Coronavirus: The geophysical risk that few saw coming

Following the release of its 2020 Top Ten Risks Survey, Risk.net made the point that categories such as geopolitical risk were always in danger of being rapidly overtaken by events.

“ When the survey was conducted in early January, the coronavirus drew scarcely a mention from respondents, a handful of whom, based in the Asia-Pacific region, flagged it as a blip on the radar,” says the global risk management entity, adding: “Nationalism, trade wars and epidemics make for a heady cocktail.”

Fast track a couple of months since the release of the survey and the “blip” has changed the entire world, its deadly tentacles reaching into homes and businesses everywhere and challenging traditional risk management models in the face of widening operational risks such as fraud and regulatory uncertainty, according to Risk.net.

Creaking health systems Another survey, the “Global Risks Report 2020 by the World Economic Forum” with support from Marsh and McLennan and Zurich Insurance Group, predicted a “sharper focus on environmental threats over the next 10 years” and voiced concern that health systems around the world were under increasing pressure. “Health systems … are at risk of becoming unfit for purpose,” said the report. “New vulnerabilities resulting from changing societal, environmental, demographic and technological patterns threaten to undo the dramatic gains in wellness and prosperity that health systems have supported over the last century. Non-communicable diseases such as cardiovascular diseases and mental illness have replaced infectious diseases as the leading cause of death, while increases in longevity and the economic and societal costs of managing chronic diseases have put healthcare systems in many countries under stress. Progress against pandemics is also being undermined by vaccine hesitancy and drug resistance, making it increasingly difficult to land the final blow against some of humanity’s biggest killers. As existing health risks resurge and new ones emerge, humanity’s past successes in overcoming health challenges are no guarantee of future results,” it cautioned.

New risk, new game Deloitte also saw geophysical risk as a growing risk category in its report titled: “The future of risk: New game, new rules”, warning that “prevention methods can never be fool-proof ” and that “increasing investment in preventative approaches often yields only marginal benefit along with unwelcome side effects such as slowing innovation”.

Planning for the unimaginable – it is doable The lessons learned from Covid-19 can help people plan for the next crisis, believes Steven Greenstein, senior advisor with Fusion Risk Management. In his article titled “Planning for the unimaginable: “it’s doable” he says, that as life as we know it is being re-written, there’s a critical need for people to ground themselves, to act pragmatically, compassionately and to make sound personal and professional business decisions.

The pandemic, he says, began as a workforce disruption (mass absenteeism) that quickly “morphed” into a workplace disruption (mandatory quarantines of workspace), and then a supply chain, logistics and distribution channel disruption.

Companies that invested money and time on implementing continuity plans with response, recovery and resumption strategies for staff, premises, technology and their supply chain, are likely to lead the way forward as the world starts recovering, he continues. The challenge for most companies, he believes, has not been so much about setting up workfrom-home bases for staff but rather the concomitant loss of control over their information security. With criminals trying to profit from the pandemic at every turn, he warns people to expect increases in cyberattacks, ransomware, fraud and money laundering schemes.

Is it even possible to plan for the imaginable? Yes, believes Greenstein. “Within the past few years, many companies have invested significantly in digital capabilities, transforming business operations, developing business impact analyses (BIAs), process mapping/inventorying all critical business services/functions, simulating disruptions to their workplace, workforce, supply chain, technology partners and essential vendors. From these BIAs and exercises, organisations have created actionable business continuity (BCP), technology recovery plans (TRP) and strategies. This has enabled businesses to improve decision-making with relevant and meaningful data, increase agility and fortify a culture of resiliency amongst important stakeholder groups such as employees, customers, third-parties, suppliers and regulators. Those companies that have already chartered this course by embedding a culture of resiliency and operationalising risk management are in a much stronger position to respond to Covid-19 and re-emerge to the market faster and with reduced impacts.”

Dealing with the here and now Greenstein’s advice for companies coming out of the pandemic includes:

• Preparing for increased absenteeism.

• Conducting regular assessments of operations (every 30, 60 or 90 days).

• Managing service and product degradation.

• Checking inventory, assets and liquidity.

• Monitoring supply chains and providers for potential impacts.

• Anticipating delays and backlogs using up-to-date forecasting and modelling methods and systems.

• Establishing reserve budgets to pay for possible legal, professional or financial services.

• Doing daily cashflow forecasts.

• Reassessing investment strategies.

• Tightening information policies and protocols to accommodate staff working from home.

• Succession planning with the focus on essential staff and senior management.

• Reviewing HR and IT policies and procedures.

• Maintaining staff morale through innovation, collaboration and connectivity.

• Revising financial forecasts and reporting.

• Reassessing the marketplace.

The aftermath The end of the Covid-19 crisis is likely to bring with it a “wave of investment and digital enablement in such areas as disaster recovery planning, processing mapping, big data harvesting and enterprise risk management and response strategies,” believes Greenstein, adding: “Brand equity and company reputation will be held to new standards and expectations post Covid-19.”

Advocating a post-pandemic debrief to assess the above, Greenstein suggests company owners ask the following questions:

• Did the company respond well to Covid-19?

• Was the company able to provide essential business operations during lockdown?

• Was there a commitment to the workforce?

• How did the company take care of staff affected by Covid-19?

• Did management communicate with employees, stakeholders and clients transparently and frequently?

• Did the company maintain its vision, mission and purpose while demonstrating its ability to strategically navigate in unprecedented and rapidly unfolding times?

“These are extremely important questions to be answered as organisations respond to Covid-19,” he says. “It’s imperative (that) leaders monitor their business continuity, crisis management and pandemic response plan procedures and steps. This way, they can document all issues and challenges that surface. These issue logs should be assigned to responsible staff for action and resolution.”