Managing The Risks Of Revenue Loss - Do You Have Exposures And Can You Explain Them To Underwriters? Patrick Steenwegen & Alexander Schmidl 26 – 27 Mai 2005 Marsh 2005 Technology Conference

Agenda Challenges – Accelerated Complexity Case Study Lessons Learned :; Challenges – Accelerated Complexity Case Study Lessons Learned Wish-list – How To Improve

Challenges – Accelerated Complexity :; From tangible towards intangible & intellectual property Complexity of and dependency on IT systems Revised value chain Outsourcing  Just-in-time  Bottlenecks Research & Development Internal and external interdependencies Globalisation, competition Shorter product life cycles (Semiconductors) Project orientated activities (IT, B2B- or B2C-solutions) Complexity Demand Supply Time Gap Time Gap

Case Study : Contingent Business Interruption Caused By Power Outage :; Insured 1st Tier Supplier Chip Manufacturer 1st Tier Customers Loss: >$20M Loss: >$200M Loss: >$100M

Lessons Learned :; “Pay me for the sales I would have had,…we were having our best year yet” Loss of market following an (insured) event Temporary fashion Seasonal fluctuations Economical & cyclical changes Fast moving markets Missing forecasts Wrong PMLs Non-adapted insured values Ambiguous policy wordings Frustration Irritation Mistrust Expectation / Valuation = Loss recovery ? The amount paid will be the actual loss sustained that the insured suffers during the business interruption, as best it can be determined based on previous experience of the business and on projected future results.

Lessons Learned (Cont.) :; Integral risk landscape instead of single risk perspective Insurers’ awareness of accumulation potentials Essential: Loss limits for the “unknown” exposure Crucial: Speed in case of loss Important: Direct access to suppliers or customers

Wish-list – How To Improve :; Ex-Ante Quantification Understanding Scenarios Insurance Risk Management Business Continuity Loss Mitigation Post loss BI = T x Q x V where: BI = business interruption and: T = the number of time units (hours, days) operations are shut down Q = the quantity of goods normally produced, or sold, per unit of time used in T V = the value of each unit of production, usually expressed in profit Continuous, structured, transparent and predefined process Minimum Activity Level Normal Activity Level Incident Benefits of effective Business Continuity Management Response Business Recovery