There is no doubt that coronavirus (Covid-19) is on the minds of countless Americans as the disease continues to catch the public’s attention with over 1,000 confirmed cases and more cases every day in the United States.
Covid-19 is a respiratory virus that has led the World Health Organization to declare the outbreak a global pandemic. Countless news articles urge people to stay in as virus restrictions spread across the globe. The stock market has fallen, global supply chains and sales have been disrupted, schools and colleges across the nation are closing to opt for online learning, and popular tourist sites have seen a decline. This pandemic may result in depressed financial performance for your company as well. There are steps you can take to help manage the financial risks of the virus to your business.
Review your insurance policy and agreements
As many businesses prepare for a loss of income from the virus, it's crucial your organization understands your policy. Business interruption insurance, sometimes called loss insurance, is a type of insurance that covers the economic losses that a business suffers after a disaster or peril. Whether your business will be covered for pandemic-related losses will depend upon your insurance policy along with other facts and circumstances.A great place to start assessing whether or not you could file a business interruption claim would be to review your property and casualty agreement. Some agreements may specifically mention “nonrecurring events” without a further definition. Agreements may also include coverage of natural disasters that are not further defined and do not specify direct physical damage related to the loss. This vagueness in the language may either permit or open the door for you to file a claim for the loss. If you have specific questions regarding your rights as an insured, you should consult your attorney or insurance agent.
Conduct a risk assessment
For a pandemic like Covid-19, it is encouraged that a risk review be completed to evaluate the impact of the organization and employees. The best assessment and ability to measure an interruption of your business, or a loss, is through identifiable and measurable factors. The main challenge will be that some impacts to your company may be vague and something that is not easily communicated. Trackable data points could be sales volumes, customer door swings, web traffic, or bottom-line profits. A recent New York Times report also suggests that the spread of the illness through contact tangible surfaces may constitute property damage for insurance purposes.
Clean, concise documentation
Documentation is key. It is vital you stay organized and be intentional. Legwork at the beginning can save a lot of time and effort on the back end. You will need to gather past financial statements, tax returns, business contracts, employee wage statements, paid invoices, and other records that may convey or support business loss. Furthermore, it is important to keep your current financials up to date so that you can monitor changes. Keep records of shipment and appointment cancellations, employee call-outs, and service interruption (gas, electricity, fuel, and water) as these will be needed for a business interruption claim.Review Cash FlowsReview and adjust your cash flow forecasts to determine the impact a slowdown would have on your ability to pay your employees and suppliers.CommunicationTimely and honest communication with your employees and customers will be key. Being mindful about your communication will maintain the trust of your network. Taking precautions now by preparing reports, gathering documentation, focusing on communication, contacting a professional for guidance, and thoroughly reviewing insurance policy language can help protect your business from the impacts of Covid-19. If you would like more information on this topic, contact Stuart McCallum at 423.756.7771.