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The Risk of Interruption: Communication Outages and Remote Work

In the post-COVID world, one of the biggest takeaways for businesses is the increased demand for remote work and the dramatic rise in electronic communication as a method of getting work done. A number of programs are used for this, everything from the ubiquitous Zoom to various social media platforms to Microsoft Teams. What happens when those lines of communication go down? What happens when remote workers simply can’t work? If the business was to shut down, what does a company do?

In October 2021, a small employee error (on the scale of a single incorrect keystroke in one very specific place) at Facebook caused Facebook itself, Instagram, and WhatsApp to shut down for around 6 hours, resulting in a loss of revenue that could easily be in the billions of dollars. What may be worse for them, however, is the fact that when the Facebook network goes down, so do all of the electronic badges that get employees into buildings to fix the problems. Hours of time and billions of dollars lost due to the click of a button. Multiply that by all of the people utilizing those same services for their own businesses.

Organizations are rapidly changing how work is done and where it takes place and many of those changes are likely to stick around in the long term. Unfortunately, due to how rapidly those things were implemented due to COVID-19 lockdowns and restrictions, many companies inadvertently let their risk management take a backseat, especially when it comes to business continuity and cyber security. Organizations have rushed to get workers hardware and systems to continue their work from home, but often have not had the time to implement security, backups, or disaster recovery paradigms into those systems during the transition.

Generally speaking, Business Interruption Insurance is used to protect companies against economic loss following a business shutdown of some sort. There are several types of Business Interruption policies and having a thorough understanding of them will help a business know which one they need. Putting a focus on communication and remote work, however, is a different matter. Most Business Interruption Policies involve five variables: physical damage, insured property, covered perils, a quantifiable business loss, and the period of time it takes for the property to be restored.

Does that apply to property being used to work remotely? Does it apply to servers being utilized to work from home? The answer is: it depends. This is where a business owner will need to consult and insurance professional and update the language of their policies to ensure they are covered for every possible event.

Another big change that has taken place in the business landscape as a whole is an increasing reliance on cloud based solutions and software-as-a-service for basic tasks. Companies like CloudFlare provide security solutions. Companies like Google and Dropbox provide massive amounts of storage and management tools. What happens when those companies go down? What if vital business documents are stored on, for instance, Dropbox, only for the service to go down at a vital time and mess up workflow for the entire company?

One potential solution could be Contingent Business Interruption Coverage. This type of coverage is meant to work in a very similar way to Business Interruption with the change being protection against losses resulting from damage or loss to property of a person or company upon whom the business of the insured depends. Of course, the terms are going to vary between policies and may not even apply in some cases.

There are a number of other considerations to keep in mind as well. Commercial Property Insurance may not (and likely does not) cover remote business assets unless they are specifically included. Transitioning to remote work means buying a lot of expensive computer equipment to send home with people. If that property is damaged while it is gone, that will represent a very real loss. It pays to make sure that commercial property insurance the company has will cover property that is being used off-site by remote workers. On the other hand, it is also important to note that the homeowner’s insurance policy of the employee will not pay to replace business-owned equipment either.

Cyberattacks and data breaches are on the rise. Virtual employees are likely not as secure as they should be and that lack of security can easily translate to hacking, malware, or phishing attacks. This can be partially mitigated through the implementation of a cybersecurity policy and First- and Third-Party Cyber Liability Insurance.

The big takeaway from the transition to remote work is that most insurance policies will need to be updated at the very least. If something were to happen to a data center, a cloud network, or a piece of hardware and business operations need to cease for some reason, mitigating the losses is essential to getting things back on track as quickly and smoothly as possible.

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