Pandemic Risk Management for Business
Pandemics pose a major threat to businesses of all sizes. In case of a pandemic, business continuity can be easily disrupted for 18 months or more.
Evidently, pandemic threats are quite different from any other business continuity threat that continuity planners take into account. Most plans are developed to aid organizations in responding to localized threats like bombs, fires, floods etc. These usually affect the infrastructure and once the event is over, the recovery phase can begin. However, in the case of pandemics, the recovery cannot begin until the infection is completely eradicated. This can take several months, and even years.
Consequently, businesses will have to start devising sound contingency plans that steer away from strategies that protect infrastructure and shift the focus to protecting employees and their ability to conduct business during a sustained crisis or pandemics.
How do pandemics affect businesses?
During a pandemic, governments enforce lockdowns and containment measures. These containment measures will impose substantial economic costs which affect growth, corporate cash flows and profits. Shipping accounts for 90% of the global trade. Many companies outsource the production of certain parts and components of their product to suppliers who are located in different parts of the world. In the wake of COVID-19, many ports are imposing 14 day quarantines for vessels that come from or pass through China. As China has seven of the world’s busiest container shipping ports, these supply chains are being disrupted to a large extent.
Apple faced a major shortage of its iPhone supply when the company’s primary manufacturer, Foxconn, shut down most of its production in China. This is predicted to result in a largely reduced forecast in iPhone shipments in the first quarter of 2020. According to Ming-Chi Kuo, an Apple analyst, this reduction could go upto 10%. Many companies often have contingency plans, which involve boosting production in an area that hasn’t been affected by the virus. However, the rapid spread of the corona virus across the globe makes it impossible to pinpoint which regions would be least affected.
Apart from the large MNC’s, small businesses also experience adverse effects of the virus. Many small retail stores, restaurants, hotels and other non-essential services are being shut down completely. Rent, debt, fixtures, taxes, payroll, service contracts, utilities, insurance and more all add up to a monthly overhead budget that is very difficult to scale back during difficult times. Even though business owners can lay off their staff to cut costs, they will still have to pay all the other bills as usual. According to a popular study that was conducted in 2016 by JP Morgan Chase, half of all small businesses have enough cash on hand to survive for only 27 days without new money coming in the door. The bar and restaurant industry tends to be particularly vulnerable. An average small service business always has the right amount of money to survive up to 19 days without any income.
This means that during the pandemic, many owners will have to pay from their own pocket or take out loans to keep up with these payments. However, due to the indefinite nature of the lockdown, this will not be a permanent solution.
How can businesses manage risks during a pandemic?
Many businesses have drawn up contingency plans to account for events like power outages, employee loss, data breaches, and other potentially harmful events that might come. However, very few of them prepare for pandemics. This is because such occurrences are extremely rare. However, pandemic risk management is extremely important, as COVID-19 has demonstrated.
It is necessary to set aside some time, budget and resources for the preparation of a risk management plan and a business impact analysis. Gaining a better understanding of the various risks that might affect your business can be invaluable as it will help in the development of strategies to reduce their impact. This will promote the quick recovery of your business, in case of any untoward events.
There are a large number of potential threats that may affect your business. It is important to think broadly about them in order to develop cost effective strategies that can help in the recovery of your business. Some of the common risks include-
During a pandemic, there will definitely be a significant reduction in workforce. This can be due to imposed lockdown, personal illness, caring for family members etc. A few measures that can be taken to manage this depletion of human resources are:
- Cross-training employees to perform essential duties so the workplace can operate when essential staff are out.
- Identifying alternative suppliers to meet supply chain needs.
- Consider prioritizing customers with the greatest needs.
- Prepare to temporarily suspend operations if necessary
Consider alternative methods of carrying out business meetings with clients in other parts of the world. Make sure that there are clear policies for obtaining medical care while abroad. There may be instances where an employee could be travelling for business when the travel restrictions are imposed. Identify POA’s to execute in such cases.
Social distancing requirements
In order to curb the spread of infection, it is guaranteed that social distancing measures will be put in place by the government. Make sure that your business has taken the required steps to ensure a seamless transition under such a circumstance. In such cases, businesses must allow telecommuting where possible and must ensure that they have the technology and infrastructure needed to support multiple employees working from home.
There are a wide variety of factors to consider while analyzing and evaluating the impact of risks. All these factors will play a major role in developing the finished plan for pandemic risk management. The effects of pandemics last a very long time, and adequate insurance must be acquired to keep the business running if there is a dip in sales.
Let’s have a look at the various phases of a pandemic risk management process in a business. There are generally four phases involved in it, they are as follows:
- Prevention phase
- Pandemic preparedness phase
- Response phase
- Recovery phase
All activities involved in the pandemic risk management process clearly complies with the already operational workplace conditions like working environment, health and safety measures.
An effective business continuity planning process involves:
- Prioritizing core business services and solutions that are needed to keep the business functioning at optimum levels.
- Prioritize the involvement of skilled employees in business projects.
- Continuously monitor the health and safety measures of the employees.
- Create an effective communication plan that connects employees, suppliers and customers.
- Prevent the failure in financial implications of a business, such as fund flow, cost rises, legal compliance costs, insurance prices etc.
- Have a business contingency plan kept ready to tackle unexpected business scenarios.
- Along with that, a clear understanding of how the business plans work is also needed.
A reliable business continuity plan consists of four basic elements:
- Risk management
- Business impact analysis
- Incident response
It is the process of detecting business risks, analyzing them and creating strategies to overcome them. By clearly identifying potential risks to a business, we could always look for ways to minimize their level of impact on the firm. This would automatically make your business capable of tackling it, even if any such an incident happens to occur in the future. It also helps us to meet the legal obligations involved in creating a safer workplace for the employees.
Business impact analysis
In this stage, activities or processes that are a key to the business survival are clearly identified. These activities are generally referred to as critical business activities.
A list of these critical business activities include:
- Day to day documentations.
- Operational resources and equipments.
- Expertise of skilled staff needed to run your business.
- Activities of external stakeholders.
- Legal obligations each business needs to meet.
An incident response is a way of dealing with activities that would have a negative impact on business. Incident response clearly describes the set of actions that need to be taken to prevent the loss of life and property before even a business crisis occurs.
A reliable incident response action plan includes:
- A detailed description of incidents, when the action plan would be implemented and who would be in charge of it.
- Roles and responsibilities of the incident response team.
- Emergency kits.
- Premise evacuation procedures.
- A well established communication action plan.
- Contact list of people you need to communicate during a crisis.
- Decisions and actions that need to be taken during a crisis.
A recovery business plan is needed to efficiently respond to a business incident or crisis. It helps us to considerably minimize the business recovery time and losses.
Having a right recovery plan gives you a chance to get your business back on track. It usually includes:
- Methods to return your business activities to the usual way.
- A list of the resources, operational equipment and staff needed for your business operations.
- Business recovery milestones.
- checklist of things that need to be done after the crisis has passed and has returned to your premises.
The rapid advancement of technology has helped us suppress the spread of pandemics.
But will it be enough? Read More