In addition to causing chaos in an increasing number of cities and countries around the world, the outbreak of the infectious diseases poses a significant threat to businesses and their suppliers, especially given China’s role as the world’s manufacturing superpower.
Many businesses have insurance policies that are meant to kick in when disaster strikes. But few of these policies will cover losses incurred because of the outbreak. Companies typically buy a kind of coverage knows as business interruption insurance as part of their property policies, which pays cash to make up for lost revenue when a business has to halt operations unexpectedly. These policies always cite “direct physical loss or damage” as a requirement to get payment. Even contingent business interruption insurance, which handles claims for disruptions from a policyholders suppliers would probably not cover virus-related losses.
The best advice is to be prepared and make a plan. Having a fully comprehensive business continuity plan (BCP) in place and ready to be implemented is crucial in such a scenario. A BCP analyzes what impact a supply chain disruption will have on operations and business objectives. It also provides a way to mitigate these threats and their consequences and entails having a framework in place which allows key functions of the business to continue even if the worst case scenario happens. Many companies have suppliers in China and they should have already started to look for alternative solutions.
It may be to late to buy coverage for the current outbreak but the daily news about the coronavirus has many executives, and rightly so, focused on how they can protect themselves if there is a next time.