Companies urged to plan for coronavirus disruption

As the death toll from the coronavirus reaches 170, risk managers are being advised to plan for potential supply chain disruption and human resource issues. The past week has seen a dramatic escalation of the respiratory illness, known as 2019-nCoV, with the first confirmed cases in Europe. More than 7,700 people have now been affected in China and all deaths from the virus are in that country. The virus has spread across China and to at least 16 countries globally, including France, Germany, the US, Canada and Australia. In three countries – Germany, Vietnam and Japan – there have been human-to-human transmissions, raising fears about the spread of the disease. A number of European countries, the US and Japan are advising against non-essential travel to China and evacuating their citizens from the city of Wuhan in the Hubei Province, which is effectively in lockdown. The World Health Organization (WHO) has praised China’s response to the outbreak but said the “whole world needs to be on alert”. It will meet today to discuss whether the virus constitutes a global health emergency. Renata Elias, a consultant within Marsh Risk Consulting’s strategic risk practice, told CRE that companies should be proactive and start preparing now for the potential impacts of the coronavirus. “Organisations need to be proactive, not reactive, and use this time to plan and prepare. That is critical. Pull out your business continuity, crisis management and crisis communication plans – and if you have one, a pandemic plan. Review and refresh them, and test them. Now is a good time to do so,” she told CRE. The main business impacts of a major public health emergency like coronavirus are related to human resources and supply chains, which could be disrupted by measures to control the virus, or a depleted workforce, according to Ms Elias. There may also be implications for customer demand and financial implications for companies with business in affected areas, she added. “Wuhan’s prominence as a tourist destination, a port city and transportation hub, and a regional centre for education and manufacturing, has raised concerns that the outbreak could continue to spread. The impacts from a potentially worsening Wuhan coronavirus outbreak to your business could be severe, but taking simple steps now can help you better prepare, plan and protect people and operations,” said Ms Elias. “Organisations with significant employee populations in China are at particular risk, while travel restrictions, supply chain disruptions and employee absenteeism within vendors, suppliers and other partners in-country could reduce productivity and efficiency for businesses headquartered elsewhere. Fears about the virus could also depress travel and tourism and adversely affect the global economy,” she said. Stock markets and commodity prices fell earlier this week as investors fretted over the potential economic impact from lower demand and supply chain disruption. In a bid to slow the spread of the virus, which has flu-like symptoms, the Chinese government has extended the New Year holidays and companies are advising staff to stay at home. Hong Kong announced on Tuesday it was suspending train and ferry services to mainland China and curtailing flights. The current outbreak could have important implications for supply chains that extend to China, according to Ms Elias. Wuhan is home to suppliers of fibre-optic cables, car parts and memory chips. Meanwhile, the city of Suzhou, a manufacturing hub in eastern China and home to major pharmaceuticals and technology companies, has ordered businesses to close until further notice. Risk managers should look at their business continuity plans and identify critical suppliers in China, and also consider potential workarounds and alternative suppliers, advised Ms Elias. Of immediate concern should be the welfare of people – staff and their extended families, suppliers and contractors, according to Ms Elias. “The first priority in a crisis should always be your people. Look after people and then the rest should follow,” she said. Marsh recommended that risk managers monitor updates from public health officials and governments. They should also keep employees informed and educated about the outbreak and any steps being taken to safeguard their health. In addition to the welfare of employees working in affected areas, risk managers should consider business continuity policies and contingency arrangements if employees are unable to get to work or if offices are closed. Communication with employees is also critical, according to Ms Elias, as public health issues could be stressful for employees and their families. 2019-nCoV is a coronavirus, a family of viruses that include the common cold, SARS and MERS. However, the World Health Organization said not enough is known about the epidemiology of 2019-nCoV to draw definitive conclusions about the full clinical features of the disease, the intensity of the human-to-human transmission and original source of the outbreak. According to Swiss Re, it is important to note that this outbreak is not a pandemic. “Although the current outbreak is clearly concerning from a human perspective, it represents a small number in comparison to the population size. Also, most deaths have occurred in more vulnerable patients,” it said in an emailed statement. “When there is an outbreak of an infectious disease, the key parameters to understand are incubation time (if it is long, that is problematic as people travel), how a virus is being transmitted from human to human, and how lethal it is. Of course, the quality of response mechanisms varies across the globe, and that plays a significant role as well,” it added. There is concern that pandemic risk and preparedness may have slipped off the radar of some corporates and been overshadowed by other more recent events. Infectious diseases were ranked tenth by impact in the World Economic Forum’s Global Risk Report 2020, down from second in 2015. “Wildfires, hurricanes and active shootings have come to the forefront in recent years, but we have not seen a large public health emergency or pandemic in recent years, so this risk has been pushed aside. However, organisations must consider all risks and prepare,” said Ms Elias.

Companies urged to plan for coronavirus disruption

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