Many scholars have argued the relevance of insurance to business considering the unpredictability of events and disruption to business and conclude that all that is needed to buffer for loss is Insurance. This view is true to an extent, but short-sighted as it doest not give consideration to long term issues of continuity and sustainability.

1. Insurance Vs Business Continuity Management (BCM)
Adelakun Oluwafemi Adeshola MBA Risk management, AIOR, ARMA
Many scholars have argued the relevance of insurance to business considering the
unpredictability of events and disruption to business and conclude that all that is
needed to buffer for loss is Insurance. This view is true to an extent, but short-sighted
as it doest not give consideration to long term issues of continuity and
sustainability. Insurance often provides support and recovery aid following a known
loss or disaster event. While some companies struggle to recover after a loss even
after being indemnified by their insurer, some automatically goes into ceassation
following a disaster event. It is therefore important to understand the role of insurance
within an enterprise and accord it importance where necessary. More often than not,
organisations rely heavily on insurance and have replaced the need for continuity
strategies with reliance on insurance. Businesses don’t see the need for business
continuity strategies or they are ignorant of the need for BCM. Traditionally,
insurance only provides indemnity against tangible losses while the intangible loss
which affects the business on the longer term is not covered. This is much aligned
with the concept of disaster recovery. However, most businesses don’t tend to recover
even after the insurance aid/indemnity. Often times, there is a gap between the time of
incident and recovery and competitors who are more strategic will leverage on this for
competitive advantage. Following the complexity and stiff competition within our
current market and operating environment, it is unwise for business to still rely solely
on insurance as a guarantee for indemnity against losses, rather, the focus should be
on how business will continue and resume operation in the face of disruption or
disastrous event. This strategic view is what is known as Business Continuity
Management (BCM). Businesses which focus on recovery rather than continuity will
always be a strong advocate for insurance. Although, insurance on the short term will
provide compensation and support in loss events, it does not provide or guarantees
organisational resilience. However, long term issues such as goodwill, reputation
damage, loss of market share and customer confidence are not indemnified by such
insurance.
There are certain risks that cannot be protected by insurance, but can only be managed
by contingency planning. This is not to say that businesses should not have insurance
covers, but it should not be the main strategy, hence, the level of insurance cover
required should be subject to the outcome of the business impact analysis (BIA). It
might interest you to know that developing a sound BCM strategy provides cost
reduction to businesses in diverse areas especially with premium payments on
Insurance. Sound BCM demonstrates to an insurer that an organisation is proactively
managing its business risk. This is because, business continuity management helps to
identify inherent business risks, and moreover, the ability of a business to recover and
mitigate losses is often a requirement of insurance policies in most developed

2. economies which should be the case across global business domains. Hence,
organisations with comprehensive business continuity strategies are categorised as
those with lower risk profile, as such this will help them in securing lower premium.
Alternatively, the very exercise of embarking on a BCM programme may mean that
you are confident enough to buy less business interruption insurance.
Overall, the required operational resilience that will enhance sustainable business
growth and operational efficiency is attained via Business Continuity Management.
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