Everyone is concerned about the coronavirus outbreak. In the business world there have been significant fluctuations in stock markets and disruptions to supply chains, especially where there is a reliance on manufacturing in China, and there are predictions of factories in affected regions needing to operate at reduced capacity because of constraints in the supply of both labour and products.
The speed in the spread of the virus and the ease with which it has transmitted from human-to-human is the chief cause for concern. Health ministers and governments are now having to balance the need to keep people safe and well with the possibilities of introducing measures to restrict travel, quarantine affected areas and close international borders.
What should businesses do?
The current advice from government and health authorities is ‘business as usual’ for everyone. For individuals this means taking extra care with personal hygiene and if any symptoms appear to stay at home, avoid contact with others and call NHS 111. Businesses should ensure they have measures in place to deal with any business interruption as a result of the coronavirus outbreak. A business continuity plan is vital to anticipate the impact of the outbreak on the business – do not wait until the situation becomes a crisis.
This should include
- A risk assessment of the business’s main vulnerabilities should it need to change the way it operates during the coronavirus outbreak. This can include staff travel and welfare, for example assessing whether staff can work from home. There may also be exposures to business operations including production, supply chains, logistics, shipping and so on.
- Review existing plans. There may already be business continuity and crisis management plans in place to prepare for ‘traditional’ business interruption scenarios such as fire and flood. These should be assessed to see if they are up-to-date and revised to take account of the latest circumstances for coronavirus.
- Communicate to your colleagues. Make sure managers and those responsible for internal and external communication are in the loop as you monitor events. Decision makers in your business need to inform the relevant people when to trigger the necessary arrangements.
The key is to prepare to manage business interruption. Have an agreed plan in place, so that if your locality is impacted by coronavirus you have a plan for mitigating its impact and prolonging that strategy for as long as necessary.
Why won’t business insurance cover me during an outbreak?
Epidemics and pandemics are usually excluded from most insurance policies. This is partly because the economic losses from viral outbreaks like COVID-19 are very hard to measure, as they rarely cause immediate physical damage to a business in the same way as a fire or flood. There are also very few business models for insurers to use to calculate risk and loss, so there are no specific insurance solutions currently available for the UK market to provide cover against coronavirus.
Whilst the options for insurance cover in this situation may be limited, there are a number of policies which should be considered to mitigate risk in a business interruption scenario:
Business travel insurance
Insurers and brokers will be paying close attention to government advice. Currently the Foreign and Commonwealth Office (FCO) is advising against all but essential travel to mainland China, and all travel to Hubei Province. This means that if you ignore this advice, and travel to areas the FCO has advised against, your travel insurance will be invalid. If you decide to cancel your plans to travel to an area where the FCO has not (yet) issued a warning, you are unlikely to receive compensation, although some airlines are letting passengers rebook flights.
Business Interruption cover
Business Interruption cover can help protect your business against a wide range of incidents, however it is unlikely that Business Interruption policies will cover the current coronavirus outbreak. You are advised to check the wording in your cover and talk to your broker.
Key Person cover
In almost every business there will be a number of key individuals who make a major contribution to the company, and without whom the business would be severely affected. Key Person Protection can help protect the business if one of these people were to become critically ill or die. If this is a new insurance cover for your business, there will be questions around the medical history of key members of staff, and there may be a requirement for more detailed information.
This article is intended to give general information only. Scrutton Bland have a number of professional advisers for insurance, risk assessment, audit and other financial services, and can help you work out what the best options are for you and your business.