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Patrick Steenwegen & Alexander Schmidl 26 – 27 Mai 2005 Marsh 2005 Technology Conference

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

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Patrick Steenwegen & Alexander Schmidl 26 – 27 Mai 2005 Marsh 2005 Technology Conference

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  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 • Wish-list – How To Improve

  3. Complexity Demand Supply Gap Supply Time Time Gap 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)

  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. 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. Frustration Irritation Mistrust 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

  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. 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 Incident Normal Activity Level Minimum Activity Level Benefits of effective Business ContinuityManagement Incident Response Business Recovery Wish-list – How To Improve :; • Ex-Ante • Quantification • Understanding • Scenarios • Insurance • Risk Management • Business Continuity • Loss Mitigation • Post loss Continuous, structured, transparent and predefined process

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