Speed of Covid-19 crisis took risk managers by surprise

The speed and scale of the Covid-19 pandemic caught many businesses and governments by surprise, a group of leading Belgian risk managers told Commercial Risk Europe. Speaking to us as part of the Risk Frontiers Europe 2020 survey, they said companies may have had pandemics on their radar but the way in which this event effectively closed down most of the world was a shock.

Sabine Desantoine, insurance risk manager at ING and immediate president of Belgian risk management association Belrim, summed it up: “You may have had pandemics on your risk list but these were events from the past – people point back to the Spanish flu of 1918, for example. But this crisis has affected all continents. When it started in China, we were not sure whether it would spread elsewhere.”

“In Europe, it started in Italy and became very acute very quickly. And because it is a health crisis, it is completely different to other crises we have faced more recently. First you have to take care of the people and their health, but then on the other side you have the economy. Even if you were prepared, you were probably not prepared for everything that has happened,” she added.

Her words were echoed by the rest of the group. Gaëtan Lefèvre, head of professional ethics, risk and insurance management at John Cockerill, as well as incoming vice-president of Belrim, said: “If you look at the traditional way that crisis management is handled, you are prepared to work with one situation in one place for a short period of time. But here we started in China and then the crisis extended to South Korea and Japan, and then Italy, Spain, and so on and so on. At first, we started to risk-manage the crisis in the classic way and we had no idea the impact would be so huge for the whole group.”

He suggested that it would be almost impossible for any company to have been prepared for the enormity of the impact.

“Clearly we didn’t expect the scale of the crisis so we hadn’t prepared in that way,” said Mr Lefèvre. “But my question is: can you prepare for anything like this? Certainly the governments were unprepared and maybe they should have something in place, but at a company level is it even possible to be prepared?”

Natalie Vandenbroucke, compliance, risk and insurance officer in Belgium, Luxembourg and France for the Royal BAM Group, believes much of the problem lies at government level.

“Leaders (in government and business) usually do not like to bring bad news or to proactively take decisions with a negative impact on the economy. It’s bad for voting results and could bring instability in some countries,” she said.

Carl Leeman, chief risk officer at Katoen Natie and vice-president of Belrim, said: “We did have some experience with swine flu and in 2015 with ebola. The big difference was that those epidemics remained in one continent or region. The second difference is that previously we were not all locked down. In the past, the economies were allowed to continue to function but now the politicians have taken control of everything. That is brand new and is the big difference.”

Mr Leeman said Katoen Natie had a pandemic plan that it used before for both swine flu and ebola. But he admitted that it was not a perfect re-run for Covid-19, because of the political inference and lockdown.

In a number of European countries, the Covid-19 crisis was underestimated in terms of speed and reach, he continued. “It is always easy to talk afterwards – we should not criticise so much but try to learn for the future. Although every virus is different, if you look at the numbers of people who died, it is clear you could have split up your confinement and let the under-50s carry on at work through this crisis,” argued Mr Leeman.

Ms Desantoine suggested the crisis has shown how complex and difficult it is to react to different viruses. “The flu, for example, is different every year but we know how to react, but here the complexity, speed and its unprecedented nature were key in how we reacted. It is difficult to decide whether to confine everyone or not,” she said.

Another challenge is how to get out of lockdown. Mr Leeman said that in Luxembourg, every citizen received masks and then were sent another 30 masks per person. In Belgium, it depended on the area but workers and schoolchildren across much of the country have also been sent masks to help people start the recovery process.

Managing the risks The key question for risk managers is what role they should play throughout such a crisis. Julien Rouaud, corporate risk manager at Agfa, said he was not in the crisis management team, but instead has tried to prepare the company for any kind of disruptive events ahead of time. But when the crisis hit, it was the local crisis management team in each location that took over.

“As a risk manager, it is important to gather the lessons learned – work out what went well and what didn’t work so that the next time, whether a pandemic or another crisis, we are better prepared,” he said.

