When we hear the words ‘business interruption’, property damage is usually the first thing that comes to mind, whether it’s from a natural disaster like floods, or a fire.

The reality is that business interruption is the result of many different things going wrong, including:

• Supply chain failure
• Industrial action
• Product recalls
• Cyberattacks

One or many of these events can interrupt your business’s ability to run smoothly and profitably.

The good news is that you can protect yourself against them. You need to determine where your vulnerabilities are, take out insurance where it makes sense, and safeguard your business and your supply chain where you can.

Most businesses don’t operate in isolation. It’s likely your business’s success is based on someone else’s ability to deliver their service to you. This can mean anything from a reliance on the Internet and your ability to access your server and company data, to a transportation partner or a third-party manufacturer.

This means you need to carefully evaluate where your risks lie:

• If one of your suppliers cannot deliver on time and to budget, what happens to your business?
• Who are you reliant on?
• How can you protect yourself?

1. What business interruption and supply chain risks do growing businesses face?

Business interruption reached number one in the top 10 global business risks in the Allianz Risk Barometer in both 2017 and 2018.

After conducting a global survey in 88 countries of 1 900 growing businesses, Allianz found that 42% of respondents reported that their top interrupters of supply chain failures were natural disasters and factory fires. However, 40% of these businesses named cyber risk as the most threatening cause of business interruption.

2. How could these factors impact your business?

It can take up to two years for a small business to recover from business interruption and supply chain failure.

Why? Because business interruption and supply chain failure can impact revenue, take you out of the game long enough for competitors to cut into your market share, and result in slower production or distribution.

3. Business interruption concerns by industry

The Allianz report analysed different business sectors and found that business interruption and supply chain risks differed across various industries.

For example, engineering and construction are most impacted by natural disasters. Manufacturing’s biggest concern is accessing raw materials. Similarly, financial services are predominantly impacted by cybercrime, while the transportation industry is plagued by theft.

What you are most reliant on to deliver a finished product or service to your customers?

What happens if you can’t access it?

For knowledge workers, this could be as simple as having no access to laptops and your company’s data.

How to mitigate your risks

1. Conduct a supply chain assessment

Assess your suppliers and do your due diligence on their suppliers – second and third level suppliers – to ensure quality down the production line.

Don’t be complacent and assume your suppliers have got everything under control. Instead, build relationships with each of your key suppliers to find out as much as you can about them and their operations. This is particularly important if they are providing a mission-critical product or service – in that case, you should even find out as much as you can about their suppliers.

2. Assess your internal risks

It’s always important to cut costs where you can, but not to the detriment of your business. Cutting costs usually increases business interruption and supply chain risk. As a small business owner, you can only control what happens inside your business, so don’t cut anything that actually ensures you meet customer expectations on time and to the level of quality that they expect.

3. The importance of business interruption insurance

Global corporations and small businesses alike need proper insurance coverage to protect themselves, employees and customers against supply chain failure.

56% of businesses have experienced a supply chain disruption in the past 12 months, according to BCI’s Supply Chain Resilience Report 2018.

As a small business, you can’t afford a huge financial loss resulting from business interruption and supply chain risk. Whether it’s a flood, fire, or any other threat to the smooth operation of your business, a loss of income could negatively impact your bottom-line.

CASE STUDY: Keeping up with demand

When Natasha Fagri and Jon-Marc De Carvalho launched Frost Popsicles, they didn’t ignore the importance of their supply chain.

In fact, they put a lot of emphasis on interviewing third-party cold-chain suppliers who specialised in getting products like Frost Popsicles (alcoholic popsicles) from the supplier to the store at their ideal temperature.

Unfortunately, they were let down. Their supplier didn’t stick to the agreement, which meant Frost Popsicles couldn’t deliver to the stores the entrepreneurs had negotiated deals with.

Natasha and Jon-Marc needed to make a plan. Like true entrepreneurs, they did the deliveries themselves, with poly boxes of dry ice to maintain the cold chain, sometimes delivering to the same stores twice in one day to keep up with the rate of sale and demand. They even pulled family members in to help them get their deliveries done on time (and on ice).

Today, they’ve invested in a fleet of delivery vehicles and manage their supply chain themselves, ensuring they will never experience this level of supply chain disruption again.