We all know a business fire is devastating. However, even the most minor fire can significantly impact a business.
A few years ago, a small fire broke out in a tenancy located in an older commercial building. Thankfully, fire services responded quickly in the early hours of the morning. They contained the business fire with minimal physical damage to the other five tenants.
However, the entire building suffered extensive smoke damage. So, all business tenants lost 1-2 weeks of income whilst the property was made safe and thoroughly cleaned. After that, there was a further 3-month impact on trading during the replacement of the old roof trusses.
But it’s not just rebuilding and reinstatement timeframes that a business should consider. There are other factors such as:
- the physical and mental health impacts on staff
- reputational damage following the loss of life or severe injuries
- time delays in replacing specialist equipment
- time spent dealing with insurance claims and attending court cases and investigations
- environmental damages including impact on cultural heritage
- fines and penalties
Here are 5 ways to mitigate and protect your livelihood from the financial and secondary effects of a business fire.
1. Establish a Safety & Evacuation Plan
You can reduce the risks of injury and the impact to staff by establishing a Safety & Evacuation Plan that you review and update annually. It should include specific information such as:
- What to do in the event of a fire
- Where to go on evacuation
- When to leave the building
- Persons in charge
- An Emergency Kit with the following items:
- Spare laptop/mobile phone, chargers & batteries
- Emergency phone numbers beyond 000 including electricity, gas, water & telecommunications companies; staff next of kin; insurance company details.
- First Aid kit & manual
- Fresh water
- Copy of vital business records including insurance policies, financial records, key supplier & customer details
- Latest stock & equipment inventory
- Spare keys for buildings, vehicles & equipment
- Hardcopy of your disaster recovery plan
- A fire safety training schedule for all staff
2. Prepare a Disaster Recovery Plan
The best way to keep incoming cash flow steady after a business fire is to plan and evaluate your risks. So when a business fire or other emergency occurs, your business is in a strong position.
When you prepare a disaster recovery plan, you develop a clear understanding of what you need to do to minimise the disruption to your business activities. Every business is unique, but the main points to consider for your recovery plan are:
- Type and severity of all potential risks
- Resources the company will need to keep going, where to find them and availability
- 2-3 other possible temporary and permanent business premises you could locate to
- Disaster recovery cashflow budget
- Document business needs following both a major and a smaller partial loss scenario
- Document and establish a data recovery process
- Establish how, when and what to communicate to critical customers and suppliers
3. Purchase Quality Business Interruption/Loss of Profits Insurance
Not all insurance covers are equal. However, you can protect your interests by correctly setting sums insured and sub-limits, for instance.
Most importantly, there are other factors to consider when looking for insurance cover. So, it’s advisable to:
- Purchase a minimum of 12 months indemnity cover or 24 months if you own the building
- Insure your gross trading profit, not your gross accounting profit
- Include 100% cover for staff wages to help retain your people and avoid the additional costs of recruitment and training
- Include additional increased costs of working for a minimum of 10% of your gross profit sum insured
- Use forecast or budget financials to set your sums insured to avoid underinsurance
- Include claims preparation costs such as a specialist accountant to help prepare and maximise your settlement
4. Consider Management Liability Insurance
We recommend that all businesses purchase some level of Management Liability insurance. Although its primary purpose is to provide personal indemnity to directors and officers for their day to day management decisions, it also includes cover for:
- your time spent in court and investigations following a business fire or a workplace health and safety enquiry
- legal defence and reputation protection costs arising from investigations or claims against the directors or business
- fines and penalties resulting from the fire and or workplace injuries
5. Retain the services of a Qualified Risk and Insurance Adviser
Risk and insurance advisers, like Clear Insurance, understand risk and the insurance market. So, they can help you understand your business risks and arrange the correct level of insurance protection for your specific needs.
Clear Insurance advisers are your advocate when dealing with Insurers. Therefore, they will help you negotiate, manage and expedite insurance claim settlements.
For advice on protecting your business and how to prepare for a business emergency, contact Clear Insurance today for a chat.