Page 106 - RISK Management IC86 Ebook
P. 106
Risk Management
Net income loss exposures
n When any of its property gets lost, damaged or destroyed, a
business may suffer a reduction in its net income (i.e. revenues
less expenses) until the property is restored back to its former
condition. This happens primarily because the business looses
use of that property in whole or in part. In many instances the
net income loss may far exceed the property loss and in view
of many variables getting involved, ascertaining the loss
potential becomes difficult. Let us now look at major net
income exposures and their potentials.
Reduction in revenues
n Loss of rent,
n Interruption in operations,
n Contingent business interruption,
n Lost profits on finished goods,
n Reduction in receivables.
n Increase in expenses.
Loss of rent
n Depending the terms of the lease agreement a tenant may not
be responsible for payment of rent during the period the
property is untenantable as a result of an accidental damage
or destruction of a property.
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