a global survey in 88 countries of 1 900 growing businesses, Allianz found that 42% of respondents reported that their top interrupters of supply chain failures were natural disasters and factory fires. However, 40% of these businesses named cyber risk as the most threatening cause of business interruption.
How could these factors impact your business?
It can take up to two years for a small business to recover from business interruption and supply chain failure.
Why? Because business interruption and supply chain failure can impact revenue, take you out of the game long enough for competitors to cut into your market share, and result in slower production or distribution.
Business interruption concerns by industry
The Allianz report analysed different business sectors and found that business interruption and supply chain risks differed across various industries.
For example, engineering and construction are most impacted by natural disasters. Manufacturing’s biggest concern is accessing raw materials. Similarly, financial services are predominantly impacted by cybercrime, while the transportation industry is plagued by theft.
How to mitigate your risks
- Conduct a supply chain assessment
Assess your suppliers and do your due diligence on their suppliers – second and third level suppliers – to ensure quality down the production line.
Don’t be complacent and assume your suppliers have got everything under control. Instead, build relationships with each of your key suppliers to find out as much as you can about them and their operations. This is particularly important if they are providing a mission-critical product or service – in that case, you should even find out as much as you can about their suppliers.
Assess your internal risks
It’s always important to cut costs where you can, but not to the detriment of your business. Cutting costs usually increases business interruption and supply chain risk. As a small business owner, you can only control what happens inside your business, so don’t cut anything that actually ensures you meet customer expectations on time and to the level of quality that they expect.
The importance of business interruption insurance
Global corporations and small businesses alike need proper insurance coverage to protect themselves, employees and customers against supply chain failure.
56% of businesses have experienced a supply chain disruption in the past 12 months, according to BCI’s Supply Chain Resilience Report 2018.
As a small business, you can’t afford a huge financial loss resulting from business interruption and supply chain risk. Whether it’s a flood, fire, or any other threat to the smooth operation of your business, a loss of income could negatively impact your bottom-line.