Page 107 - RISK Management IC86 Ebook

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Interruption in operations

n As a result of damage, an organization may have to suspend
or reduce its operations. The loss caused by such a business
interruption would be
a) Net profit the business would have earned if there was
no interruption,
b) Expenses that continue despite the interruption.

Contingent business interruption

n Where the organization depends on sales to a single customer,
any interruption of the supplier's operations may cause
interruption of its business. Such a interruption loss is termed
as "contingent business interruption loss".

Loss of profits on finished goods

n If the finished goods ready for sale, and gets destroyed he
will loose the profits he would have made by selling them.
Similarly, if any finished goods are sold but get damaged or
destroyed before their delivery to the customer, the loss is the
selling price including profit.

Reduction in receivables

n If the records of an organization's account receivable
get destroyed, it' may encounter difficulties in collecting
from customers. The difficulty may be greater if the

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