Pavla Vypěrová, Respect Group: why insurance alone is not enough

When orders pile up, revenue grows and the company is hiring, that is precisely the moment for business owners to be on their guard. So said Pavla Vypěrová, a board member of the insurance and brokerage group Respect Group, at the Forbes “Better Czechia” conference in Karlovy Vary, held in the Císařské lázně hall.

There is no time to train a newcomer properly, because production has to keep running. Checks can wait; orders matter more right now. And methods that worked for a small firm will surely do for a bigger one. Each of these decisions looks reasonable in the daily rush, but together they create weak spots that an owner may not know about until something happens.

According to Vypěrová, the pace of growth sometimes outstrips a company’s ability to keep everything in order: there are more employees, the way of working changes, and rules and controls fall behind. “You don’t have time to do the basic checks, you don’t have time to train people properly,” she says. That raises the likelihood of damage. The danger does not always come from outside, in the form of a fire or a flood: it can arise inside a successful company, and an owner focused on growth easily overlooks it.

“But we’re insured”

Take a company that picks a cheaper material from abroad to save money. If it cannot verify whether the new supplier will deliver the required quality and safety for health, the savings can quickly turn into a problem whose consequences far outweigh the benefit.

Vypěrová believes such changes demand constant attention. It is not enough to assess the threats to a business once, sign an insurance contract and consider the matter closed. “I think you have to keep looking at this all the time, because risks keep changing,” she answers when asked how often owners should review the situation in their company.

Although entrepreneurs’ attitude to risk has changed over the past decades, she still meets the view that the insurer takes responsibility for the problem. “After all, I’m insured, so the insurance company will somehow have to pay,” is how some people reason, she says, and she warns against it. Insurance rests on specifically agreed terms and scope of coverage and, above all, does not replace preparing for how the business will operate if it loses something vital. That is why, Vypěrová stresses, owners themselves must understand their risks first of all.

She also speaks of those who built firms from scratch and gave them most of their lives. Even such dedication does not protect against the consequences of underestimated threats. “I’ve seen many firms go under, firms that were truly built on a family basis,” she says. In her experience, even good companies can get into trouble if they fail to notice how their risks have changed.

What if production stops tomorrow?

How long would the firm last without a key machine? Where would it produce if it lost its site? And what would its customers do in the meantime? These are the questions to start with, Vypěrová believes. In conversations with owners of large companies she finds that even for such situations they do not always have a ready answer. “Sometimes they tell you they have never thought about it, and that, in my view, is the foundation of a healthy company,” she observes.

A damaged machine or building is only part of the problem. A business also has to survive the period when it cannot fulfil orders as usual: keep its customers and its place in the market until work resumes. That is what business continuity plans are for. Their point is to think through in advance what could stop the company, what that would lead to and how it would respond.

Vypěrová does not want to call entrepreneurs people who knowingly play with fire: in her words, some threats simply never cross their minds. But once they start talking about them concretely and understand the possible consequences, the approach often changes.

By the Around Prague newsroom