The COVID-19 pandemic and its economic repercussions have been tough on almost everyone.
Shrinking margins, layoffs and furloughs remain top of mind in many of the worst-hit sectors like leisure, hospitality, transportation and retail.
The medium-term impact of the coronavirus will not only force businesses to adapt their business models, but also to tighten their budgets.
One of the biggest risks – and a key danger facing the region in the next six to 12 months – is the postponement of risk management and mitigation processes in an effort to protect cashflow.
As businesses reassess, reframe, adjust and adapt, our advice to all businesses is that these cutbacks must be short-lived, if they happen at all.
The exposures today during the pandemic may be different from when the global economy was running full tilt – managing risks associated with keeping up with a high demand for goods is something that only a few fortunate businesses face today, for example – but they are nonetheless just as acute and pertinent.
In many ways times like these require heightened vigilance. The ability to recover quickly from a loss may be hampered through a lack of easy access to expertise and spare parts; and the potential damage to market share and consumer confidence can be much worse due to the longer recovery time.
Key risks to watch out for in these pandemic-dominated times arise from idle facilities, retooling to develop new products, restarting idled equipment and hazardous material storage. Many sites are also experiencing more frequent stops and starts with all the ongoing change management and unpredictable lockdowns across international and domestic boundaries. Equipment breakdown and the higher risk of fire damage must remain top of mind.
Additionally, increased reliance on technology and a rise in cyber attacks points to the need for vigilance. We have already seen clear evidence of how opportunities have abounded for hackers during the pandemic, compounding the multitude of other risks.
In the first week of August, a new cyber threat assessment from the Australian Government noted malicious cyber attacks against Australian businesses and government agencies from a state-based actor have increased over the previous two months. Cyber attacks are now "one of the most pervasive threats facing Australia and the most significant threat in terms of overall volume and impact to individuals and businesses".
Then there is the ever-present climate change perils of bushfire, storm, and flood, among others.
There’s no free lunch. Risk management may come at a cost, but unmanaged risk is far costlier. And while risk management comes with a cost, research and science can support greater efficiency. With tools such as predictive analytics it is possible to pinpoint the highest priority risks and the solutions which are most likely to be effective.
Analytics are also helping organisations identify locations that are most predisposed to loss, as well as the individual engineering recommendations that have the highest likelihood of preventing such outcomes. CFOs can use these surgical tools to prioritise, plan and execute risk management in a strategic way.
Loss prevention and insurance have to co-exist. There’s never been a more important time for insurance professionals to work with their clients in this regard.
Close collaboration between insurers and brokers with both operational staff and heads of finance within a business is essential, including providing advice around the types of tools that can be used to support risk management planning and execution.
Risk mitigation and improvement are as vital in these trying times as they have ever been. Understanding exposures, having the right partners and making the most of data will ensure organisations come back stronger when we finally recover from the pandemic.
This article was first published in Insurance News