Unfortunately, safety is often one of the last things businesses consider when working to maximize financial success. Corners will be cut and suggestions ignored, but these decisions have dire consequences. It’s never a matter of if something will go wrong, but when something will go wrong. Lawsuits, insurance loss, property destruction, and employee endangerment are just a few consequences that could befall any company that skips corners.
This blog will be the first in a series where we tell the stories of past clients who tried to maximize profits by leaving themselves open to disaster. The names and small details will be changed to protect identities, but otherwise, these stories are entirely true.
How They Tried to Save Money
We’ll call this company Kirkan Inc. The owners started by forming their own captive insurance company. To quickly explain, captive insurance is when a company forms a personal insurance company to cover its own assets, rather than relying on a larger established company. Captive insurance companies are typically created to save money when the standard insurance offered on the market is prohibitively expensive. While there’s nothing inherently wrong with establishing captive insurance, it does put the company entirely on the line if something happens.
This is where the actual problem came into play. Kirkan Inc. was heavily advised to include lightning suppression when installing the wiring to the building. This saves the entire building’s electronics from lighting up if there’s a power surge. Rather than pay for the added protection, the owners considered this an additional cost they could circumvent.
Remember, Kirkan Inc. has to pay for its own damages if something goes wrong. Knowing this, they opted to avoid the cost of installing lightning suppression and had the building filled with basic copper wiring. They considered their actions business-minded, but nothing could have been further from the truth.
The money they initially saved wasn’t even remotely worth it. Remember when we said cutting corners leads to “when” problems, not “if” problems? Naturally, the building was eventually hit by lightning. Everything would have been fine if they had the suppression installed in the building. Instead, an electrical surge burned out every electronic connected to the system. That meant every computer, printer, server, light fixture, and air conditioning unit was destroyed with one lightning strike.
With no insurance company to bail them out, Kirkan Inc. needed to replace every piece of electrical equipment in the building on their own. In the interim, they had to shut the business down entirely until they could replace their equipment. They lost clients, profit and ruined their reputation with insurance companies. Why would anyone in their right mind insure a company that wasn’t interested in keeping its assets secure? And as a cherry on top, they also lost their captive insurance company.
At the end of the day, the owners easily eclipsed their costs by foregoing the safety of their building. This is why we at Millennium always stress the importance of putting in the proper defenses a business needs. It may not be likely that a disaster hits, but it’s better to have a setback rather than a total shutdown of operations when it eventually does. Now that’s good business sense.