Most SMEs “too busy” to develop continuity plans
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 study commissioned by QBE in 2017 found that just 17 percent of small business owners had such policies in place.
However, small business owners aren’t the only ones underinsured – Vero‘s 2017 SME Insurance Index was almost as disappointing after 79 per cent of respondents did not believe they held any business interruption insurance.
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.”
Worringly, the QBE-funded study also found that 43 per cent of small business owners had never heard of business interruption insurance while 11 per cent said they know it exists but don’t know anything about 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.
Peter Emmett will be hosting an online event on 12 September where he will offer advice on effective business continuity planning. More information can be found online.