Most small businesses that suffer fire, flooding or systems failure and are not insured or are under-insured, will fail within twelve months according to recent statistics. For this reason, small business owners should be prudent about possible risks and set out to understand their risk exposures and ways to contain or transfer the risk.

Small businesses can also learn much from their larger counterparts about a risk management approach to business insurance with particular emphasis on business interruption cover. It is known that about 70% of uninsured or under-insured small businesses that suffer from a big loss fail within twelve months. These statistics show small business owners lack an understanding of the consequences for their business in the event of a major interruption to trading.

Clearly identifying and managing the risks a business faces and having a contingency plan in place to help minimise exposure to severe interruption in the event of major events such as fire, flooding or systems failure. Another benefit for small businesses in having a risk management plan is that they can be rewarded with lower insurance premiums whilst still being adequately covered for a major catastrophe and the loss of trading.

When thinking of insurance needs, small business owners should consider the questions “What would happen tomorrow if my business suffered property, technical, staff or supplier loss tonight”.

Based in this question, small business owners should be able to get a good idea of their exposure to certain risks and the resulting consequences to business continuity. Small businesses should have a business plan and a major element of that plan should be the contingency or disaster plan. Strategic plans should include strong back-up computer files and important documents off site and keeping replacement equipment off the premises.

We recommend that the workplace should be inspected in detail and every possible eventuality assessed.