Business Risk Management For 2022: Prepare for Whatever May Come

Risk Management For 2022

As companies begin to plan their coverage portfolios for 2022, many have a whole new perspective on business risk management. The truth is, most businesses weren’t prepared for the global pandemic. In fact, businesses often find themselves unprepared for black swan events like the COVID-19 pandemic. Given what we’ve all gone through over the past two years, however, your company’s annual insurance review for the coming year should analyze whether you’re fully prepared for another black swan event.

What is A Black Swan Event?

Modern Black Swan Events

If you’re unfamiliar with the term “black swan event” as it applies to business risk management, consider this definition from Investopedia

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.

Many believe COVID-19 is a black swan event. Other black swan event examples include terrorist attacks like 9/11, natural disasters such as Hurricane Katrina, and the dot-com crash of 2000. While epidemiologists, intelligence officers, meteorologists, and economists likely could have predicted the above events based on their specialized knowledge, most businesses don’t have access to that information. As a result, their business risk mitigation efforts often prove deficient when a black swan event does occur.

How To Plan for a Black Swan Event

As we enter business risk management planning for 2022, many business owners would like to believe that in light of COVID-19, we won’t see another black swan event for years to come. That belief is not the basis for a solid planning strategy, however. In fact, some experts believe that roughly 40,000 black swan events have occurred in modern history. Surely, more are coming. So, the real question is, what can you do to mitigate the impacts of these events on your businesses?

  • Hire and retain innovative thinkers. The truth is, some businesses have thrived during black swan events. Why? In large part, it’s because they had innovative thinkers on board to shift business gears when things went sideways. In your organization, who can you count on to respond to crises … to think outside the box … to quickly react to rapidly changing business realities? Identify or hire those people and involve them in planning and response efforts.
  • Have a business continuity plan. While you can’t predict the details of upcoming black swan events, you can plan for certain categories of business interruptions. For example, what would happen if your physical business location was destroyed? What if trucking routes were shut down? How would your company respond to a cyber-attack? By preparing for possible catastrophes in a general sense, you’ll be better able to respond when a specific disaster occurs. Business continuity plans can even be used to deal with “minor” events such as burglaries or property damage.
  • Analyze your business risk management portfolio. Another critical part of planning is, of course, undergoing an annual insurance review as part of an overall risk assessment. What kinds of events are covered by your policies? Even if you have business interruption insurance, does it exclude certain types of events? What coverage do you have if multiple employees are injured in an on-site disaster? Does your cyber liability policy cover cyber-attacks by terrorists? These are the kinds of questions you need to be discussing with your broker or agent sooner rather than later.

As 2021 draws to a close, now is the perfect time to conduct your annual insurance review to ensure you have adequate coverage for whatever the coming year has in store. Contact Roger to begin your policy review today.