The economic cost of influenza related workplace absenteeism is a business cost incurred each year, to a greater or lesser extent, by all organisations. However, the possibility of a pandemic, by definition a worldwide epidemic, significantly magnifies the potential cost of workplace absenteeism, and highlights the importance of having effective business continuity plans in place.
Many organisations have business continuity plans in place to identify, respond and recover from a broad range of potential interruptions. The focus of a disaster recovery plan, for the majority, is usually the computer and telecommunications technology. However, although business continuity planning has become a critical component of operational risk management, few organisations have addressed the business risks that arise from the threat of an influenza pandemic.
Influenza, or ‘flu’, is an acute respiratory illness caused by an influenza virus infection. New strains emerge every year giving rise to epidemics of variable size and duration. In recent years, there has been growing concern about the possibility of a flu pandemic and its implications for both human health and global financial systems. According to the World Health Organisation (WHO), the risk of a new human influenza pandemic has increased over the last three years, largely based on the risk posed by the H5N1 ‘bird flu’ currently circulating in poultry in South East Asia and elsewhere. If an influenza pandemic occurs, it will cause major disruption to health and social services, and to business organisations around the world.
A flu pandemic is not a ‘normal’ business risk. Some unique characteristics include:
• An international impact with no demarcation by culture, industry or geography
• The potential to escalate very quickly and last for many months
• A projected attack rate of 25% or more of the world’s population
• Overload of healthcare facilities, public health agencies and their work forces
In terms of business impact analysis, a flu pandemic represents the extreme end of what risk management literature would refer to as low frequency/high severity events. As is the case with other natural disasters such as hurricanes, earthquakes or tsunamis, the risk of the occurrence of a flu pandemic exists, but the precise nature and severity cannot be determined until it actually occurs. Unlike many other natural disasters however, a flu pandemic will not limit its effects to a single geographic region – it will be a worldwide phenomenon.
How can the risks be managed?One might initially conclude from the preceding paragraphs that there is little that can be done by the business community to prepare for a flu pandemic. All organisations will be affected, but whether an organisation can respond and recover will depend on (i) the existence of continuity plans and (ii) the quality of advance preparation.
1. Business Continuity Senior management of all organisations are advised to consider the business risks that would result from high levels of prolonged absenteeism from the workplace. Examples of contingency plans that will enable business continuity in the event of a flu pandemic include:
• Identification of specific senior management responsibilities that will ensure speedy and flexible responses
• Succession planning to ensure that key responsibilities are taken over on a timely basis if necessary by appropriate individuals
• Identification of core functions and key individuals, to include the feasibility of remote working
• Supply chain management – what alternatives will be available to customers and suppliers in the event of a pandemic?
• Managing ongoing health and safety responsibilities in the workplace
• Support of government and health service initiatives as the public health service will be under extreme pressure
2. Information and Data FlowsEnsuring access to reliable sources of medical and business information, and timely communication thereof, will be a crucial part of business continuity. This will be a particular necessity for organisations with worldwide operations, global supply chains or international customers. Effective decision support systems will be critical to ensuring appropriate decisions are taken on a timely basis.
3. Ongoing Health ProtectionSeasonal strains of flu are not usually of the catastrophic variety (either medically or economically) but, nonetheless, result in absenteeism and lost productivity. Measures taken to address seasonal flu provide a solid foundation for escalating a response to a pandemic. Good public health policies that could be embedded in organisational routines include:
• Corporate seasonal flu vaccination programmes, at a minimum for key and high risk individuals
• Stockpiling of appropriate anti-viral drugs e.g. Tamiflu, on the reasonable assumption that the public health system may not be able to cope and so require additional means of distribution
• Implementation of standard infection control practices and hygiene measures that reduce the risk of transmission of the flu virus in the workplace.
Conclusions
Seasonal flu accounts for around 10% of sickness-related absenteeism. The cost of lost productivity in France and German is estimated to range from £5.6 billion to £8.5 billion per year. The WHO considers that, once a flu virus mutates into a form that allows for efficient human-to-human transmission, a pandemic could occur. Because of high global mobility and growth of service industries, serious illness could spread quickly. A pandemic might emerge in repetitive waves with varying intensity, including durations beyond six weeks. The economic impact of a pandemic is likely to be significant and a severe pandemic could pose risks to the global financial system.
Most business continuity plans focus on restoring infrastructure and critical functions in the face of short-lived events. Only now, given the recent experiences in South East Asia, are organisations beginning to adapt those plans to consider the possibility of high levels of staff absenteeism for prolonged periods of time. Although there is considerable uncertainty regarding the nature and timing of a flu pandemic, senior management of all organisations would be well advised to include it in business continuity planning as a real possibility.
References:
Health First www.healthfirst.ie
International Monetary Fund, ‘The Global Economic and Financial Impact of an Avian Flu Pandemic and The Role of the IMF’.
Meltzer, M. ‘The Economic Impact of Pandemic Influenza in the United States: Priorities for Intervention’.
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© The Institute of Chartered Accountants in Ireland, 2007.