52
LEGAL VIEW
AHEAD OF THE GAME
By Ged Henderson
If there’s one thing that the coronavirus crisis has highlighted it is the massive challenge businesses face when it comes to preparing for the unexpected.
Every company would like to think that it is doing all it can to protect itself from the unforeseen. Research reveals many are not.
Few will have been as prepared as the All England Lawn Tennis Club, which reportedly had the tremendous foresight to take out around £1.5m a year in pandemic insurance following the SARS outbreak in 2003.
Wimbledon has been cancelled this year as a result of coronavirus, but the club is set to receive an insurance pay-out of around £114m as a result, “making it a very sensible investment,” according to Ben Carey-Evans, insurance analyst at UK-based GlobalData.
He explained Wimbledon’s organisers are “one step ahead of most businesses by having insurance in place for current events.”
And he believes that event organisers across the world may now look to follow the All England’s lead as they look to protect themselves in future.
But what of small business? New research has revealed that millions of SMEs across the UK could be putting themselves at unnecessary risk in the face of a major business disruption.
Nearly half of small businesses have been affected by disruption over the past five years. And the average insurance claim exceeds the monthly net profit of 45 per cent of the UK’s SMEs, according to a report by Direct Line for Business.
Carly Menken, head of small business trading, at Direct Line for Business, which carried out the research, says: “These businesses operate on very fine margins, and a major incident
Marc Kirker
He adds: “It really is an eye-opening exercise; it certainly highlights areas of frailty and helps you put plans in place, not solely for pandemics, but should situations occur that cause interruption to your business.
could have significant repercussions on their financial stability.”
Marc Kirker, development director at Lancashire-based insurance broker Spencer Hayes Group, says: “Whereas, companies in the main do have business interruption cover, it was simply not designed to react in a pandemic – if it was, then the premiums would be significantly higher.
“There are, on some rare occasions, where claims have been successful. However, these are few and far between. This is more down to the policy wording leaving gaps opening up claims rather than being designed to react in this way.”
Marc believes it is that vital that companies work on their business continuity planning to help mitigate any loss and become more resilient.
“Good business continuity plans are certainly well received by insurers, but regardless of that, it will prove invaluable should you ever need to utilise it.”
Stephen Greenwood, partner at Farleys solicitors, says that when it comes to commercial contracts, the best way to ‘disaster proof’ is to try and plan for the unexpected.
He says: “Flexibility can be achieved with an express right to terminate or a comprehensive and carefully worded force majeure clause providing for suspension and ultimately termination should events arise that fall outside of the contracting party’s control.
“In new contracts, specific provisions should address the impact that Covid-19, or any other restrictions, could have on performance and what that means for the parties in terms of their obligations.
“Particular care needs to be paid to the effect that non-performance in a contract might have on obligations in other contracts to third parties and that needs to be addressed to avoid leaving a ‘liability gap’.”
Mark Schofield, from Haworths Chartered Accountants in Accrington, says there is no “magic bullet” to help businesses be more resilient, because companies’ circumstances vary so broadly.
He says: “Businesses that don’t have any borrowings, keep billing up to date and maintain control of debtors are in a better position, but many are vulnerable simply because of the line of business they’re in.
“To support the ability to diversify in the future, businesses should manage risk by adapting to the latest developments in their sector, giving them improved agility for times of crisis.
IN ASSOCIATION WITH:
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67
