Third-party risks are soaring, and merchants are facing extended, unavoidable downtime through no fault of their own. Traditional insurance players are not coming to their defense.
Retailers/merchants have historically seen the Q4 holiday revenue as mission-critical. Indeed, that’s where the name Black Friday comes from: the day retail financial books go into the black, meaning turn a profit.
But this year, more than ever, merchants face a threat to that revenue that has nothing to do with weather, shortages of the most-desired toy, or deep special sales from the competition. The threat is third-party risk.
We have talked about the monumental third-party risk before, but retailers in late November/all of December face vertical-specific risks–and no traditional insurance firm will protect them. An 831(b) Plan will.
The risk to all verticals involves sharply increasing dependence on companies–as well as the companies those companies rely on–who make risk decisions that put retail revenue in severe jeopardy.
To better understand this risk, let’s look closely at the Amazon Web Service outage in October 2025. The fact that it knocked business offline for almost a full day is not the point. The point is why it happened and how likely these kinds of problems will be in December.
Why? December sends Web traffic sky-high, which in turn puts tremendous pressure on cloud environments supporting it. And the technical underpinnings of the October AWS breach–which was significantly followed in just a few days by a similar global outage from Microsoft Azure, as if to double down on our point–makes clear that this fragile outdated environment will hurt many more businesses this holiday season.
The question of more outages from Microsoft or Amazon–and maybe Google–is no longer “if” or “when,” but how many times?
Don’t forget that the nature of third-party risks is so dangerous because of how interconnected systems are becoming, courtesy of clouds, SaaS, IoT/IIoT, AI/GenAI/Agentic and 50 other factors.
In other words, your business doesn’t have to use, for example, Amazon’s AWS to be devastated by an AWS outage. What if your supply chain used AWS and you didn’t? Or your trucking fleet? Or your e-commerce platform? Or the vendor whose POS systems you rely on? If a hyperscaler crashes, your business is still hit as long as someone in your partner chain depends on it.
And when that happens, your traditional insurance company will be looking for excuses to not pay you. The further away in the chain the outage occurs, the less likely you are to be reimbursed.
Clearly, these problems could hit any business–including retailers–at any time throughout the year. But it’s this magnified impact in December that makes the difference.
If most retailers suffered an outage on March 7 or Sept. 5, it would be painful but not devastating. Most customers would just return the next day. And even if there was a loss, it would be relatively manageable.
But if that same outage hits on Dec. 23? Desperate parents will simply go to your competitor as waiting may not be an option.
That is precisely why an 831(b) Plan is becoming essential, allowing a business to self-insure for risks not available through traditional insurance. By setting aside tax-advantaged dollars during strong years, the plan ensures business owners have the resources to stay whole when unexpected events strike.
This is something to seriously consider as premiums go up and coverage decreases with traditional policies.