VIEW 21
Seasonality
“To everything there is a season, and a time for every purpose under heaven.”—Ecclesiastes 3
The natural world is a synchronized one, with its timing tuned with the rotation of the Earth around the Sun. All living things show some seasonal synchronicity, as the interdependent chains in an ecosystem follow an ordered sequence. Temperature and rainfall trigger both the blooming of flowers and the hatching of insects that will pollinate them. In the fall, they all fruit around the same time, creating a sudden abundance which maximizes the chances of survival.
Though these cycles are as old as life itself, humans began to intervene some 10,000 years ago with the birth of agriculture, fine-tuning some timings to domesticate grains.
Wild wheat plants are brittle, scattering their seed haphazardly over a longer time period than cultured ones. Domesticated wheat ripens precisely on time, holding its seeds tightly and waiting for the farmer; in fact, requiring the farmer to propagate.
We have come a long way in the last 10,000 years yet seasonal patterns are imprinted on almost all human activity. On top of the cycles of nature, we have economic cycles driven by supply and demand that have broken out beyond a simple annual rhythm and spread over several years. But there are still many businesses that continue to be rooted in seasonal changes. This has important implications for business interruption claims following a cyber incident.
If these highly seasonal businesses are compromised in the low season this will have a dramatically smaller impact than if they are compromised in the high season.
Take a florist, for example. Sales hit a peak around Valentine’s Day and a smaller one again on Mother’s Day, but in the long summer months when people are on vacation, flower sales drop off.
So, an attack in February could have an impact five times bigger than an attack in August. This often leads to a debate about the appropriate average sales figure to use when calculating indemnification—should it be the average for the year or the average for that particular month? If it is the low season, have the sales been lost or just deferred because timing is flexible?
The more you look, the more examples of highly seasonal businesses you will find. Air-conditioners and tents sell more in the summertime, snow removal services and ski shops in the winter.
The school year imposes its own cycle on sales of uniforms and tutoring services, accountancy firms are especially busy at the end of the tax year, and agricultural equipment suppliers at harvest time.
Given that the standard length of an insurance contract is one year—which clearly contains all months—the ability to adjust for seasonality is limited, but it is worth noting that the cost of business interruption can fluctuate wildly depending on seasonal timing.
