Practical Insurance to Minimise Your Business Risk!
Resilient businesses are built by having strong, documented contingency plans. Having a contingency plan means that you are making allowances in your business for a possible event or circumstance that could have a negative impact. The types of negative impacts that should have a contingency plan are, any event where:
- Supply of your goods or services could be seriously impeded
- It causes you, the business owner, stress or concern regularly
- Your business may not survive if it were come to pass
Really, it’s a practical insurance policy. Insurance policies are designed to ensure you, or your business are not worse off in the event of flood, theft, accident or other damage. It’s the financial contingency plan and would result in your businesses ability to survive those events. A contingency plan in turn is the practical insurance policy. It’s the “what to do AND when” for a wide range of events where either insurance itself isn’t enough OR the event cannot be insured against.
The major issues I see businesses have that need contingency plans are:
- Reliance on any one key person within the business
- Reliance on any one key customer within a business
- Reliance on any one key supplier within a business
You should have contingency plans in place if anything negative happened in these areas (as well as others).
Your major contingency plans should be documented and other people in the business should know where to find them. Its almost like a will. What if, for example, the contingency plan is about you. How would your family, other key team members or advisors know how to act should something happen to you? How do you ensure your business viability going forward?
I recently met with a coffee roaster client of mine. They told me about how they build contingencies within their business around their suppliers of coffee. Coffee bean suppliers around the world can be notoriously tricky because of geo-political issues, weather, crop or a million other supply issues. The problem is that if they lose an original source of beans, it affects the taste of their coffee blend which may impact their brand. So, how did they build contingencies? Their plan of action was to make a blend of coffee that was complex and NOT reliant on any one source. It meant that if any one source was to disappear, they could either alter the rest of their mix or find a close enough alternative that their blend and their taste remained the same to their customers.
I recommend you look at the risks in your business. Building strong contingency plans, reduces risk and increases the value of your business. It also might identify opportunities for revenue growth (especially where you are reliant on once customer).
In the short term however, the biggest impact of a contingency plan might be to allow you to rest easy at night!