Government should step in to minimise the cost of pandemic
The spread of swine flu is gathering pace. By the end of August the government says the UK can expect over 100,000 new cases every day, which could leave between 10 and 13 per cent of staff absent from work for up to five days. For small firms the absentee rate could be even higher.
Last week the thinktank Oxford Economics warned that a six-month swine flu pandemic in the UK could cost the economy about £60bn and extend the recession by around two years. It predicted that a severe pandemic could cut gross domestic product by five per cent, with the economy shrinking by about 7.5 per cent next year and enduring one per cent deflation until 2012.
Home secretary Alan Johnson has declared swine flu a bigger threat to Britain than terrorism. Are businesses ready? According to data revealed at a Whitehall meeting last week, 38 per cent of companies have no contingency plans for dealing with a pandemic. Grant Foster, associate director at Aon Risk Consulting, suspects small firms in particular are not prepared. "If you're a small business you've probably got other things to worry about—if I was a small business, I'd be busy trying to earn money," he says.
Lyndon Bird, technical services director of the Business Continuity Institute believes that much of the emergency planning for the economic impact of a pandemic is focused on large businesses that are better able to cope with staff sickness and not enough on smaller companies and the impact on consumer spending.
"Small businesses will be very badly hit," says Bird. He believes the government should consider giving emergency assistance—such as tax breaks—to small firms if the pandemic is prolonged.
Foster reckons there are two factors in particular that will hit small companies affected by swine flu. "First, small businesses don't have lots of spare staff, so if one gets infected or has to stay at home to look after a relative or dependent with swine flu then you cut into your available resources quite quickly," he explains.
Second is the pandemic’s effect on the business. "The challenge is to try and reduce your costs at the same rate as your demand goes down—assuming it does go down," he says. "If your costs remain high then very quickly you're going to face problems and if you're a small business you haven't quite got the collateral to see yourself through a prolonged flu incident."
Businesses with a lot of customer-facing staff are likely to suffer quite quickly and should think about their preparedness plans more urgently. "The classic thing that businesses say is we're all going to work at home," says Foster. "But for a small business that might be a bit of a challenge if they haven't got the IT set up." On a more positive note, some small businesses can cope better than large ones as they tend to be “lean, mean and flexible”, adds Foster.
Another very real possibility is the breakdown of a company’s supply chain. Policy advisor Professor Jim Norton, who in 2005 gave evidence to a House of Lords committee on the likely impact of a pandemic, points out that most businesses are more vulnerable than they were 10 years ago—mainly due to the fact that much of the slack has been taken out of the system through just-in-time manufacturing and stock removal.
"Although it's made perfect economic sense, it means we rely on the smooth running of our infrastructure," explains Norton. "The consequences of failure cascade much more quickly and, as a result, even businesses that escape the worst effects of a pandemic could suffer if suppliers are hit."
So what should small businesses be doing? "First they need to decide what the effect on their business is going to be," says Foster. Develop several pandemic scenarios and ask: “What are my minimum staffing requirements, and minimum technology requirements, to keep the business going?"
For export firms, Foster says, at the very least, “you need to have a plan to make sure there is someone there to take the orders, dispatch them and send them off—some sort of shoestring operation that will get you through the event."
However, not every business will see a downturn. "If you have any sort of internet presence then those that are at home feeling rotten in bed may spend their time shopping on Amazon," says Foster. "Not every business is going to suffer in the same way. Depending on the business, they may even need to make plans to maintain or even grow capacity depending on what they see happening."
One small business that reckons it could see an increase in business is delivery services company eCourier. "We are prepared for an upsurge in volume as people work from home," says Jay Bregman, founder and chief technology officer.
Seeing some of its clients devoting resources to risk management in response to the bird flu outbreak in 2006, eCourier decided to follow suit. "We put together a general policy to respond to any biological threat," says Bregman. "The preparatory work we did in 2006 is almost identical to what we'd have to do for swine flu."
eCourier's main goal during an outbreak is to continue to service clients, but if necessary, it may impose some restrictions on services in order to prevent the spread of infection. This could include a ban on certain deliveries, such as to hospitals (except deliveries of medical supplies), perishable goods and certain international shipments. "If we do restrict any services we will notify clients immediately and if they have any special needs we'll work with them as much as possible," says Bregman.
Employees will be issued with face masks, latex gloves and anti-microbial hand wash to help prevent transmission. At worst eCourier is prepared for up to 50 per cent of staff not making it into work. All office staff have the ability to work from home and in the event that a large number of couriers are off sick, the company has prepared for “aggressive recruitment” and has trained office staff to help out with deliveries.
Bregman believes that in an outbreak, panic is the biggest threat. "We have put together a brief for employers and contractors so there is no surprise if there is an outbreak. Our hope is that by educating people, we'll have better retention and loyalty in the event of an outbreak."
Foster agrees. "The human response to a pandemic is quite emotional and people sometimes react in irrational ways that are not proportionate to the actual risk of the flu itself. I think we saw that in Mexico City—the whole city shut down," he says.
Although it pays to be prepared, should small businesses be spending their time doing that? "There is an upside to planning," says Foster. "If you go through some scenarios you might find a cheaper, more efficient or better way of doing something.
"Being prepared isn't just about bracing yourself for the blow, it's about turning it into a tactic to make you more competitive. If you're just looking at it from doom and gloom then you're probably missing a trick."
Posted 21 July 2009 : Director.co.uk
