COVID-19: The global risk response - IRM

The Institute of Risk Management (IRM) has drawn on its global network of regional/sector groups to ask them for their views on the ground on how the pandemic is affecting their sector/countries. Among other things, its global analysis reveals that:

• The spread of Covid–19 in Pakistan is extremely worrisome, with the country already under a strict IMF programme and challenged by other economic vulnerabilities. A nationwide shutdown is harming the most vulnerable in Pakistan – including those working in the country’s substantial informal economy. The most immediate impacts of Covid on Pakistan has been the -30% crash in the stock exchange and massive capital flight from the country leading to a -10% devaluation of the currency.
• Vietnam, being a country whose economy benefits largely from foreign direct investments particularly from Japan, Korea and the rest of the developed world, will start seeing the impact on its economy, in the short-run and long-run depending on how the above investing countries are able to manage the crisis, which is yet to be seen
• The impact in India is relatively low compared to other developed countries because the country took early mitigating action such as screening international passengers, closing the international boundaries, wearing masks and national lockdown. Human resource is the driver of the entire economy, so it’s availability is the key consideration. As long as human resources are not available in all key sectors, the economy will not churn. 

”Barring in the countries where Covid-19 reached in January and February, the world was waiting to spread the fire further and it did,” commented Sonjai Kumar, CMIRM, Global Ambassador, IRM India. “Why don’t our risk management frameworks have buttons which prompt taking immediate actions rather than leaving the actions for the decision makers?”

”It’s like having an immediate sprinkler system as soon as a fire is visible or smoke is there. If we need to protect the world for the next disaster that may come anytime in the presence of global warming, we need to tighten up the risk management framework that everyone must agree as a part of national constitution. The losses to human life and economic cost are enormous, we have to have a sprinkler system and decision making cannot be left to choice.”

Among other things, the IRM sector analysis revealed that:

• Cyber risk a key heightened risk during the pandemic. Many companies are in the process of assessing their cyber risk profiles in the full work from home operating environment which seemed to have happened overnight. Activities including trading, customer service, recruiting and financial statement preparations are all being done from home. Although working from home wasn’t entirely foreign, it was never so widespread and in many cases was not considered (or tested) in business continuity plans.
• The energy industry has been heavily affected by Covid–19 over the last few months. With many organisations having supply chains which rely heavily on countries which have been significantly impacted by Covid-19, as well as relying on people working remotely and on shifts (including fly-in / fly-out), it has become increasingly difficult to meet the challenges of progressing projects and maintaining operations at optimum levels. The lockdowns globally have also seen a major decline in demand for oil and gas which has resulted in an unexpected demand shock, placing downward pressure on prices. According to a recent survey conducted by the IRM Energy SIG, when asked which events energy companies have been most impacted by over the years, Covid-19 and the current oil price slump came out on top. 
• As with most other industries, Covid-19 has taken no prisoners in financial services. The impacts are broad and varied. Financial and crypto markets in free fall, potential widespread credit defaults, insurers potentially forking out for business interruption or just general resilience issues especially where there are dependencies on third parties both local and foreign.
• The major impact of Covid–19 on the health sector has been the requirement to prepare at great pace and with urgency for a huge and uncertain increase in the number of patients suffering from the virus, to ensure that they receive the treatment and care required, with reduced numbers of available staff, who have also been directly impacted by the virus.

”Some less risk mature organisations will be in unchartered territory which will sadly, inevitably, lead to some businesses folding as has been widely reported,” said Iain Wright, CFIRM, IRM chair. “Many companies do not survive a moderate/severe global risk event like the Covid-19 virus.”

“We are now deep in a phase of response and recovery. As risk professionals we are skilled at framing and understanding these difficult policy choices. One of the challenges for risk managers will be to ensure there is a balanced, proportionate and commonsense approach.”

“A core principle of risk management is to learn from experience and improve; there will be lessons from the experiences of dealing with the challenges of Covid-19 which will result in improved resilience and better risk management in the future. Professional risk management will deliver the resilience that organisations will need to emerge and recover from the pandemic crisis, the role of the risk manager has never been more important.”

Michael Bartlett, co-Chair Covid-19, added: ”As a classic crisis management scenario, we have seen the phases of ignorance, disbelief, individual panic alongside organisational inertia, then over-reaction until a new (albeit forced) equilibrium is attained. The next few months remain uncertain: will the current state hold steady and evolve as assumed or are more seismic shifts to come?”

”What is fascinating to see in the current state is that there are many opportunities to re-evaluate what is important and to benefit from shifting priorities… At a macro-level, the risk management community has the potential to provide intelligent advice on the real risks of future paradigm-changing events whether Covid-2x, other low probability events or, probably more pertinent, the effects of climate change which is the longer-term catastrophe for all our societal norms.”