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Business protection in a pandemic: a short guide

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This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincoln or other local offices.

COVID-19 has thrown immense financial challenges at many businesses across the UK both large and small. Running a business always carries the possibility of risk and reward, yet the former is arguably more strongly felt in this third quarter of 2020 by many business-owners and directors. Having a strong business plan will help to navigate through a crisis, of course. Yet this alone does not guarantee success or stability. Setting strong protection measures in place, therefore, can go a long way to mitigating risks to your business and help carry it through hard times.

As part of our protection series, our Grantham-based financial advisers here at Castlegate offer this short guide on business protection in 2020; especially in light of the pandemic. We hope you find value in this information. If you want to discuss these matters or your own financial plan with us please get in touch to arrange a no-obligation financial consultation, at our expense:

01476 591022

COVID-19: Identifying Some of The Risks

The pandemic has brought a host of new challenges before business owners, many of which are still shrouded in uncertainty about how to address them. For instance, suppose you are a sole trader and you have lost upcoming work due to COVID-19 (e.g. a client cancelled a project because they lost staff etc.). How can you replace this loss of income? Can you use insurance to help cover it, or do you have to fall back on your reserves?

The lockdown brought another difficult question to the fore. If running your business relies on being “on premises”, how is it possible to continue if lockdown measures force you to “work from home”? For those who have lost income due to isolation policy, it can be frustrating to hear that these cannot typically be compensated by business interruption cover. Few insurers foresaw the kind of lockdown measures witnessed in the UK in 2020, and so have not accounted for them in the provisions of their policies.

How can business protection help?

So far, it might sound like business protection can do little for you in a pandemic. Insurers seem ill-prepared for COVID-19, and many are simply pointing their customers to the financial support measures available from the UK government (e.g. the Coronavirus Job Retention Scheme). Yet there are certainly crucial areas where protection can help your business weather a pandemic.

Business interruption (BI)

Whilst most BI policies are not covering losses caused by lockdown measures, there are plenty of scenarios where they can save a business from financial ruin. Suppose one of your suppliers is forced to shut down due to financial pressures caused by the pandemic. This could put you in a difficult position as you suddenly find yourself unable to sell your key products. Having a strong business continuity plan and BI cover can help you navigate these dangerous waters.

Legal action & compensation

What might happen to your business if a customer became infected with COVID-19 and claimed that they caught the virus whilst on your business premises? It is not yet clear how these kinds of scenarios might play out regarding possible court action. Yet having a robust insurance plan in place to provide compensation in the event of a claim will help to mitigate the risk. There are different types of commercial insurance available to business owners, so consider financial advice to ensure you get the right solutions you need.

Key person cover

Do you have a key manager, salesperson or other staff member who you cannot afford to lose? If so, then COVID-19 should be focusing business owners’ minds on key person cover. This can help provide a much-needed lump sum should you unexpectedly lose one of your key people to COVID-19 or other injury/illness.

Shareholder protection

For those with limited liability companies, what happens if one of your key shareholders is lost suddenly? Their shares in your business – without adequate protection in place – automatically get included into their estate, which then passes on to their beneficiaries. This can leave your business in the difficult position of needing to then negotiate with the family members of the deceased, who may have little experience or interest in the future of your business. Again, here a financial adviser can add real value by helping your business craft an appropriate shareholder protection framework to mitigate these kinds of risks.

Conclusion & Invitation

Hopefully, this guide has given you an idea of the kinds of business risks COVID-19 amplifies for owners and directions, whilst highlighting some of the powerful ways business protection can help minimise many of these risks. Finding the right policies and ensuring they all fit together coherently within a unified financial plan, however, can be a difficult feat to achieve on your own. Here at Castlegate, our Grantham-based financial advice team can help you work through your questions on this important subject, pointing you towards the solutions you need.

If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

01476 591022