Latest research amongst FTSE 500 companies has revealed that one in five risk managers suspect a mismatch between their own and their insurer’s perceptions of their company’s resilience. This potentially resulting in less favourable insurance terms and less capacity when placing property and business interruption cover.
Zurich London has conducted in-depth interviews with 50 FTSE 500 listed companies to discover their attitudes to business resilience and in particular what they think of their company’s ability to recover from a major interruption to its core activity.
When asked to rate their company’s resilience on a scale of one to ten, 10% of respondents gave themselves a score of at least nine However 20% rated their resilience at six out of ten or lower. When asked what factors played a role in rating their companies’ resilience to interruption, 76% named supply chain management and dependence on third parties as significant influencing factors, followed by well tested business continuity plans and flexibility and interchangeability of processes.
Mark Platten, Head of Property Underwriting for Zurich London commented on the research, "Few businesses believe they are resilient enough to dispense with business interruption insurance. However, most believe they have some degree of resilience that should be factored into insurers’ assessment of their business interruption risks. The key is being able to produce strong data to back up these beliefs."
Despite high confidence in their company’s resilience to major events and the considerable weight they gave to business continuity planning as a major factor in measuring business resilience, the risk managers and directors surveyed said that only 20% of their time is spent on business continuity. Whilst many of the companies surveyed said that they are considering appointing a full-time business continuity specialist, only 10% of those surveyed currently employ someone in that role.
Two thirds of risk managers said that overall spending on business continuity management had risen over the last three years with over nine out of ten saying that the key external push factor which influenced investment was that it was seen as good business practice.
A minority of those interviewed were involved in the end-to-end production, testing and implementation of business continuity plans with the majority of risk managers taking an overseer role, ensuring the business had an adequate BCM strategy and the different parts of the business had their own plans in place.
Malcolm Stokes, Head of Strategic Risk Services for Zurich London observed, "Companies are increasingly turning to computer modelling of their operational risks to highlight concentrations and to demonstrate their resilience".
Stokes warned, "Compliance with published standards such as PAS 56:2003 (Guide to Business Continuity Management) does not necessarily prove that a business is truly resilient. Expert judgement will remain the insurer’s first choice for assessing resilience".
Platten concluded, "The way forward for businesses that want to be rewarded for their resilience is to have their business interruption loss potentials accurately modelled, their continuity plans fully detailed, and to be able to make a strong case for the likelihood that their plans will succeed".
For further information contact Susannah Jeffery, Zurich Financial Services on 01489 561559
Source:
- Research: Conducted by IFF Research Ltd during May 2004
- Sample: 50 in depth interviews with FTSE listed companies consisting of 23 top 100, 17 top 250 and 10 all cap