“For us, it was mostly managed locally. But we were also surprised by the speed and scale. It was a failure of government to organise itself. In Europe they should have coordinated the approach, but Belgium, the Netherlands, France, Germany etc are all doing what they want to do. It was a missed opportunity to have a stronger global government approach,” he continued.

Mr Lefèvre added: “I have a specific role as coordinator of the crisis committee but I was involved as a risk manager and also supported human resources in managing the situation. We made a distinction between the health crisis management team that we had at the start. After a few weeks, we introduced an economic crisis committee to limit the impact. I was a member of both.”

“It was not easy but it was also important to prepare for the end of the lockdown. We worked on how to get back to normal activity. We have five or six different activities across the group and some of them never stopped work – and indeed had more work,” he added.

Ms Vandenbroucke believes that, more broadly, society needs to invest in global and universal data-collection systems that are compatible with each other. “Governments need to follow up on the data and share it. There needs to be investment in systematic detection of contaminations and there should be more open collaboration between countries and major companies – including pharmaceutical, sharing critical and medical information. Declare the – still to come – vaccine as a universal right,” she said.

“And then risk managers should be the second line of defence in the processes of open collaboration between entities they belong to,” she added.

Mr Leeman stressed that Covid-19 has been a very different experience for different companies. For example, as an international logistics and port operator, Katoen Natie is deemed part of the essential sector and its activities never stopped. “We have the advantage of being active in Asia, so we were able to roll out the pandemic plan we had in place in Asia into Europe very quickly,” said Mr Leeman.

“In terms of management, it was a case of managing the safety of your own employees and then the safety of the company. Largely speaking, we have not had a massive outbreak linked to a workplace and we have found people are more disciplined at work than they are at home. It has proved easier to control the safety processes in the workplace,” he continued.

Adding: “We have operations in the hotspot of northern Italy and also in the Barcelona area but we managed to carry on without anyone being infected through work. We split up our teams to keep them safe, we split breaks and have no overlap during change of shifts. Also, the transport that we organise to and from the workplace has been made coronavirus-proof. So, we now have 22 instead of 52 persons on a bus. To keep the employees and different shifts split, we are now using four buses compared to just one bus before.”

Mr Lefèvre reported that the main supply chain problems appear to come from the automobile sector. “We have some clients in that sector,” he said, “and we heard that some had to stop manufacturing because the suppliers weren’t able to deliver. Particularly when China was shut down, it was a problem.”

This has raised the issue of the globalisation and interconnectedness of supply chains, he continued.

“It did highlight the way in which we have all become so dependent on China, because nobody had realised how dependent on China we were for medicines and masks, for example. A lot of spare parts etc are produced over there and I hope some companies will bring that production back to Europe for the sake of supply chain safety,” continued Mr Lefèvre. Chain link

Mr Rouaud added: “What was strange in the crisis, was the way that when China stopped all activities, it impacted everyone. China stops, Europe continues, Europe stops, China restarts. It was a challenge for any business to manage its way through. For example, for one project in Germany we rely on a supplier in China. That link in the chain got blocked but now we can start to send people to check the quality of the product and we will resume the project in Germany.”

Mr Lefèvre said business can now use China as a blueprint to see what will happen next. “The challenge is in knowing whether consumers will resume buying. If we look to China, the consumption has started up again quite quickly – that maybe is the positive news,” he said.

Mr Rouaud noted that now people have experienced working from home and discovered it can be more efficient, there will be changes to the way people and companies want to work. “On the manufacturing side, we need local teams on site but for white-collar jobs that will accelerate the cultural change,” he said.

The question is to what extent working patterns will shift, he continued. “Online meetings can be efficient but it doesn’t replace face-to-face interactions. Will we reinvent the way we do business?” asked Mr Rouaud.

