Minimising business impact from Corona Virus Containment Measures

Companies in China are facing challenges due to (forced) delays of business resumption after the Chinese New Year and due to restricted movement of goods and employees.

As the fog of initial confusion is clearing, the reality of the situation starts trickling in with the first consolidated results of studies showing up. A study from the Economist Intelligence Unit shows that 18,41% of companies have downgraded their growth expectations for the year. The study also shows that 29,41% of companies in China have a business contingency plan in place for the crisis to last longer than a few weeks, and 50,59% is working on it.

Business leaders are looking for ways to assess how their operations and supply chains will be impacted. International and Chinese official media are updating about new containment measures around the clock. Social and online media are hyperactive and often provide misinformation and speculation. "Is there anything we can do about this? How long will this last? What’s happening next and when?

GREENMENT’s DERA, which was introduced in 2018, feeds on these updates dynamically and proves valuable to anticipate and mitigate or minimise business interruptions due to virus containment measures in China. Our clients currently use DERA to screen their operations and business partners to anticipate and mitigate the expected fallout over the next few months.

Key short-term impacts are:

• Prolonged vacations and passenger outages causes delays in resumption of production and employee shortage (see figure below);
• Traffic control causes halts or delays in transportation, affecting ao. cargo ships, highways etc. (see figure below);
• Employees infected with pneumonia cause production stagnation and labor shortage;
• Upstream and downstream supply delays; and
• Falling supply and demand on investment, consumption, import and export.

The following questions help assess how effective current risk management strategies are:

• Do I have a way to follow the epidemic development trend in regions relevant to my business? (eg Hubei, Zhejiang, Guangdong, Henan, Hunan and other provinces)
• Do I have a way to collect, assess and adopt the latest policies and management requirements of the central and local governments?
• Am I able to timely assess and mitigate any implications of travel limitations on my staff, suppliers and business partners?
• Do I have a dynamic monitoring and warning system in place catch and manage external factors that may impact my business operation?
• Do I have an effective risk assessment framework that helps me to effectively assess the overall impact on my business value chain based on the above factors?

In the longer term, companies are considering adaptations of their HSSE (health, safety, society, and environment) risk management approach and business strategy:

• Is my HSSE management strategy dynamic enough to cope with China’s drastic policy implementation approach?
• Do I have a strategy in place to hedge against any adverse business impacts in case market conditions deteriorate, eg. reducing costs, increasing efficiency…
• How do I anticipate the epidemic fall-out will impact country HSSE policies, short-term and medium-long-term, what are the risks and opportunities in different regions and industries? How should we respond as a business?

Dynamic Risk Management using DERA

DERA is a GREENMENT proprietary database that dynamically monitors government policies and measures in 31 provinces / autonomous regions, 338 cities and over 5,000 information platforms. DERA facilitates focused data collection and screening to evaluate and mitigate impacts of government measures at company and regional level. DERA uses the SSP approach which allows companies to evaluate their business resilience risks in their China operations and supply chains considering multiple dimensions (Site) (Surrounding) (Policy).

This is especially relevant in China where external events can be very dynamic and have substantial impact on the business. Examples of such events are the Jiangsu explosion in 2019 and the recent Corona virus outbreak in 2020. DERA uses a data-enabled approach for more efficient, cost-effective and proactive risk management.

The current situation is an unexpected and major resilience test that may influence society, business, and markets. In China we like to use the word “危机” which indicates that, in every challenge, lies an opportunity. We wish everyone courage and strength with clarity to focus on priority actions to be taken and positive determination to make the best of it.

Contact us in case you require any assistance.

GREENMENT

GREENMENT was formed in 2012 from the North Asia Division of CH2M, part of the world biggest environmental consulting and engineering group (CH2M was merged into Jacobs in 2017). GREENMENT has its representative offices in Shanghai, Beijing, Guangzhou, Brussels in Europe and Silicon Valley in the US. GREENMENT specializes in operational and supply chain risk management and development and provides all-round environmental consultancy.