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Emergency Preparedness Essentials
 

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Risk Mitigation

The vast majority of Federal Disaster Declarations have been the result of natural disasters. Some natural disasters cannot be avoided such as hurricanes, earthquakes and tornadoes. Many technological disasters such as regional power outages cannot be stopped by a single business. Asset destruction and business disruptions can be the result of accidents that were not prevented and deliberate acts that were not stopped. Non-preventable hazards still have options for reducing damage to business operations, property, life, and the environment. Risk mitigation addresses these options.

Mitigation Strategies

There are a variety of mitigation strategies that can decrease damage from disasters. Choosing a property site that is void of floods, storm surges, earthquakes or not near other hazardous locations is essential to mitigation of disasters. Construction of property should meet all building codes which are designed to protect life and reduce fire risk. Property of great value such as data servers and manufacturing equipment should be protected by follow all manufacturer recommendations. Hazardous chemicals and processes should be protected in accordance with national standards. Computer networks should be evaluated to verify that they are secure from intrusion.

Mitigation requirements and opportunities can be found by researching national standards and fire prevention regulations. Renovated or new facilities need custom protection specifications so check with your underwriter, broker, or insurance agent to see if they can assist in the matter. Remember, reduced insurance premiums could be a consequence of providing more protection to your facility.

Insurance for Financial Risk Mitigation

Buying insurance is one way to ease the financial impact of business interruptions, damage, or loss to equipment or a facility. Insurance companies can provide coverage for business interruption, property damage, automobile liability, general liability, workers’ compensation, and several other losses. However, insurers will only pay if the hazard that caused the loss was insured by the policy. Losses that are caused by pollution, terrorism, earthquake, or flood might not be covered by the standard property insurance policies. If a facility is located in a flood zone the flood insurance may be able to be purchased through the National Flood Insurance Program. Pollution, terrorism, and earthquake coverage could possibly be purchased separately or added to an existing policy as an endorsement. Other hazards might be covered by basic property insurance but the policy may limit the amount of loss that is payable.

Coverage for business interruption might be available for continuing expenses or for reimbursing profits lost during the time the business is shutdown. Losses that are caused from a supplier failure could have available contingent business interruption coverage. Support for standard policies could cover any extra expenses, such as additional costs for the expedited delivery of the replacement machinery which follows a loss that was insured.

Review the insurance policies you have with your brokers, agents, or with your insurers directly in order to evaluate the equality of the insurance policy with your potential loss. Consider these recommendations:
  • Make sure you understand the waiting period before coverage starts, deductibles, and the procedures for the notification of the insurers when a loss happens.
  • • Find out if property insurance policies will just cover replacement cost or actual cash value.
  • Do an inventory list of assets and properties to determine if the insurable values will reflect the inflation costs over periods of time.
  • Examine scenarios which result in impacts for many different facilities. Determine if the limits of insurance are sufficient.
  • Use the BIA as a help in quantifying the potential financial impacts.
  • Review your risk assessment, the identifiable hazards, and the potential impacts for your business.
  • Download and use the Insurance Coverage Review Worksheet.
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