A year ago, Ms Desantoine was already discussing the way younger people wanted to work closer to home. And that process looks like it will be sped up by Covid-19. “If I take the example of ING on 13 March, we were testing everyone working from home. The test was live and then became a permanent situation the following week and now, in June, we are still all working at home. With the rare exception of people needing to be in the office, the evolution is that for some, if not most of the companies, they can see teleworking is working. People needed to adapt but the systems are now working,” said Ms Desantoine.

She pointed out that if the virus had hit ten years ago, the technology would not have been able to support people working from home. “Certainly, for financial institutions, for insurance and for risk management we can work remotely. I am sure we will be working from home in the future. It is convenient but also helpful in terms of health and safety. In the past you may have woken up and decided that, even though you didn’t feel well, you would continue into the office. You won’t do that anymore because you can work from home – both to look after yourself but also to look after your colleagues,” she added.

Mr Leeman suggested that instead of buying people company cars, firms will have to buy an office chair and desk for employees. “We are already seeing complaints from employees working from home, who sat at their kitchen table all day in a not-so ‘ergonomically friendly’ chair. That is something new to take into account. People complain when they don’t have an ergonomic seat at the office but we don’t check on the one they have at home,” he said.

“I don’t think this is the moment to be in the office real estate market as companies will cut back on office space for different reasons. Companies won’t be wanting to take the same spaces in those office tower blocks,” he added.

A leading telephone company in Belgium, for instance, has announced it will probably never again have as many people in its offices as it did prior to Covid-19. It should become easier for those that have to commute because roads will become clearer and office start times staggered, the group of risk managers suggested.

Ms Vandenbroucke said going forward risk managers will need “to find the right balance in an extremely volatile situation, be able to adapt on a daily basis and in each sector or geographic area, and take new strategic decisions on a daily basis”.

“One of the biggest challenges is not failing in the duty of care to employees and being able to adapt the business in a sustainable way,” she added.

Managing the risks

The key question for risk managers is what role they should play throughout such a crisis. Julien Rouaud, corporate risk manager at Agfa, said he was not in the crisis management team, but instead has tried to prepare the company for any kind of disruptive events ahead of time. But when the crisis hit, it was the local crisis management team in each location that took over.

“As a risk manager, it is important to gather the lessons learned – work out what went well and what didn’t work so that the next time, whether a pandemic or another crisis, we are better prepared,” he said.

“For us, it was mostly managed locally. But we were also surprised by the speed and scale. It was a failure of government to organise itself. In Europe they should have coordinated the approach, but Belgium, the Netherlands, France, Germany etc are all doing what they want to do. It was a missed opportunity to have a stronger global government approach,” he continued.

Mr Lefèvre added: “I have a specific role as coordinator of the crisis committee but I was involved as a risk manager and also supported human resources in managing the situation. We made a distinction between the health crisis management team that we had at the start. After a few weeks, we introduced an economic crisis committee to limit the impact. I was a member of both.”

“It was not easy but it was also important to prepare for the end of the lockdown. We worked on how to get back to normal activity. We have five or six different activities across the group and some of them never stopped work – and indeed had more work,” he added.

Ms Vandenbroucke believes that, more broadly, society needs to invest in global and universal data-collection systems that are compatible with each other. “Governments need to follow up on the data and share it. There needs to be investment in systematic detection of contaminations and there should be more open collaboration between countries and major companies – including pharmaceutical, sharing critical and medical information. Declare the – still to come – vaccine as a universal right,” she said.

“And then risk managers should be the second line of defence in the processes of open collaboration between entities they belong to,” she added.

Mr Leeman stressed that Covid-19 has been a very different experience for different companies. For example, as an international logistics and port operator, Katoen Natie is deemed part of the essential sector and its activities never stopped. “We have the advantage of being active in Asia, so we were able to roll out the pandemic plan we had in place in Asia into Europe very quickly,” said Mr Leeman.

“In terms of management, it was a case of managing the safety of your own employees and then the safety of the company. Largely speaking, we have not had a massive outbreak linked to a workplace and we have found people are more disciplined at work than they are at home. It has proved easier to control the safety processes in the workplace,” he continued.

