1. 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

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

3. 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

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

5. 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.

6. 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

7. 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