An avian flu pandemic, which would unleash disaster across many areas of the world, requires global, holistic planning by companies, according to a new report from The Conference Board, the global research and business membership organization.
Companies failing to create detailed crisis management and business continuity plans are likely to find themselves at peril.
The avian flu virus, which has spread rapidly in wild-bird and fowl populations through Asia, Europe, and Africa, has killed about half the people who have contracted the virus from birds. While the timing and severity of a worldwide pandemic are difficult to predict, the report warns that, “to gamble that it won’t happen or its impact will be minimal could prove catastrophic for businesses.”
Responding to a flu pandemic requires a different kind of business response than natural disasters and other crises. “Unlike most business continuity planning efforts, coping with a pandemic requires a more holistic response,” says Ellen Hexter, Director of The Conference Board Integrated Risk Management Program and author of the report. “Most crisis management and business continuity plans are built on the expectation of loss of infrastructure or data, for example. An avian flu pandemic would be nearly the opposite, impacting the workforce in one’s own company and throughout the supply chain.”
The H5N1 avian flu virus first infected humans in 1997 in Hong Kong. Since then, it has spread via the bird population throughout Asia and into parts of Europe and Africa. Humans have contracted the disease primarily through improper handling of infected birds.
MANAGING A POTENTIAL DISASTER
Pandemic crisis management requires a range of tools, from scenario planning to creating global, company-wide strategies to deal with potential disasters. The creation of crisis management and business continuity planning can help transform risk mitigation strategies into business processes to manage extraordinary events.
The development of risk mitigation plans are transferable to other risk management areas and functions. Because a real pandemic would likely cause high employee absenteeism and damage a company’s ability to produce goods or services, an avian flu pandemic would have a global rather than a single-area impact.
BALANCING HUMAN NEEDS WITH CORPORATE NEEDS
The threat of a severe pandemic has driven many companies to develop detailed crisis management and business continuity plans. While first tending to the human needs of employees, their families and others, companies are now developing plans to deal with periodic and extended business interruptions.
“At the very least, companies ought to consider how to continue when work practices must be altered to reflect the reality of a changed environment,” says Hexter. “Meetings, travel, and even office environments can spread infection through an extensive population. Because of this, companies can play a major role in containing the spread of the virus if they plan adequately.”
For example, in October 2005, the Netherlands-based global bank ABN Amro set up a task force to plan company-wide strategy to deal with a potential flu crisis. It created plans to educate all employees about symptoms and appropriate responses; made the decision to not purchase anti-viral medication as a matter of principle; and emphasized ethical considerations of stockpiling drugs in light of their current scarcity. The group also recommended setting up a task force team in each country where the company operates to monitor the health environment.
After considering human needs, managers must face the challenge of assessing risks to the continued health of their businesses. Identifying key people and processes is necessary to sustain business in the face of a pandemic. Many companies are choosing to run scenarios of how to get work done with 20 percent to 30 percent of their workforce incapacitated—and even greater losses of workers in certain areas.
One global hotel chain is considering closing its properties in locations where the virus has spread. Other companies are considering shutting down non-critical processes or producing only key products. Roche has determined that it will attempt to continue to produce its anti-viral medication along with other life-saving medications.
ENTIRE SUPPLY CHAINS MIGHT BE THREATENED
“The interconnectedness of the global economy suggests that a business slowdown in one sector is likely to have an impact across many sectors,” says Hexter. “If travel comes to a standstill, airlines, hotels, restaurants, and convention businesses will start a ripple effect though local economies. Some companies may be hard pressed to make lease payments to their lenders, and financial institutions could face liquidity problems. Companies must consider the impact not only on their business, but on their entire supply chain.”
A GLOBAL CASH SQUEEZE AND LIQUIDITY CRISIS?
When developing scenarios and possible mitigation plans, companies must think about extra costs, loss of production or service delivery capabilities, and impacts to their cash flow and income. Companies are likely to continue to pay people as long as they are able–even when not producing or selling goods–contributing to a potentially significant cash squeeze and possibly a global liquidity crisis.
“Realistically, companies are unable to mitigate every potential risk because the costs are simply too high,” says Hexter. “But understanding the possible implications is important, and building enough financial flexibility in the form of additional liquid assets or access to increased lines of credit can cushion a temporary disruption of a normal business environment.”
Employee engagement is important when developing action plans. Besides ethical concerns, companies need to consider a vast range of issues, from increased security for IT systems, to supporting those working from home, to designing communications plans and back-up alternatives for employees and their families. Companies also must engage their suppliers and customers to ensure the viability of their supply chains, particularly for critical goods and services.
Human resources functions must remain intact in the event of an avian flu pandemic. Policies for continuing to pay employees, for adequate sick leave, and for when infected employees can return to work all need to be considered.
Establishing teams and plans to develop educational materials and policies for a potential pandemic is a way to help ensure the continuity of a business. The first line of communications may be to point employees looking for information to the World Health Organization’s website. Local emergency management teams should be the communications conduit to employees in specific areas. Protocols for interfacing with local health officials to accurately track infection and offer guidance should be developed.
“This kind of business continuity planning effort will lay the foundation for companies to begin thinking about expanding these policies into enterprise risk management,” concludes Hexter.
For more information on avian flu preparedness visit:
About The Conference Board
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duces The Consumer Confidence Index and the Leading Economic Indicators for the U.S. and other major nations. These barometers can have a major impact on the financial markets. The Conference Board also produces a wide range of authoritative reports on corporate governance and ethics, human resources and diversity, executive compensation and corporate citizenship. Our conference and council programs bring together more than 12,000 senior executives each year to share insights and learn from each other. Visit The Conference Board website at www.conference-board.org.
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Source: Is Avian Flu The Next Y2K? Can We Afford to Think So?
Executive Action Report #188, The Conference Board