A new resource designed for business owners from the Institute for Catastrophic Loss Reduction, points out that 60 per cent of economic losses globally are generally not covered by insurance. Of these losses, more than 85 per cent can be attributed to flooding, cyclones, hurricanes and severe convective storms, they say.
The resource, Conducting risk assessments and using technology to protect your organization’s value chain, is the fourth installment of the institute’s Mind your business: Special Business Resilience Series bulletins covering business interruption, interdependencies, contingent business interruption and supply chain exposures. The series encourages business owners to gain a full understanding of how natural hazards and severe weather events impact their respective organizations and develop action plans, in addition to insurance coverage (which may or may not be available), for mitigating the risks.
“With the dramatic increase in catastrophic insurable losses related to severe weather, the insurance industry has undergone a variety of changes, making insurance coverage harder to acquire and more expensive,” the report warns before describing what business owners can expect during an insurer’s risk assessment of their operations. In encouraging business owners to conduct their own risk assessments, the report examines the necessary components including appropriate staff and management participation and a commitment to complete the process.
The report breaks down the steps and parts of such an assessment and also discusses how technology and digital tools can help manage an organization’s risks.
Digital twins
“Regardless of the threat that might cause a loss event, organizations can now use technology to plan and execute defense strategies and alternatives to protect their revenue stream and their physical property, provided they recognize which solutions are best for their operations and services.” Digital twins – that is, a computerized twin of the organization’s operations that can be used to run simulations and mimic loss events – along with logistics efficiency tools and real-time tracking are all discussed and examined alongside suggested solutions and examples.
“Not everything is easily insurable,” they warn. “Therefore, it is critical for organizations to use the means at their disposal to identify these risks and develop a plan to help avoid or minimize their impacts.”
They also note that the process is necessary, as threats to revenue generation will change overtime, as will the organization itself. “Using the appropriate risk assessment process and including digital tools, artificial intelligence or monitoring services will help manage the assessment process, deliver needed results in real time, and help identify previously unknown risks,” they write.
