Companies have contingency plans for dealing with almost every sort of natural crisis — from fires to hurricanes — to guarantee the continuity of their business. But something as common as influenza can seriously imperil commerce around the world. Three out of every four companies are not prepared to deal with a pandemic which, according to a World Bank estimate, could cost more than US$800 billion in a single year.
According to Marsh, the insurance and risk advisory firm, 73% of all companies have no contingency plans for dealing with a flu pandemic. In a year without any mishaps, companies lose about 210 million euros from absenteeism alone. That figure could be three times as high in the case of a pandemic: In addition to lasting much longer, labor absenteeism could exceed half of the work force in such cases.
Juan García Gay, a consultant in business continuity at Marsh, says that an outbreak such as swine flu, which is already considered a Level Five alert (the second highest) by the World Health Organization (WHO), has a double impact since it not only triggers labor absenteeism, but also has a psychological effect on corporate personnel, who are afraid to become infected even when they are at home.
“We have found very few companies that are adequately prepared to protect their personnel or guarantee the continuity of their operations in case of pandemic,” says García Gay. “We were saying it at Davos, and we are saying it now: We have a long-term problem. During the crisis of 2006, when the risk of a pandemic was imminent, some companies were interested in improving their preparation for events of this sort. Nevertheless, the moment when the problem no longer seemed to be pressing, many forgot and they continue to be unprepared for the risk of a pandemic outbreak.”
Erwann Michel-Kerjan, managing director of the Wharton Risk Management and Decision Processes Center, noted during a conference called “The Irrational Economist”: “Conventionally, we tend to think that risks are local and routine; that it is possible to make a list of all the undesirable events that can occur. That we can determine their probability based on historic data, measure the costs and the benefits of designing and applying a contingency plan for each risk.”
However, human beings naturally tend to think only in the short term. “You have to be prepared,” notes García Gay. This is not about being an alarmist, he says, but about being prepared for situations that, although improbable, have already been repeated three times during the past century. The Spanish flu of 1918 took the lives of about 30 million people, and similar pandemics were repeated in 1957 and 1968, although their mortality rates were only one-tenth as high.
SARS (Severe Acute Respiratory Syndrome) provided the first warning of the risk of global contagion. The outbreak cost US$40 billion dollars to the economies of the Asia-Pacific region, where 8,000 people were infected. In the case of an authentic pandemic, the same number of people would be infected every hour. Michel-Kerjan believes that there has been “an acceleration of the rhythm of great catastrophes,” such as financial crises, problems with the supply of energy and food; pandemics; terrorism and natural disasters. Adjusted for inflation, the 20 most costly disasters between 1970 and 2007 all took place after 1987, and half of them after 2001.
With the swine flu outbreak, “there is a crisis and you have to take it seriously,” notes García Gay. But what do you do if a pandemic is confirmed, and you haven’t foreseen it? “There is still time to stop and think,” he says. However, you cannot delay creating a crisis committee and acting in ways that “are not catastrophic but are realistic.” In Mexico, for example, there are no longer any masks available, and the demand for anti-viral medications has shot up. García Gay notes that he does not believe in simply collecting safety supplies without thinking about other fundamental details, such as how many workers are necessary for maintaining basic activities. Big companies that have the means and require large numbers of personnel can stockpile everything from anti-viral medications to disinfectants. However, other companies that don’t have such requirements can make agreements with laboratories and suppliers of sanitary measures so that they get preferential access to these materials as needed.
Experts also recommend that employees check their corporate travel policies for restrictions, follow the recommendations of the WHO, and look into whether their company’s insurance policy covers this sort of contingency.
According to Marsh, in the face of a potential pandemic like swine flu, companies need to do the following:
- Review your company’s travel, hygiene and sanitary policies (i.e., providing medical checks for all employees), as well as the number of available anti-viral medications and supplies such as anti-bacterial disinfectants, masks and other materials.
- Be absolutely clear about any measures you are taking to minimize the spread of the virus in the workplace (for example, if there is a recommended distance that should be kept between employees).
