As the contest progresses so does the level of risk, uncertainty, and opportunity. Business interruptions are one of the major risks and it discusses the external and internal risks and challenges that organizations have to confront in their life cycle in several terms one way or the other and which may significantly affect business income. These include for instance cybersecurity threats that have become a common recurring phenomenon since the very inception of internet technologies, environmental catastrophes, disruption in digital supply chains, physical damages to property or machinery in case of accidents, social unrest, and recent outbreaks of pandemic of COVID-19.

As much as it is crucial for firms to shield themselves against strategic challenges at the same time it is also imperative for firms to scan the market and foresee unanticipated events that could lead to substantial loss of revenues and profits. Allianz Global Corporate & Specialty (AGCS) the leading corporate insurance company highlighted that today the biggest source of challenges to organizations may not be cutthroat competition as much as it is business interruption. According to AGCS risk barometer surveys of 2020 identified three major risk elements that businesses must keep an eye for. Allianz conducted a survey of risk experts who responded that cyber incidents at staggering 39% are the highest risk factor this year, following by business interruptions at 37% and lastly climate change at 17%, which considering negligent government policies and impetuous climate reforms in the Trump administration might escalate climate change as the highest contender for business risk in following years.

A cybersecurity survey published by France’s Information and Digital Security Experts Club (CESIN) reported that 80% of the organizations have been a part of cyberattacks incidents in recent times. The root causes as underlined by AGCS are security breaches, espionage or ransomware, and reckless handling of vital information touchpoints. These types of attacks also vary greatly in terms of intensity and impact they have on business functions, often exposing key vulnerabilities of security systems and informational databases, making the corporations prone to even more future damages. While digital transformation, the fundamental aspect of 21st digital evolution which has made lives hassle-free for the common people and made it easier to carry routine businesses around the world, comes along with cyber threats of various degrees and intensities that are often incomprehensible for even the biggest of corporations. These days as every organization depends highly on IT ecosystems; they should simultaneously cope and opt for more secure security options to shield themselves against external threats as well as increase awareness. In a global Cybersecurity 2020, Forecast Canalys reported that cybersecurity global investment is assessed to grow between 2.5% ($43.1 billion) and 5.6% ($41.9 billion).

Despite taking the second position in AGCS risk barometer 2020, Allianz suggests that business interruption is the most frequently occurring challenge factor. The Allianz dataset analyzed over five years revealed that fires and explosions with 59% responses are the top two factors accounting for the most claims, which is roughly dollars 6.7 million. Following the fire/explosion losses are claims of natural catastrophes like storms or hurricanes at 4.4 million, earthquakes at 1.6 million, and machinery and inventory damages at 0.62 million. Another rising cause for business interruption today as previously mentioned is a disruption in supply chain management systems. Although more and more companies are moving towards digitizing their systems, inefficient networks and redundant technologies are causing significant challenges to maintaining long supply networks and eventually creating market delays.

Climate change has become one of the leading causes of business risk and challenges due to increased carbon footprints from the businesses mostly associated with product development. This particular external environmental threat comes along with various risk and expense factors such as increasing government policies regulations to reduce carbon emission and modify production methods, and reputational. Corporate social responsibility acts by large corporations are the direct result of this prevailing risk that has landed climate change at the third-highest place in the AGCS risk barometer. Just the fact that 17% of respondents agree upon that climate change is a global risk, delineates the gravity of the situation that could cause unanticipated irreparable damages to firms.

Other sources of business threat and risk include litigation, lawsuits, and legal proceedings against the business. The biggest issue of dealing with litigation is that they are expensive and can sometimes carry on for years. Secondly, cases that cause lawsuits and class-action suits greatly tarnish the reputation of companies/brands that worked years to form it in the first place. Therefore, in order to safeguards themselves from this risk companies often resort to settlement options.

RPS provides a portfolio of insurance coverages and industry-specific solutions to help businesses address the various risks they face – from Commercial Property and Business Interruption to Cyber Liability, Flood, and Employment Practices Liability insurance. The coverage content of different business risk insurance can vary somewhat but they are similar in terms of basic concepts and provisions it offers. It is indispensable for companies and risk management personnel to understand the following key concepts:

Sustained Losses

In case of actual physical sustained losses, the business interruption (BI) insurance covers the loss or the damage to property by categories provided under BI i.e. fire/explosion, storms, floods, etc. Your insurance company is then liable to pay the insured if the business has sustained losses such as loss of income or revenue. This rule is however dependent upon an appropriate limit, and place of loss occurring.

Servicing and restoration

Your insurance company is liable to repay you for the duration it can take them to service and restore the sustained damages and losses covered under the insurance plan. This starts from the time the actual loss occurred and the duration within which the damage is serviced for reusability and routine business activities.

Contingent business interruption (CBI)

CBI coverage is a very specific type of insurance coverage found on a business owner's policy. It provides protection in the event that your business suffers a loss as a result of some other business that you depend on suffering a loss.

Extra expenses

This is an essential extension of servicing and restoration policy which covers the fundamental cost of expenses or expenses incurred to reduce the loss that business has to incur in the process when they have sustained damages to property and therefore have to halt their service provision.

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