Is business prepared for the new normal of disruptions?
The fluid developments around the COVID-19 outbreak are a stark reminder of the evolving threats confronting businesses. Businesses may think they are prepared – but are they?
The fluid developments around the COVID-19 outbreak are a stark reminder of the evolving threats confronting businesses. Global pandemics, along with increasingly unpredictable and intense weather events coupled with sophisticated cyber attacks, are becoming the new normal of business disruption.
Businesses may think they are prepared – but are they?
Hitting where it hurts – people
The World Health Organization’s declaration of this as a pandemic acknowledges the severity of the outbreak which began in China, and the potential havoc it could wreak in countries with weaker health systems.
While companies in most service-oriented industries, such as banks, have implemented action plans to minimise the impact on their staff, asset-heavy industries and supply-chain reliant businesses should adopt the same forward-thinking mindset. Most heavy industry companies in sectors such as manufacturing and power-generation factor in conventional business risks related to natural disasters or cyber attack.
The impact of a pandemic might come as a surprise as it is often not in the risk-management plan. However, this is a grim necessity given that it impacts the critical link in their operations – people. No matter how automated a plant is, people are still required to manage or operate critical systems or machinery.
Businesses may think: ‘Machines and equipment need very little care, so what?’ While the spread of these viruses isn’t an outright risk to a property, it surfaces vulnerabilities to the continuity of efficient and safe operations of machinery if personnel required to oversee operations cannot report to work due to sickness or are under quarantine orders which can last for weeks.
Let’s paint a picture of one scenario: Serious disruptions can lead to overworking of equipment, which in turn can strain the machinery and lead to other risks such as fires and, in power plants, result in electricity outages if supplies are not met.
Always have a plan
If pandemics hit and personnel are affected, what should you do? It’s important to have personnel and contingency plans that can be activated at a moment’s notice. The speed with which a viral outbreak can spread, unlike a hurricane or storm that builds in a more linear, localised way, requires a quick response. If planning and processes take a lot of time, it’s not a business continuity plan.
In large scale facilities, plant managers need to ensure safety compliance, such as signing off on physical checks of proper equipment shutdown and ensuring that protection systems like sprinklers are working. While businesses may have invested in the technological capabilities to monitor or control sites remotely, in most cases, it is people who ensure protocols are adhered to.
From a property risk perspective, companies with minimal access to their facilities should focus on three things: Ensuring that equipment is working; that equipment is shut down properly (especially in the process industries); and that physical protection is working. Additionally, if businesses have the ability, they should monitor and, if possible, control their sites remotely.
Although a viral outbreak doesn’t change the property risk issue, businesses should routinely evaluate contingency plans to be prepared for various scenarios, such minimising damage from unexpected events or if critical personnel are unable to work. CFOs should have the ability to model what the impact of business shutdowns like this will have on results.
Preparing for the global economic impact
As this public health crisis continues to roil markets across Asia, businesses face another huge challenge – the prospect of shutting down voluntarily or by government order. The economic impact may be significant and far reaching.
The global business landscape now has changed significantly since 2002, when the last major viral outbreak, SARs, hit Asia and was largely contained to this region. China has become more globally connected through commerce and finance, travel and tourism, and digital and physical infrastructure. This connectivity extends across Southeast Asia, through supply chains in countries such as Vietnam, Thailand and Cambodia, creating a larger footprint for the spread of business risk, and pandemics – as well as the world, with business travels aplenty to and from this region.
As healthcare workers and governments continue to battle the spread of COVID-19, businesses, especially those in critical infrastructure facilities, should take a leaf from the serious and swift actions by government and health agencies, and re-evaluate their contingency plans to ensure their business remains resilient, with back-ups in place to function through serious disruptions and recover quickly.
A good business continuity plan will not be hung up on the causes, but on the response. If well implemented, it should ensure that such incidents remain a minor business distraction and not a major disruption.