From the monthly archives:

March 2010

Using a Yardstick to Calculate a Business Interruption Loss?

by John March 30, 2010
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One of the first orders of business when calculating a business interruption loss for an insurance claim is a valuation of lost sales or lost revenue.  There are several ways that a forensic accountant can approach this task, such as calculating sales trends, evaluating lost sales to specific clients, or comparing actual results to budgets [...]

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What Happens When A Key Supplier or Vendor Goes Down?

by John March 26, 2010

Risk managers, business owners, and corporate officers ask me what will happen if they experience a business interruption loss because a key supplier or vendor is unable to fulfill an order.  They ask me, “Can I make a business interruption claim if my sales are affected because one of my key suppliers has a fire?” [...]

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Shred Those Values At Risk Worksheets

by John March 23, 2010
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Brokers often ask me which business interruption values at risk worksheets I prefer or think are the best.   I guess the answer depends on if you want to use them to wrap fish or make paper airplanes.  Aside from those two uses, they are all about equally worthless.  I know this sounds harsh, but [...]

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The Fraud Triangle: Opportunity

by John March 22, 2010
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Criminologist Donald R. Cressey identified three traits that are commonly present when people perpetrate fraud. Cressey created an hypothesis known as the ‘fraud triangle.’ The three sides of the fraud triangle are: 1. Rationalization – Since the majority of individuals who commit serious occupation fraud are not career criminals, they feel a strong need to [...]

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Check for An Abatement Clause Before the Disaster

by John March 17, 2010

One of my favorite sayings related to calculating a business interruption loss is: All variable expenses are saved, but not all saved expenses are variable. This quote can often be applied to rent related to office or production space. Before a business interruption loss occurs, managers should review commercial leases and look for an “abatement” [...]

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Review Asset Depreciation Methods in a Business Interruption Calculation

by John March 16, 2010

Let’s assume that a commercial printing company has a small fire. As a result of the fire, the undamaged commercial printing press sits idle for one month during the restoration period.  The printing press originally cost $200,000 and the historical monthly depreciation is $2381 based on the fact that the IRS considers the printing press [...]

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How to Use the Correlation Coefficient in a Business Interruption Calculation

by John March 11, 2010

When preparing a business interruption calculation for an insurance claim, one of the most common statistical tools I use when evaluating continuing and non-continuing business expenses is the correlation coefficient. The correlation coefficient can be found using analysis tools found in spreadsheet software, using specialized statistics software, or by calculating the values with a pencil [...]

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Gratitude & Business Interruption Loss: Do These Two Things Go Together?

by John March 8, 2010

Every February 24th, without exception, my phone rings, and without fail the phone call catches me by surprise. This year, I was in the middle of sorting through a pile of debris on my desk, when the voice on the other end of the phone said, “No matter how bad things in your life may [...]

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Business Interruption Claim Presentation: The Three Column Approach

by John March 5, 2010

There are many ways to format a business interruption calculation for an insurance claim. Each method is unique and there isn’t a “one size fits all” method that works for every business income loss.  However, there is one method that I use repeatedly,  which is referred to as the “Three Column Approach.”  In the graphic [...]

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Is It Worth It To Hire A Forensic Accountant To Prepare Your Business Interruption Insurance Claim, Regardless of Fee Coverage?

by John March 3, 2010

I am often asked by potential clients if my forensic accounting fees to prepare a business interruption insurance claim will be reimbursed by the insurance company. This question is completely valid because professionals who are experts in business interruption claims are not cheap, and risk managers, corporate officers, and business owners want to clearly understand [...]

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