“The H1N1 ‘swine flu’ pandemic, which has sparked widespread fear and disruption across the globe, has shone a spotlight on a risk that many companies have disregarded in the past few years,” notes an article on the Lloyd’s of London web site (www.lloyds.com).
Until the latest outbreak of the H1N1 virus, the possibility that a widespread infectious disease would significantly disrupt business activity had fallen far down the list of risks that companies are concerned about.
“Issues such as the recession, increasing regulation and climate change have dominated risk discussions in company boardrooms, at the expense of a risk that last occurred 40 years ago,” Lloyd’s notes.
“Some companies don’t have very well thought-out plans, because it’s off their risk radar,” stated Julia Graham, Chief Risk Officer of DLA Piper, and the person heading AIRMIC’s [Association of Insurance and Risk Managers] swine flu initiative.
“Ever since SARS there have been lots of warnings that a pandemic would soon come, but one never did. As a result, many companies came to think it wasn’t ever going to happen. Other issues have gone up their list of priorities,” she added.
Pandemics aren’t one of the “top ten risks” according to research cited by Lloyd’s. “As a result, many firms have been caught out by the recent pandemic declaration by the World Health Organization.
“Even some firms that did have contingency plans in place have struggled to keep pace with the virus’s rapid transmission,” Lloyd’s said. “Of those who do have plans, most companies gear their response to the World Health Organization phase levels,” Graham explained. “Swine flu raced through the levels at break neck speed, which left many firms breathless. They geared their plans around a very mechanistic process and it hasn’t worked that way.”
The latest figures indicated that the “the death toll from swine flu stands at 429 (out of 95,412 cases),” according to WHO figures as of the 6th of July. “Its effect has been light so far in comparison to the much more lethal H5N1 ‘bird flu’ outbreak in 2007, which many feared would turn into a pandemic.”
“This event is really a moderate event for the time being, because the numbers are high but the disease is overwhelmingly mild,” WHO spokesman Gregory Hartl told Reuters Television.
However, Lloyd’s pointed out that the “pandemic is already having a devastating impact on some businesses. Mexican resort Cancún is virtually deserted, despite having relatively few cases of the virus, the Financial Times reported. Hotels and restaurants have been forced to shut as the city loses around $6 million a day, the paper reported.
Up to now flu cases have been relatively mild; however, Lloyd’s warned that “health officials worry that swine flu could mutate during the southern hemisphere winter and return in a more virulent form in the northern hemisphere this winter.”
“If the numbers of people becoming ill rises exponentially in combination with a display of increased virulence by the H1N1 virus, staff shortages will become the dominant concern for business and service continuity,” said a report by Exclusive Analysis.
Trevor Maynard, Head of Emerging Risks at Lloyd’s, warned that companies should be careful not to concentrate on dealing with a rerun of the 1918 ‘Spanish flu’ outbreak. “You may mislead yourself, because although 1918 was quite an extreme pandemic, it had a number of individual characteristics,” he stated. “Businesses should plan for a range of scenarios, not simply for one.”
According to a survey conducted by Marsh, 31 percent of respondents said they were not adequately prepared for a pandemic. “Not only will those firms be far more vulnerable to the effects of a pandemic, they may be at risk of being sued by disgruntled shareholders if they lose out to better-prepared rivals.”
“If you stand out from your peers for having done a particularly bad job in planning, then there is a chance you may be sued under your D&O policy for being negligent,” Maynard explained.
On a more positive note, Lloyd’s concluded that “a major crisis may be averted, as drug makers are on course to have a vaccine ready for widespread use in the northern Europe autumn flu season. Firms are now using the breathing space afforded by the northern hemisphere summer to draw up plans to deal with a more virulent wave in a few months’ time, in the event that pharmaceutical firms fail to produce enough vaccine or one that can deal with a mutated version of the virus.”
“What a lot of businesses are doing I think is using the current situation as a wake-up call or a dress rehearsal,” Graham pointed out. “Those who have plans can sit down and work out how they performed and whether they were as good as they should have been. They can use the current environment to prepare themselves.”
Source: Lloyd’s of London
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