How can your grocery chain quantify its losses from a business interruption?

How can you accurately quantify your losses?

Damage quantification extends beyond your immediate losses. If your grocery chain has experienced a business interruption event, it is crucial to consider these key factors to accurately quantify your losses:

Lost revenue and gross profit

It is important to analyze your grocery chain’s sales history by stock keeping unit (SKU), location, and seasonality to determine your lost revenue and gross profit. Accounting for mitigation efforts, including temporary store transfers or substitute product sales, is also necessary to accurately quantify your losses from a business interruption event.

Additional expenses

A business interruption in your grocery chain can lead to additional expenses — such as emergency generator costs, temporary labour, product rerouting, or rental equipment. It is crucial to document each of these expenses during the loss quantification process.

Reputational damages

A temporary store closure or unavailable products can lead to customer dissatisfaction. Track changes in foot traffic and customer loyalty after the business interruption incident using available data or loyalty programs to demonstrate its impact on your grocery chain. Considering impacts that are difficult to measure is critical in settlement discussions.

Overlap with contingent business interruption

Contingent business interruption insurance protects a business from income losses caused by disruptions to its suppliers, customers, or other third parties. Examining supplier disruptions or transportation failures may reveal additional covered loss elements that you can include in your insurance claim.

What are common pitfalls in business interruption claims?

Inaccurate measurement periods

Many business owners use flat year-over-year comparisons that do not account for seasonal promotions, inflation, or other external events. This can lead to inaccurate assessments.

Undocumented mitigation efforts

Your grocery chain may act quickly to mitigate its losses through efforts such as transferring goods or deploying mobile refrigeration. However, many businesses fail to appropriately track these costs — which means you may not receive compensation for these expenses.

Overlooked inventory impacts

Damage from an equipment failure — including partial spoilage or temperature excursions — may not be immediately evident at the time of the business interruption event. This makes it more challenging to trace future product returns or shrinkage back to the incident.

How can a forensic accountant help your business during a claim?

Forensic accountants provide objective, data-driven insights into the true economic impact of a business interruption event on your grocery chain. This includes:

Transaction-level analysis

A forensic accountant can mine point of sale (POS) data for granular insights on lost sales by product or category to accurately quantify your losses from a business interruption event.

Margin sensitivity reviews

Not all product losses are equal, and some perishable goods with high turnover may have lower margins but a higher reputational impact. A forensic accountant can perform a margin sensitivity review to demonstrate the impact on your business.

Claim support

A forensic accountant can provide additional support for your business interruption insurance claim. This involves collaborating with risk managers, insurers, and adjusters to align on defensible, well-documented loss models.

Take the next steps

For more information, contact a member of MNP’s Insurance Advisory team. Our advisors can work with you to ensure you have the appropriate level of coverage to protect your business. We can also provide professional support after your business experiences an interruption event to help quantify your losses and ensure you receive fair compensation.