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Manage computer risk via backups, insurance

Posted online

by Richard Ollis

for the Business Journal

Computers are fast becoming one of the most important pieces of equipment businesses use. Accounting, customer databases, sales and management are just a few important functions.

If you think about it, most businesses would be in real trouble financially and emotionally if their computers were destroyed or broken down for an extended period of time. Businesses rely on computers extensively, but most have an inadequate plan in the event of loss or breakdown.

Being in the insurance business, I have the opportunity to consult with many business owners. The biggest misconception surrounding computer loss involves running a backup regularly and storing it off premises.

Many businesses run a backup, but it's not done regularly or on a schedule. Then, when the backup is completed, they store it on site in the "fire proof" vault or file cabinet. Although it may not burn, it's likely to melt.

Here are a few things you may want to consider when managing your risk associated with computers.

?Run a backup regularly. (It may be daily, weekly or even monthly, but have a schedule.)

?Store your backup off premises. (It does not have to be locked in a safety deposit box. Someone's home will do.)

?Understand your contract with your major software vendor. Will they replace the software if it is destroyed? What support will they provide in the event of loss or breakdown?

?How will you reconstruct and reload data lost? Your backup schedule may have to be modified to reduce the amount of data lost. One often overlooked area is insurance coverage. Computers need to be specifically addressed. Do not insure them on a standard property or contents form.

Make sure that mechanical breakdown, electrical surge, software and extra expense for reloading data are covered under your policy. Another area to consider when looking at your exposure is the year 2000.

Many businesses are sending questionnaires to their partners, vendors and customers. Insurance companies are starting to exclude year 2000 issues on insurance contracts.

In addition directors and officers need to be concerned about their personal exposure to year 2000 problems.

A few areas that businesses may want to consider regarding the year 2000 are:

?Be careful when filling out questionnaires about your business' year 2000 compliance. There may be legal implications.

?After you address your own year 2000 issues (computer, fax, copier, etc.), then communicate to your partners, vendors and major customers to see if they are compliant.

?Have a contingency plan for your business, its partners and vendors in case they cannot perform in the event of year 2000 problems.

?Review insurance contracts, specifically directors and officers, business income, professional liability (errors and omissions) and general liability to see if they address the year 2000. Some address it, some are silent and some will exclude it. Contact your broker and discuss the possible implications.

(Richard Ollis is a commercial insurance specialist with Ollis and Company Insurors.)

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