Adding: “We have operations in the hotspot of northern Italy and also in the Barcelona area but we managed to carry on without anyone being infected through work. We split up our teams to keep them safe, we split breaks and have no overlap during change of shifts. Also, the transport that we organise to and from the workplace has been made coronavirus-proof. So, we now have 22 instead of 52 persons on a bus. To keep the employees and different shifts split, we are now using four buses compared to just one bus before.”

Mr Lefèvre reported that the main supply chain problems appear to come from the automobile sector. “We have some clients in that sector,” he said, “and we heard that some had to stop manufacturing because the suppliers weren’t able to deliver. Particularly when China was shut down, it was a problem.”

This has raised the issue of the globalisation and interconnectedness of supply chains, he continued.

“It did highlight the way in which we have all become so dependent on China, because nobody had realised how dependent on China we were for medicines and masks, for example. A lot of spare parts etc are produced over there and I hope some companies will bring that production back to Europe for the sake of supply chain safety,” continued Mr Lefèvre. Chain link

Mr Rouaud added: “What was strange in the crisis, was the way that when China stopped all activities, it impacted everyone. China stops, Europe continues, Europe stops, China restarts. It was a challenge for any business to manage its way through. For example, for one project in Germany we rely on a supplier in China. That link in the chain got blocked but now we can start to send people to check the quality of the product and we will resume the project in Germany.”

Mr Lefèvre said business can now use China as a blueprint to see what will happen next. “The challenge is in knowing whether consumers will resume buying. If we look to China, the consumption has started up again quite quickly – that maybe is the positive news,” he said.

Mr Rouaud noted that now people have experienced working from home and discovered it can be more efficient, there will be changes to the way people and companies want to work. “On the manufacturing side, we need local teams on site but for white-collar jobs that will accelerate the cultural change,” he said.

The question is to what extent working patterns will shift, he continued. “Online meetings can be efficient but it doesn’t replace face-to-face interactions. Will we reinvent the way we do business?” asked Mr Rouaud.

A year ago, Ms Desantoine was already discussing the way younger people wanted to work closer to home. And that process looks like it will be sped up by Covid-19. “If I take the example of ING on 13 March, we were testing everyone working from home. The test was live and then became a permanent situation the following week and now, in June, we are still all working at home. With the rare exception of people needing to be in the office, the evolution is that for some, if not most of the companies, they can see teleworking is working. People needed to adapt but the systems are now working,” said Ms Desantoine.

She pointed out that if the virus had hit ten years ago, the technology would not have been able to support people working from home. “Certainly, for financial institutions, for insurance and for risk management we can work remotely. I am sure we will be working from home in the future. It is convenient but also helpful in terms of health and safety. In the past you may have woken up and decided that, even though you didn’t feel well, you would continue into the office. You won’t do that anymore because you can work from home – both to look after yourself but also to look after your colleagues,” she added.

Mr Leeman suggested that instead of buying people company cars, firms will have to buy an office chair and desk for employees. “We are already seeing complaints from employees working from home, who sat at their kitchen table all day in a not-so ‘ergonomically friendly’ chair. That is something new to take into account. People complain when they don’t have an ergonomic seat at the office but we don’t check on the one they have at home,” he said.

“I don’t think this is the moment to be in the office real estate market as companies will cut back on office space for different reasons. Companies won’t be wanting to take the same spaces in those office tower blocks,” he added.

A leading telephone company in Belgium, for instance, has announced it will probably never again have as many people in its offices as it did prior to Covid-19. It should become easier for those that have to commute because roads will become clearer and office start times staggered, the group of risk managers suggested.

Ms Vandenbroucke said going forward risk managers will need “to find the right balance in an extremely volatile situation, be able to adapt on a daily basis and in each sector or geographic area, and take new strategic decisions on a daily basis”.

“One of the biggest challenges is not failing in the duty of care to employees and being able to adapt the business in a sustainable way,” she added.