Many businesses today have large supply chains, which can sometimes be complex and integral to a business’s success. A supplier may supply a key part of the product you manufacture for example. But have you considered how a supplier suffering a disaster event could result in interruption to the running of your business?

How could supplier issues impact your business operations?

• A supplier could suffer a fire at their premises making them unable to operate. If they supply a key part needed in your production chain would your own business have to shut down until your supplier was back up and running?
• A supplier could suffer a serious cyber-attack bringing their IT systems down and potentially meaning the security of your data is compromised
• Or if one of your key suppliers goes into administration have you considered how long it would take to find an alternative and how you would deal with any related credit issues?

These are all real-world issues which could affect any of your suppliers and therefore your own business. A recent study by the Business Continuity Institute found that of all the businesses it surveyed, over half reported experiencing at least one interruption in their supply chain in the past 12 months. Given these figures, this is a risk your business needs to account for and importantly plan for.

How can business interruption insurance help mitigate supply chain risk?

Business interruption insurance is designed to cover loss of income if a business suffers a disaster and as a result has to cease trading for a period of time.

Through extensions of your business interruption insurance it is also possible to insure against supplier issues, mitigating the risk presented by suppliers suffering a disaster event.

In order to adequately protect your business, you need to ensure that you have the correct level of business interruption insurance in place. This means you need to consider your whole business operation including your suppliers in your business interruption insurance calculation.

When it comes to covering risks posed by your suppliers you need to have and be aware of

• A thorough understanding of how your supply chain works
• Who your suppliers are
• What contracts you have in place with suppliers’ state when it comes to liability

At First Recovery we also can’t reiterate enough the importance of planning to ensure that you are well equipped to deal with a disaster if it should strike. Whether the disaster strikes your own business or that of a supplier.

Whilst business interruption insurance will provide financial indemnity if something should go wrong, insurance doesn’t provide you with practical steps to take in the event of a disaster. If you have robust disaster recovery and business continuity plans in place, which also account for disaster affecting your suppliers, you should be one step ahead and able to act quickly, aiming to mitigate any downtime to your business. 

If you have any questions about our disaster recovery services don’t hesitate to get in touch with our team today.