People tend to believe that they can insure themselves against anything, but that is unfortunately not the case. The parental home of a friend of mine recently burned down. The required fire insurance will cover the immediate damage, as well as the rental costs of the apartment where his mother must now temporarily stay. But the loss of the photos and countless memories is irreversible. The emotional damage is huge, and no insurance can ever cover that.
Companies are also arming themselves with customized insurance solutions against disaster. For them, fire insurance, just like consequential loss insurance, is still not legally required. But those companies that have insured themselves are covered for fire damage suffered and any possible lost profits over a certain period.
The rebuilding will admittedly require some time: on average, it takes a company 18 to 24 months before it is fully operational again after a serious fire. This time span can also result in consequential damage that is much more severe that the material damage suffered – this includes the loss of customers or market share, as well as extensive damage to reputation. Just like with the emotional damage after a fire in your private life, you cannot insure yourself against it.
Recently, a Vanbreda customer expressed concern for his business continuity for that very reason. He had just seen how a competitor became the victim of a disaster and watched how his market share was divided up among the competition after barely one week. He thought: if that happens to me, I can forget about starting up again, because my customers will leave in the blink of an eye.
A well-conceived fire prevention plan then becomes the solution. It costs nothing, but its added value is enormous: it has a positive impact on your company’s chance of survival after a disaster. The plan is made up of three elements.
Firstly, it gives due consideration to the legal requirements with regard to fire prevention. The legislator, for example, asks that you take the necessary measures to prevent fires from starting and spreading as much as possible. If a fire happens to break out anyway, employees will need to be evacuated swiftly. Emergency services will also need to be able to perform their work safely.
Secondly, the fire prevention plan focuses on the requirements set by the fire insurer in order to keep the risk to a minimum. Among other things, it focuses on the compartmentalization of your commercial premises to keep the fire from spreading quickly. The use of non-flammable materials, having sufficient fire extinguishing equipment, smoke detectors, sprinklers and regular inspections of the electrical installations are also obvious measures.
Some entrepreneurs may object to these requirements. They only think of what it costs to meet these requirements and convince themselves that it gives them nothing in return. At best, they are only prepared to do what the fire department requires. Neither can they be swayed from the notion that fire prevention does require their attention as entrepreneurs, but is solely the responsibility of the fire prevention advisor.
That fire prevention certainly is a matter that entrepreneurs must address becomes clear in the third element of this plan, which focuses on measures taken in the interest of business continuity. Entrepreneurs often fail to consider this in advance – when there is no fire or disaster to speak of.
Here, it above all comes down to estimating the scale of the specific risks and taking certain parameters, such as the maximum downtime, into account. For example: if the delivery time of a unique machine is two years, you must consider in advance what you would do if this machine were to be destroyed by fire. After all, waiting for two years is not an option.
What are my firm’s single points of failure? These are the links that can cripple your company if they were to fall away, such as a vital machine within your production processes. As an entrepreneur, it is important to be aware of these in advance and develop, in consultation with a number of key figures, some scenarios to keep the downtime as short as possible.
In short, when you draw up a business continuity plan in advance, you will have to start searching for your company’s weak spots. How can you prevent a single point of failure from being a weak spot? If a disaster occurs that impacts this, you will know how to minimize that impact thanks to the business continuity plan you drew up in advance.
This plan also means that you have considered in advance how you can prevent such a situation from damaging the confidence of your stakeholders. A clear-cut communication plan will be in place to guide you through. Crisis communications that were not drawn up and analyzed beforehand, however, can often cause even more loss of confidence.
One favorable side effect of having a carefully conceived fire prevention plan is that you gain the trust of your insurer. Let’s face it, trust is an essential component in this sector. The more demonstrable efforts you make to prevent a fire, the more favorable the insurer’s rate will be.
The higher the excess – these are the costs that a firm incurs with a claim, and for which the insurer is therefore not liable – the lower the premium you have to pay. You can, of course, take all kinds of measures to keep the risk of small incidents to a minimum.
An adequate fire prevention plan and the decision to compartmentalize will undoubtedly bear fruits in the event of a fire. Just recently, this spared a firm from suffering far greater damage thanks to the measured fire extinguishing work by the fire department. Thanks to a concrete construction and a solid barrier between the inventory room and the production room, the risk for them was minimal. Without these modifications, they certainly would not have taken that risk and the fire would have carried over to the rest of the building.
It shows that a good fire prevention plan not only benefits the safety of your employees, but also the economic survival of your company. A smart business continuity plan is a crucial aspect in this, and above all, will help you take stock of all the possible residual risks within your company.