COVID-19 is challenging all business owners on multiple levels. We see evidence every day of creative 11th hour innovation for businesses to “stay afloat,” such as restaurants quickly shifting to takeout dinners, service businesses transferring their workplace to computers and telephones in staff members’ homes, and others beginning to sell products online or by telephone.

However, many businesses have been ordered to shut down operations totally This stops all operational revenue, of course. Yet, fixed expenses and employee salaries continue as before!

How does a business survive?

The answer is something you rarely see in the media, yet it’s a form of advance planning needed by virtually every business.

We see references to business interruption insurance, but that’s not the solution in this pandemic. Virtually every policy expressly excludes this risk, or precludes coverage if there is no direct property damage to trigger this indirect coverage. (Talk to your broker anyway as your may have a unique policy.)

A noninsurance risk management solution is needed. It’s generally called a business continuity plan, an extension of disaster plans a business may already have in place. However, in too many businesses, this is not the case.

Why a BCP?

Despite all the creative responses described above, results are almost always better if actions are planned in advance — under less stressful conditions.

Each BCP includes a unique set of planning elements because each business is unique. The key is to be certain each critical system and its various processes will continue to be operational, or will be resumed within a reasonably brief period.

A BCP includes these steps:

n Select a BCP team and leader from senior management within each department.

n Identify outcomes and adverse effects common to most, if not all, disasters (earthquake, flood, fire, epidemic/pandemic, etc.) and assume total business shutdown for at least 30 days, preferably longer.

n For each critical function or process, draft a business impact analysis that identifies adverse effects. For each adverse effect identified, think through and list the resources needed for recovery in the short term as well as longer.

n Estimate funding needed to provide each resource.

A complimentary worksheet for this planning process is available by email request to

Newspapers are classic examples of effective business continuity planning. Most have a reciprocal agreement with another daily newspaper of similar size. Should one plant become inoperative from any cause, the other will accommodate printing of the shutdown paper’s daily editions until their printing plant’s function is restored. Each needs to be at a location not subject to the same loss, of course.

For many other businesses, a temporary location, arranged ahead of time, if feasible, is a common example. The key is to minimize the inability of customers to buy products or receive ongoing services with little or no interruption.

A creative yet practical example occurred in Bakersfield in the aftermath of our 1952 earthquake. Brock’s Department Store at that time was on the southeast corner of Chester and 20th streets. Shaking rendered the building unsafe and untenantable. John Brock wisely erected a very large tent on their adjacent parking lot and moved a major portion of inventory inside the tent so revenue could be continued until his building became safe to occupy.

Even with business interruption insurance in place, a BCP will help reduce your shutdown period and restore full customer service. Such insurance should already cover extra expenses a business incurs to avoid or minimize a shutdown. A BCP fits this scenario perfectly!

In the current pandemic, business interruption insurance is not available for one of two reasons, sometimes both:

n A virus of this pandemic nature is usually expressly excluded.

n The shutdown is required to have been triggered by direct damage to the insured property.

Also, closing by governmental edict is not covered. Contingent business interruption plus ordinance and law coverages could conceivably apply. Yet, if the cause is an excluded peril (a virus pandemic), this is another reason for a business to have a BCP already in place.

Another key provision you’ll want to be certain is included is an extended period of indemnity endorsement. Business interruption coverage ceases when operations are resumed. However, revenue normally isn’t fully restored for another 90 days or so. This endorsement “bridges that gap” in revenue for the selected time period.

You can still prepare for virtually any disaster. Do it now and enjoy the benefit of effective risk management, viz., a quiet night’s sleep.

John Pryor, CPCU, ARM, AAI, AIS is a risk management consultant in Kern County and the author of “Quality Risk Management Fieldbook” that converges risk management with quality management (Lean Six Sigma). A copy is available on or from the publisher, International Risk Management Institute in Dallas.

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