- Review your current methods for informing employees about the danger of a pandemic and the current condition of the business, whether they are working in the office or at home.
- In population centers, be sure that the plans you make include allowing your staff to work at home when possible and appropriate.
- Consider if there are key business processes that should be maintained in case a pandemic breaks out, such as call centers, corporate medical services, and other services that are vital and indispensable.
- Check if you have the necessary structure to effectively manage a possible crisis, and reassess how to implement various business continuity plans. Prepare for the eventuality that the number of employees who work from home will need to increase, and plan for how you will react to important changes in your supply chain and the marketplace.
- Be certain that your crisis management and business continuity plans include scenarios and exercises for testing the plan when possible.
In addition, contingency plans have to take into account your means of communication, both with employees and with medical authorities. According to Sara Blázquez, director general and director of crisis management at the Burson Marsteller public relations agency, “Collaboration with public health organizations guarantees that the public chain of response functions correctly. The Spanish Ministry of Health has a National Preparation and Response Plan for dealing with a flu pandemic, and it has already been activated. The plan deals with how to assist those people who are infected.” In any case, Blázquez says, “every company must add to the national plan its own response mechanism, including proper measures that help to avoid the spread of – and minimize the consequences of – the epidemic.”
Some Spanish companies have already set to work their own teams for managing the crisis. Companies such as Telefónica, Santander, Iberia and Leche Pascual have begun the processes recommended by health organizations for the prevention of the spread of the flu and the early detection of possible cases. Companies are informing their employees about what measures to follow, ranging from not traveling, except when necessary, to reminders about basic hygiene methods for avoiding illness.
García Gay recommends that crisis management teams focus their efforts on the following seven areas:
1. Policies regarding protection of personnel and communications.
2. Travel restrictions and quarantine policies.
3. Decontamination, cleaning and hygiene.
4. Stockpiling preventive medications.
5. Strategies for working at home.
6. Business planning when dealing with a pandemic.
7. Temporarily discarding non-essential business processes.
Major consulting firms such as Ernst & Young and Deloitte have put together action road maps for their clients, and other companies have developed their own plans. According to César Ferrer, a partner in the risk management practice of the KMPG consulting firm, “Historically, [these action road maps] began with contingency plans about information services, and then those plans were extended to the entire business. From that point, they went on to evaluate every sort of risk, including personnel in this case.” These plans can cover a catalog of 3,000 different threats.
What Are Companies Doing?
At Telefónica and Grupo Santander, management has informed all employees about measures they must follow to avoid infection. A few days ago, Unilever created a national crisis committee that every day evaluates how the illness is evolving. In addition, the company is medically evaluating all employees who “might have been in Mexico or might have received visitors from there during the past 4 to 6 weeks, in order to prove that they don’t have any symptoms.”
Leche Pascual, a food company, has its own unique contingency plan that reflects the nature of its business. The company developed the plan when the bird flu broke out in 2005. According to Javier Urtiaga, a partner at Deloitte, Leche Pascual has received a great deal of input about how to incorporate swine flu into its business continuity process, especially from companies that do business in Latin America.
Rafa Ortega, a partner at Ernst & Young, explains that these plans begin by identifying those people who are involved in managing critical processes, and whose physical presence is necessary at the plant or office. The rest of the company can work at home. Companies also create an office of information, and re-locate production toward those regions that are not affected by an outbreak.
The pharmaceutical sector provides a special case. In addition to ensuring the security of their personnel, drug companies need to plan for continuity in the supply of pharmaceuticals. In that regard, Roche has already activated its action plan, which provides for the possibility that the company can continue to operate even when only 15% of its personnel are at work. At GSK — another company that can manufacture antiviral medications for the new flu — José Manuel Llano, director of anti-pandemic planning, explains that the company “has designated additional workers for each key position, who are trained and would act as back-ups in case the first person [doing the job] should fall ill.” Sanofi-Aventis, the French pharmaceutical firm, says that it has also enacted its own “Vigiflu” plan against the pandemic. Like Lilly, the U.S. pharmaceutical firm, Sanofi-Aventis has restricted travel for its workers.