Risk management takeaways from COVID-19 pandemic

Matthew Reitz, BridgeTower Media Newswires

The COVID-19 pandemic created unprecedented challenges for businesses and entrepreneurs, both large and small, but experts say there are a number of risk management lessons that can be learned from the unparalleled crisis.

Unlike any situation in the past century, the coronavirus crisis expeditiously swept through the world and changed nearly every aspect of human life. The COVID-19 crisis will likely be permanently imprinted on the minds of generations of business leaders, and can help leaders prepare for the next crisis — whatever it may be — and recognize the importance of developing and frequently revisiting risk management strategies.

Mark Peterson, Rochester practice leader at Lawley Insurance, said risk management has become a top priority for many who are both seeking to survive the ongoing pandemic and looking toward potential future crises. Peterson said ensuring employee and client safety is paramount to any company’s success, noting “it’s too risky to do anything but” operate as safely as possible.

“All companies are now thinking we need to anticipate the unexpected and have more planning in place, and really taking a look at various risks,” Peterson said, noting business continuity during unusual occurrences — such as moving to a remote workforce during the COVID pandemic — is now more important than ever.

Peterson said clients have largely become more aware of what is possible, and businesses are seeking long-term solutions and guidance to avoid similar situations in the future. In the shadow of the COVID-19 pandemic, Peterson said individuals and companies are more cognizant of the potential for significant disruptions to business.

“People have clearly gotten the message that the more you know, the faster you know it, and the more we are prepared to take quick action and communicate it to our employees and our clients, the more likely it is this could be a short-term incident rather than a long-term problem,” Peterson said.

Companies are assessing all aspects of their business, Peterson said, not only safety and compliance programs. Lawley immediately formed a task force to create and integrate COVID-19 action plans based on Centers for Disease Control and Prevention (CDC) and Occupational Safety and Health Administration (OSHA) guidelines, company officials said, and continuously adapting to fast-moving changes in available information.

Such task forces are a common recommendation made by risk management experts, who note companies should also track decisions made throughout the crisis and review those decisions afterward to emerge stronger for the next potential crisis.

Mark Verdi, a partner at Lawley, noted many of the items and policies being put in place would likely be pertinent to future catastrophes, not strictly the current COVID-19 pandemic. Verdi notes “risk management is ultimately about avoiding risk,” rather than simply purchasing insurance policies to cover such risks.

Lawley and others are not only offering insurance coverage to clients, but also helping to identify best practices for returning to work after the unprecedented shutdown. Peterson pointed out Lawley developed a publicly accessible COVID-19 Information Portal on the firm’s website to help guide business owners.

Jim Mickles, an insurance broker with Mickles Insurance Agency and strategic partner to Walsh Duffield Companies, said industry-specific guidance detailing when and how to reopen are crucial, and noted businesses should adopt policies to maintain social distancing, sanitize employee and patron areas and implement other precautions prior to reopening.

Those simple but important policies can be key to minimizing a company’s liability in this unparalleled time. Experts say companies should also devise detailed long- and short-term plans for how to deal with future crises, and be able to flexibly adapt to future unknowns.

In addition to the obvious steps needed to safely reopen, Mickles said there is a handful of other risk management issues related to the COVID-19 pandemic that business owners should have on their radar.

The possibility of catastrophes, such as fire or flooding, are anticipated by many businesses and covered by various insurance policies that can keep a business afloat during the rebuilding process.
Unfortunately for most, those same protections don’t offer coverage for global pandemics and many businesses were left scrambling to adapt to a new environment.

Mickles said business interruption insurance policies, which would under most catastrophes cover lost income when a company cannot operate, almost across the board did not cover losses due to the global pandemic. Most insurance policies would cover fire insurance, wind damage, vandalism and other events, but few, if any, business interruption policies were set up to cover the COVID-19 crisis.
“Many people thought they had business income coverage and went to their insurance companies to submit a claim,” Mickles said. “But unfortunately it’s not covered in most policies.”

Verdi noted “99 percent, maybe 100 percent” of business interruption policies did not cover the loss of income due to the COVID-19 pandemic. Verdi said most of the policies require “a direct, physical loss,” and the pandemic is not considered such.

“Every policy had a virus and communicable disease exclusion,” Verdi said.

Insurance experts said in light of the Ebola, SARS and Zika outbreaks across the globe, insurance companies over the past decade added a clause to policies that denied coverage for bacterial and viral incidents. Business income insurance is a coverage most of Mickles’ clients have, he said, but none covered a triggering event like COVID.

Policies that cover viral or bacterial incidents could perhaps become more common in the future, experts said, and businesses should be aware in the future whether or not such incidents would be covered by their policies.

Workers’ compensation issues were also brought to light, Mickles said, noting employees of a health care facility or emergency response agency who contract the virus at work would likely be covered by workers’ compensation, but for others working in offices it’s difficult to prove the virus was contracted at work, and coverage can be denied.

A perhaps unexpected consequence of the COVID-19 pandemic, and a rising threat for businesses across the globe, is the presence of cyberattacks, Mickles said.

“Unfortunately there are so many people out there trying to prey on people during times when they’re most vulnerable,” Mickles said. “If you’re in a position where you’re not making any money because you’re not able to work, to me, you’re more susceptible to cybercrime and cyber hacks.”

Common phishing emails, promising riches and other benefits, have increased in recent months, Mickles said, and business owners and their employees should be more cognizant than ever of such attempts.

Verdi and Peterson said the firm has also seen an increase in cyber-attacks since the COVID-19 pandemic started. Peterson noted with more employees working from home, companies can be particularly vulnerable to cyberattacks.

“You take all these people who were working in a secure office that now don’t have the proper firewalls at home and the right security,” Peterson said. “You have a new exposure to a significant amount of cyber issues.”

Information technology departments can take various precautions against cyberattacks, Mickle said, and companies can also purchase insurance against such attacks. Cyber policies can vary, however, Mickles said, so business owners should be careful when comparing policies. Internal protections remain important, even for those who purchase a cyber policy, Mickles said, as those protections can lead to lower premiums and more inclusive policies.

Mickles also encourages business owners to keep a line of communication open with their insurance broker, noting that if work is slowed or employees have been laid off, often companies can save money on their premiums.

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Matthew Reitz is a Rochester-area freelance writer.