Business interruption in the global corporate world

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Jason Trahan, a senior manager with Ernst & Young, discusses business interruption in today’s global corporate structure.

Jason Trahan: I think what’s changing business interruption is really the complexities of businesses themselves. As they get more and more global their supply chain is stretched out across the globe and there’s more issues. Not only physical damage to a company itself drive can drive business interruption, but also damage to key suppliers or customers. And companies are really starting to get their arms around exactly what their exposures are from a business interruption standpoint and those aspects.

Large events like Hurricane Kartrina that happened, a lot of companies would maybe view, ‘Well, I don’t really have any exposure on the Gulf Coast. I don’t have any assets on the Gulf Coast. Hurricanes don’t impact me.” Well, what Hurricane Katrina pointed out was that a lot of companies even deep in the middle of the U.S. or even north of the border, received a lot of product and supplies through that port, or through the port of New Orleans itself. And that contingent exposure, once again, allowed them to recognize what their business interruption risk was in that area and how to address it through potential insurance.

I think in the throes of a loss a lot of times companies are focused on their business continuity plan and restoring business. And what falls by the wayside sometimes is capturing all the documentation that would be needed later in the financial recovery of that business interruption. And so that’s one where it’s really key for the risk manager to be tied into the business continuity process and that way they are working in lock step instead of parallel processes to not only recover operations of the business, but also capture the documentation that’s going to be needed to recover the business financially as well.

Well, true success is seeing at the end of that process how you’ve helped the client navigate through the treacherous waters of recovering from that loss and receiving the financial recovery that’s due to them under their insurance policy. After a business interruption loss typically there is a lot of chaos whenever we show up, so what we like to do is bring some order to that chaos and help our clients to scope out the overall impact to the organization that the loss has caused. And then methodically work through with their insurers to reach financial resolution at that and allow our clients to receive recovery quickly under their policy so they can get back to normal policy as soon as possible

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