According to a new study by Marsh, an insurance broker and risk adviser, in the wake of the COVID-19 outbreak, operational readiness has emerged as the immediate priority for all businesses, whether small, medium, or large. To effectively respond to these threats, businesses are increasingly taking a two-pronged approach, starting with establishing preparedness strategies that cover emergency response, business continuity, crisis management, and crisis communications. Then reviewing how existing insurance coverages may respond to an outbreak, and make any necessary changes to policies.
To date, standard corporate business continuity plans have accounted for a range of external and as well as internal scenarios such as political instability, natural disasters, economic recession, theft or fraud, but most did not account for an event such as the current pandemic, until now. Businesses now find themselves in the position of planning for a unique set of emergency scenarios that could impact their operations, as well as COVID-19’s prolonged effects on staff welfare, operations, supply chains, and the broader economy.
Businesses now find themselves in the position of planning for a unique set of emergency scenarios that could impact their operations
Marsh outlines 5 key areas for businesses and entrepreneurs to consider in order to better quantify and manage risks.
#1 Quantification of the impact
Businesses should map out the potential severity and spread of the pandemic and link that to their current operations and recovery strategies. At this stage, no one knows for sure when a potential vaccine or treatment will emerge or how long global country lockdowns could continue. Therefore it is necessary to prepare for a number of scenarios, 1-3 months, up to half a year, or as a worst case scenario even longer.
#2 Safeguarding staff and operations
Management should assess how people will be impacted and provide a safe place of work, especially for those asked to work in difficult circumstances. Factors such as frequent work place disinfection and the implementation of sanitisation and remote access infrastructure should also be considered. Similarly, they must identify the people that are critical to operations and provide them with the necessary infrastructure and safety. Alternates for critical staff should be identified and training provided to ensure they are ready to take on additional responsibilities.
#3 Cost calculations, systems resilience
It is crucial to remodel cash flows in light of reduced revenue, increased costs, and incident response spends, to ensure funds are available to continue managing the pandemic. Leaders should also take this time to stress test systems and processes to ensure they work; and then make upgrades as necessary. Any cost assumptions made should then be regularly evaluated to ensure they remain accurate.
#4 Crisis response and communication
Another important area is the implementation of response protocols and the monitoring of their effectiveness. Businesses should actively engage with all stakeholders including suppliers and customers to determine where support can be provided. Similarly, it is important to connect with local communities and identify how to better collaborate and support one other. Communication should be clear, with the objective being to keep stakeholders informed as new developments emerge.
#5 Supply chain risk or restructuring
These are a critical component for many businesses and the focus should be on examining the end-to-end supply chain including all dependencies on third parties. These can include banks, logistics deliveries, government authorities, etc. Given that there will be situations where employees are not present at work, and there may be opportunities for some business functions to potentially be outsourced or transferred to other departments.
Speaking about the impact of COVID-19 and managing its business impact, Christos Adamantiadis, Marsh Middle East and Africa CEO, says: “Current events have taught us that as the world becomes more inter-connected, the risk of disease outbreaks may increase, and preparation for a pandemic will become a mainstay of business continuity plans going forward. COVID-19 has impacted all areas of society and it is vital for companies to have a continuity plan in place as maintaining a reactive approach can potentially delay recovery efforts, increase costs, and place a significant strain on day-to-day management, which will further compound the challenges faced in this environment. However, it goes without saying that managing operational risks have to be well balanced with safeguarding the well-being of employees.”
“All organisations can look to mitigate the economic and other effects of pandemics through comprehensive risk management. Plans should include business continuity and contingency planning as well as modelling and analysis of pandemic risks. These will support the pricing and placement of pandemic-specific insurance coverages that will help reduce your risk. Taken together, these important tools will assist in ensuring you are prepared for the inevitable reality of a pandemic outbreak,” says Adamantiadis.