Business interruption insurance: Risk and insurance advice

Business interruption insurance: risk and insurance advice

In the previous article, we explored business continuity plans and how they can be used to identify risks and determine income streams. In this article, we unpack risk and insurance advice and how they can be used in managing risk.

What is risk advice?

Risk advice

  • Risk advice is critical in the formulation of an adequate and accurate insurance solution.
  • Prioritising risks based on their expected frequency and severity is key to determining which risks can be managed or treated, and which risks should be insured.
  • Ensure that your cover is adequate for the risks that affect business continuity, rather than the minor inconveniences. E.g. insuring for fire, rather than insuring smartphones.
  • The first step in the process involves identifying potential risks, then evaluating them in terms of frequency and severity. Determining appropriate risk management processes and steps should follow this, and then determining the residual risk and finally, identifying the most appropriate means of financing the outcomes of the realisation of identified and evaluated risks.

Insurance cover

  • Insurance solutions or products provide the financial resources that businesses can fall back on, in the event of a catastrophe.
  • What you need to consider:
  • The balance between choosing the proper retention level and where you transfer the risk. This is often driven by the relative cost of insurance and the level of materiality inside the organisation.
  • Your business’s appetite tolerance for risk: the relative profitability and size of the organisation, as well as the risk appetite of the owners and/or management, will determine what the maximum risk is that the company will be prepared to carry for its own account, in any one financial period.
  • The financial implications that insurance solutions have on the business.

How do you know which route to take and when?

Start with the information that you have about your risk exposure:

  • Identify your risks.
  • Evaluate them.
  • Look at what you can control and the cost of exercising such control.
  • Consider transfer options (risk transfers):
  1. Hand it over to the insurance company
  2. Retain risk on your own balance sheet
  3. Form a self-insurance fund on your balance sheet
  4. Transfer a particular risk to a third party, e.g. a security company in respect of cash in transit.
  5.  Ultimately, the decision to retain or transfer risk should be an economically efficient decision which is aligned to and in support of the business objectives of the company.

Further reading

Take a look at these case studies and see how quickly things can go wrong, when you don’t have proper risk management and continuity plans in place:

Reach out to an Indwe advisor for the right risk and insurance advice. Visit or send an email to

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