Is a Pandemic Coming? Building Resilience against COVID-19

The coronavirus (COVID-19) outbreak is deepening with the cost to society and to business likely to rise sharply; the IMF has already lowered growth forecasts globally and FTSE is down as the world markets head for worst week since 2008. As the disease extends beyond the Hubei Province epicentre, emerging data indicates a steep fall in factory output across all of China and across other nations in the Far East. The more recent outbreak of COVID-19 in Northern Italy now raises fears that the disease will quickly spread across mainland Europe and to the UK.

Is this the beginning of a pandemic or are we already in it? As yet, the World Health Organisation (WHO) have avoided such terminology for fear of an uncontained negative social response as well, no doubt, from political pressures to refrain from doing so. The US President, contrary to the county’s Centre for Disease Control (CDC), appears unconvinced of the disease’s virility, but appears stubbornly supportive of the need for a rising stock market. Despite this there are strong indicators that the spread of COVID-19 deserves of the definition of pandemic due to its reach in most parts of the world. 

So, what is meant by pandemic, as opposed to epidemic for example? A pandemic is a rapidly spreading infectious disease that poses a global threat. Such an event is measured by the expected scale, speed of transmission and its mortality rate. Pandemics have previously created social and economic chaos. The first recorded example, in modern history, occurred in 1918 (Spanish Flu) and the second in 2009 (Swine Flu). Both came at great cost to human life and, particularly in the case of the 2009 event, to businesses as it impacted on local commerce in the Far East and global supply chains. In the case of COVID-19, yet more stretched global supply chains are at breaking point, if not already broken. Sharp rises in absenteeism at factories could lead to catastrophic levels of non-completion of manufacturing contracts. So far, an estimated USD 39 billion of Chinese contracts have been granted force majeure certificates, exempting them legal recourse. The disease impedes not only manufacturing but the ability to deliver products and services to customers. 

China’s President Xi Jinping has recently warned that the outbreak would have a “relatively big impact on the economy and society”, he is not known for over-exaggeration. Estimates as to how many people are likely to contract this most virulent flu strain, over the coming months, conservatively is estimated to be close to a quarter of the world’s population. Prominent virologists in the US have suggested a greater figure of between 40 to 70% of the world’s population by year end. Whilst the morality rate remains relatively low, estimated at approximately 2%, the global population number of approximately 7.7 billion points to a death-toll in the millions. Many people will simply remain home-bound, unable to work for weeks at end; the first case of re-contagion has already been reported in Japan. As COVID-19 goes global governments engage in yet-coordinated plans of: Contain, Delay, Research and Mitigate. Business leaders must do their part too; they must be proactive. 

Managing emerging threats e.g. a global recession, posed by a pandemic, is critical for business survival. Based on our ongoing research into international socio-political risk and conversations with senior leaders, we have attempted to create a business continuity plan that can help business leaders manage the impacts of a pandemic, contribute to social cohesion and meet legal obligations to staff to ensure their safety. Just as with the UK government’s own plan, tactical and strategic planning by businesses for pandemic risks should start quickly and now, be simple in its focus and be geared to a 3-phase pandemic plan (PRA Model):

1. Prevent
2. Respond
3. Adapt

Urgently begin developing the PRA Model - Risk mitigation planning process needs focus on resource - leaders need to immediately plan for the following:

1. Prevent

• Create a team that captures data daily to update information on the day in terms of infections and geographic locations with a critical eye;
• Identify core services, and what is needed to maintain the supply chain;
• Identify key staffing arrangements, such as telecommuting, succession planning and cross-skilling;
• Protect the health of staff: Limit travel to essential business only. Any employee that shows symptoms or reports being exposed to the virus should be sent home free in the knowledge that statutory sick-pay is in place.

2. Respond:

• Develop a communications strategy for employees, customers and suppliers;
• Consider financial implications today, such as short-term cash flow needs, expected cost increases, insurance and forecasts;
• Seek bank support to cushion any increases in costs and income reduction;
• Continue to account for the unexpected. Not all factors are known;
• Schedule the plan and make it known to management teams and staff;
• Make sure all staff are aware that there is leadership in place. 

3.      Adapt:

• Communicate to customers and suppliers that pandemic risk is not an isolated or idiosyncratic risk, it effects all parties;
• Reduce unnecessary process and delay deadlines where possible;
• Seek out opportunities; new products and services might well be required during and after the outbreak;
• Show the broader community that business is doing its part;
• Continue to engage with staff, they not only fear the disease but also the economic ill-effects it can produce.
• Prepare for a changed world as the COVID-19 will change how businesses build future resilience and agility.

Dr Filipe Worsdell is a Teaching Fellow of International Business and Strategy at Surrey Business School, a leading Business School in the UK. He can be reached on [email protected]

Professor Tazeeb Rajwani is Professor of International Business and Strategy; Head of Department of Strategy and International Business at Surrey Business School, a leading Business School in the UK. He can be reached on [email protected]