8 ways to protect your business in a crisis

UK businesses are getting accustomed to managing unexpected events. We’ve had the curveball of a global pandemic followed by economic instability, and the threat of cyberattacks, financial crime and extreme weather events. And that’s before you add serious staff illness or unexpected death to the mix. When you consider that 50% of businesses experiencing a disaster will fail within the following 12 months, managing a business is not for the faint-hearted!

Unforeseen events and crises can be catastrophic if you do not plan for them. When you own a business, there are lots of events you can’t control. The key to surviving the uncontrollable is to put protections in place before you need them. Whether you manage a local family business or an expanding UK operation, check what protections you should have in place and review them regularly to ensure they meet your needs.

A combination of good planning and relevant insurances will protect your company in times of crisis. In this article, we look at the options to mitigate the impact of unexpected events in both these areas. Let’s start with planning. 

Planning for unexpected events

1. Articles of Association

Articles of Association set out the rules of running a limited company. Every director must agree to these rules and responsibilities and behave in a way that represents the best interests of the business. They protect a business from disputes and govern its management. Most company directors adopt the standard Articles of Association when setting up and registering their business. Over time and as companies grow, you may need something more specific than a standard cover-all. If your business is growing or seeking new ownership, it might be wise to consult a solicitor and seek professional advice. 

2. Business Continuity Plan

Have you ever considered what might happen if a plane were to crash into your building, or a flood caused business operations to shut down? Your company should have a Business Continuity Plan in place to enable key business operations to continue functioning in the event of an incident. Working through the consequences of an incident with your team will help identify vulnerabilities and weak spots. You can then take action to reduce business risk in these areas.

As part of your plan, consider the key members of staff that need to be involved in an  incident response. Your plan should set out who those people are, their role, responsibilities and contact details.

Continuity planning is not just for big companies. Every business needs to do some level of contingency planning, for example, what happens if the office boiler breaks down during a cold snap or the latest storm takes the power out from your manufacturing facility? With extreme weather events becoming more frequent, it makes sense to put plans in place.

When it comes to selling, having a robust business continuity plan shows potential buyers you have assessed and planned for potential risks. It builds confidence that your business is a sound and profitable investment.

3. Shareholder agreement

A shareholder agreement defines the roles and rights of shareholders and sets out how the company is run. A valid shareholder agreement can prevent disputes in the event that a shareholder chooses to leave the business. Shareholders may also refer to it for guidance if a shareholder were to fall ill and be unable to vote in major business decisions, such as a decision to sell.

Business Protection Insurances

A buyer may request evidence of insurance during the due diligence phase of a business sale. Having accurate, valid policies in place will present your business in the best light. 

4. Protect your Intellectual Property (IP)

Protecting the assets that belong to your business is essential. Your branding, trademarks, imagery, literature, software, patents and copyrights all hold significant financial value. Software developers, manufacturers, product designers, and businesses in technology and the creative industries may benefit from having intellectual property insurance. Cover can protect against loss of income and finance the legal costs of defending your IP rights, if a case arises. In the era of AI, IP insurance has become a vital piece of protection.

5. Keyman insurance

Keyman insurance protects your business against financial loss caused by the temporary or permanent loss of a valuable team member. This could be:

• The salesperson who brings in the most revenue
• The person with the most client relationships
• An employee with unique, specialist or expert knowledge.
  

6. Death in service

Death in service insurance protects your business if an employee dies while on your payroll. Policies usually pay a tax-free lump sum to the deceased’s nominated beneficiary. In larger companies, death in service is a popular employment benefit.

7. Director’s insurance

A director’s insurance policy provides cover for individuals with decision-making powers. In the event of an unexpected loss of a director, the insurance payout would enable the remaining directors to hire someone to perform their role, make key decisions, and keep the business running smoothly. This type of cover can be invaluable to protect against the unexpected when selling your business.

8. Cyber insurance

According to a UK Government report, just over 4 in 10 businesses reported a cybersecurity breach or attack in the last year. The estimated average financial cost per breach is £1,600 – and that’s purely based on the incidents businesses choose to report. The cost of a major incident can be much higher.

Cyber insurance can protect against financial loss in the event of an online attack, but this shouldn’t be your first line of defence. Staff training could prevent an attack happening in the first place. As part of your planning, consider the financial crime, scam awareness, and online safety knowledge gaps you need to fill.   
  

Security is a sign of a valuable business

Planning to protect your company from crisis is a sign of a well-managed business. From machinery breakdowns to the loss of a key employee, investing in planning and insurance can mitigate the impact of unforeseen events. And with so many businesses failing following a catastrophic event, you could see your livelihood disappear all too quickly.

Securing the right level of insurance cover and reviewing your policies regularly to ensure they meet your needs is good practice. A business that has considered information and financial security represents less risk than one that has not. Having robust continuity plans in place gives potential buyers extra peace of mind.

If you have questions about business protection or what insurances you might be asked to evidence during the due diligence phase of your business sale, find your local business broker or contact us here.

Sometimes imagining the worst can be the best thing you can do to protect the value of your business – for the present and a future without you.