Despite the country's recent severe flooding, Norwich Union Risk Services (NURS) reveals that less than half of businesses in the UK have an adequate business continuity plan in place.
Despite the country's recent severe flooding, Norwich Union Risk Services (NURS) reveals that less than half* of businesses in the UK have an adequate business continuity plan in place.
Experience from Norwich Union's risk management specialists, shows that businesses which had business continuity plans in place and experienced recent flood damage, coped much better than those without. Although some businesses prepare for such devastations, others, particularly those employing less than 50 people, are less concerned and in extreme cases are continuing to believe that an interruption to trading "will never happen to them."
Alan Trueman, business interruption specialist for NURS, said: "Businesses are failing to realise the importance of business continuity planning and appear to be unaware that an interruption could have a potentially devastating consequence to a long term business plan.
"Only 34%* of small businesses (those employing less than 50 people) have a business continuity plan in place, yet it is these businesses that were worst affected by the recent flooding. They can't afford to take the risk of not having such a plan in place and are less likely to recover from a serious loss.
"Having a workable plan is absolutely crucial in helping a business to recover from a disruption. The industry as a whole has recognised this importance by creating a British Standard for Business Continuity Planning - BS25999, which will act as a benchmark for businesses wanting to minimise interruption.
"Once a plan is in place, an adequate Maximum Indemnity Period should be carefully assessed. Maximum Indemnity Periods should represent the maximum period it would take a business to recover completely from a major incident.
"Furthermore, NURS's experience has found that businesses are invariably over optimistic when estimating how quickly the business can recover from a serious disruption."
Trueman adds: "If firms are not able to recover their revenue or gross profit within the maximum indemnity period, the impact upon their business could be catastrophic.
"Factors contributing to delays and further disruption periods can be endless and beyond a business's control. Rebuilding, contamination, listed status/heritage considerations, planning issues, local construction market and environmental issues are all factors which may not necessarily be straightforward.
"Planning permission can be a very lengthy process even for non-hazardous risks. Following a recent fire in London, it took one of our policyholders seven months just to obtain planning permission. This involved several discussions with the relevant authority and a number of changes to the original re-building plan to cater for environmentally friendly design and use of energy. For hazardous risks the process can be even longer - you just have to look at the debate surrounding the re-building of the oil terminal at Buncefield to see the issues involved here.
"Critical considerations which businesses tend to underestimate include lengthy lead times of transport and installation for machinery, and assistance from outside sources which can often lead to long delays.
"Access to premises can also be a factor in assessing the Maximum Indemnity Period. For example, we have seen serious delays when gaining access to repair premises near to railways as railway lines cannot be closed for a lengthy period.
"We have also seen numerous cases of businesses being able to restore their buildings, replace machinery, stock and raw materials and to all intents and purposes operate normally, but then fail to recover their custom within their selected Maximum Indemnity Period due to being over confident that they can regain their market share."
* Chartered Management Institute 2007
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For further information, please contact:
Sam Bramwell at Staniforth on 0161 919 8024/ 077381 96667 or Sally Leeman on 01603 684 225/07800 699 670.
Notes to editors:
Norwich Union is the UK's largest general insurer with a market share of around 15%, with a focus on insurance for individuals and small businesses.
It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.
Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.