The phrase, “the new normal” has been commonly used in the last two years to reflect the way we have all had to adapt. Adapt to a change in lifestyle; adapt to new ways of doing business. The phrase also suggests that the change is permanent, or at least long-lasting. The new normal has brought the word “furlough” into our vocabulary and working from home as a standard practice for many, and the words “you are on mute” have been spoken countless times on Zoom or Teams meetings across the globe.
The new normal might also have been driven by much more than just Covid-19, however. Other massive global risks, which have been of concern even before Covid came about, include:
- Geopolitical tensions
- Supply chain disruptions
- Volatility in energy costs
- Commodity and raw material shortage
- Risk of natural disaster caused by climate change
All of these risks are relevant and current in the UK, but you might also add Brexit to the list of additional risks faced by many businesses.
The recent invasion of Ukraine by Russia has horrified the world, although it was not a complete surprise; many are predicting a similar forthcoming threat from China over Taiwan. The world is almost united in condemnation of the decision taken by President Putin and our new normal incorporates the repercussions of his actions. As individuals, we are naturally affected by the appalling loss of life and suffering caused and the fact that we are now living in a world less safe. Businesses need to reflect on the risks the new normal brings and how to best manage those risks.
Here are some new or heightened risk exposures you may wish to consider for your business:
War Risks
One would hope that the current crisis will be over soon, and that the UK will not be involved in any conflict, but we have already had a number of questions regarding this, which is perhaps a sign of the depth of concern. On UK Commercial Property insurance and Business Interruption insurances, war risks are excluded. The reason for this is that war is a “fundamental” risk, meaning it affects the whole population. The insurance market could not withstand the depth of potential losses from war and as such, the Government would step in to help finance such risks.
An exception is Marine risks, where War Cover is available.
Supply Chain Exposures
This is a broad subject and disruption is already being felt in a number of areas, not least in the supply and cost of energy but also in a vast array of products and services. The application of sanctions will inevitably affect UK businesses. Single source products or those areas with limited supply options obviously face the biggest challenge. Looking at each link of your supply chain and having contingency plans in place is key for operations to continue.
Cyber Risks
Cybersecurity risk is well known and substantially discussed. At McClarrons, we have been making our clients aware of cyber risks and the insurance cover available for years; however, most experts warn of an increased cybersecurity risk from Russia, particularly in the shadow of the current conflict. In the last week, the New York Post reported on increased attacks against US banks, which you can read more about here.
Awareness, vigilance and an investment in your own cybersecurity and insurance protection is recommended.
Credit Risks
Whether you manage your own credit risks or finance the risk exposure through a third party or insurance, it is worth revisiting this in the current climate. Many companies have “limped” through the last two years with help and could be excessively vulnerable now, especially in the light of increasing costs and the possibility of higher interest rates this year.
Political Risks
If you are trading in geographies that give you increased cause for concern, Political Risks insurance is one source of help. It is possible to protect commercial trading and investments against political risks, including trade embargoes, border closures, expropriation, confiscation, or deprivation of assets.
People Risks
You may have personnel travelling to countries of concern and in the changing geopolitical landscape, there are naturally heightened risks attached. The FCO (Foreign & Commonwealth Office) provides helpful guidance here but, for peace of mind, the following are areas of insurance to consider:
- Business Travel policies
- Group Personal Accident cover
- Key Person insurance
- Kidnap & Ransom insurance
Even if you don’t have employees travelling for business, it is important to consider potential mental health issues. These have been extremely challenging times and the new normal is sure to bring some additional stresses to everyone; help is available if required in the form of support tools and insurance.
Reassessing your risks
Some of the risks referred to above can be mitigated or financed by insurance products; however, insurance is not always the best solution and often, implementing proactive risk management is the best course of action.
If you are concerned about any of the above, please do not hesitate to contact our specialist team and we will be very happy to help.
You can contact our Commercial Insurance Team on 01653 609151 or at commercial@mcclarroninsurance.com.
