Risk managers warned of ‘fear multiplier’ and $1.43tn GDP loss if Ebola spreads

These findings were reported in the centre's Ebola contingency scenario that modelled the possible economic impact of several hundred individual cases of Ebola reaching the US and Europe before the current outbreak in west Africa recedes. It warned that even though an outbreak would likely be quickly contained a 'fear multiplier' could cause big losses for economies and business alike. "Businesses need to be aware how much damage the 'fear multiplier' from deadly diseases such as Ebola and emerging infectious diseases could cause," said the centre.hideIts analysis concludes that each local outbreak in the US or EU would probably be dealt with quickly and there would be few deaths. The fear multiplier, however, would lead to avoidance of public gatherings, reduced travel and decreased economic activity and consumption. Dr Scott Kelly, Director of the centre's external advisory board, explained: "The fear of catching the deadly disease causes more economic damage than the direct consequences of illness and treatment measures. If a new disease is in circulation, then as a precaution people will not take a business trip or a holiday to a region they think might increase their chances of being infected, they won't shop in places they think might expose them and they won't go to work if they perceive that this poses a personal risk." Potential consequences include lower economic output as a result of reduced consumer spending, higher interest rates and increased unemployment. Overall, there could be a loss of 1.1% of global GDP or $760bn in 2015, the model indicates. The economic shock waves would continue for several years, ultimately taking $1.43tn from the world's economic output over the next five years, it finds. Based on the scenario, Europe would see a 1.71% fall in GDP resulting in 2015 losses of $210bn. This would rise to $620bn over the next five years. "The threat of new diseases in distant populations may seem of little relevance to a global business in an era of medical miracles, but our interconnectivity and human nature's fear factor is strong enough to make these outbreaks a genuine risk and potentially cause significant economic disruption. All businesses should have risk management processes in place for events of this type," said Dr Kelly. The centre's model is based on the consequences of the upper bounds of published projected epidemiological Ebola cases in the US and Europe as a result of the 2014 Ebola outbreak in west Africa. This scenario is not a prediction or an expected outcome, but is described as a 'contingency' scenario to help businesses put in place preparedness measures to improve their resilience to disruption from future infectious disease epidemics. Over the next few months the Ebola outbreak is likely to provide more examples of how the fear multiplier will ripple through the global economies of the world, said the Cambridge Centre for Risk Studies. "Any location where a reference case shows up will experience a fear factor chill on its local economy and businesses can expect disruption as a result. In severe examples, corporations may have to deal with localised offices or regional operations faced with business continuity issues from high levels of absenteeism, disruption to their markets, failures in their supply chain and distraction in their trading partners. Having clear risk management guidelines in place before an event occurs is much preferable to improvising responses when one occurs," it concluded. You can access the Cambridge Centre for Risk Studies' Ebola Contingency Scenario working paper at http://cambridgeriskframework.com/getdocument/23.

Risk managers warned of ‘fear multiplier’ and $1.43tn GDP loss if Ebola spreads

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