The latest outbreak of Middle East Respiratory Syndrome saw more than 2,500 people placed into quarantine in just four weeks. StrategicRISK investigates whether firms in Asia-Pacific have learned lessons from previous pandemics
Countries in Asia-Pacific are no strangers to emerging diseases that can spread fast, take lives and slow down economic activity. Strategies for stopping new viruses are once again being put into action, with the Middle East Respiratory Syndrome (MERS) outbreak in South Korea highlighting the need for risk managers to review their protocols for managing infectious diseases and pandemics.
Since May, more than 2,500 people have been placed in quarantine, 2,200 schools have been closed and 27 people have died as a result of the MERS virus (at the time of going to press).
MERS is a respiratory virus that was first reported in Saudi Arabia in 2012. The present outbreak began in South Korea, when an elderly man returned home from the Middle East and was diagnosed with the virus.
Since then, more than 170 people have been diagnosed with the disease, which the World Health Organization describes as being “large and complex”.
It’s far from the first time that the region has found itself exposed to a highly contagious virus. Since the SARS (Severe Acute Respiratory Syndrome) outbreak in 2003 that killed about 800 people, countries in Asia-Pacific have been on alert for the next possible pandemic.
Many firms based in the region have reassessed their business continuity plans for managing infectious diseases as a result.
Telstra International human resources director Lynne Barry says: “Like most companies operating internationally, we have been through previous outbreaks and have taken care to learn from the experience.
“We are taking precautions to ensure the safety of our people and service continuity for our customers.
“A local and regional team are monitoring the situation closely, backed by the latest information from national governments and health agencies, as well as expert input from our medical advisors. Our policy of encouraging flexible working means we are well placed to respond to any escalation by facilitating people to work from home to help avoid an illness being spread while supporting business continuity.”
But not all businesses have implemented new business continuity plans following the SARS pandemic, according to research by Aon.
Aon Risk Solutions regional director – healthcare Michael Griffiths says: “While more than eight in 10 (85.5%) respondents viewed a possible influenza pandemic as a threat to their business, fewer than six in 10 (57%) had put measures in place to protect themselves against such a risk.
“The most effective way for organisations to protect their employees in the event of a MERS outbreak in their home country is to have in place a comprehensive business continuity plan (BCP) with specific epidemic/pandemic provisions.
“While we know that many companies have implemented a BCP, few have ever subjected their plan to an implementation test. For example, working remotely is often an important strategy built into BCPs, but relatively few companies in Asia have any experience in managing and supporting remote workers.”
Aon has issued a special supplement to its clients that explains what MERS is and the implications for organisations.
“At a minimum, as the outbreak unfolds over the coming weeks, organisations should prepare for disruptions to their supply chain. How would your business adapt if key suppliers in a particular country or region shut down?” the supplement reads. “Any person who has come into contact with an individual who has contracted MERS will be placed into quarantine for a period of up to two weeks until it their status can be established. If this happened to key employees in your business, how would you cope?”
Economic cost of a pandemic
It is these sorts of questions that illustrate how high the stakes are when it comes to addressing emerging diseases quickly.
Singapore prime minister Lee Hsien Loong says it is “only a matter of time” before the first case of MERS is reported in the country and that “possible financial costs include a loss of customers, sales losses, adapting operation to meet health requirements”.
Indeed, a pandemic, could bring Asia’s economic growth rate to zero or even push it into recession, according to a study by the Asian Development Bank (ABD).
If an outbreak is not brought under control, and lingers for months, it could reduce the global trade of goods and services by 14% and cause economic losses in Asia of $283bn, or about 6.5 percentage points of gross domestic product.
“The psychological impact of the disease may be long lasting,” the study says. “Much of the Asian boom is built on confidence in the region’s growth potential. A pandemic could shake that confidence and lower future investment.”
According to another ADB study, a pandemic could send a message to potential investors in Asia’s developing economies that the region is not a stable place to do business.
“From the perspective of foreign direct investment, a health shock such as SARS is likely to have economic effects akin to those seen after a political shock such as a revolution or an assassination,” the report states. “This is quite different from the effects of widespread endemic prevalence of other communicable diseases such as HIV/AIDS, malaria, and tuberculosis.”
Risk of massive outbreak ‘low’
But others believe they are well prepared should a MERS outbreak occur.
“Given the experiences of this region with other pandemics, many countries are better prepared in responding to MERS and the likelihood of a massive outbreak is low,” according to Roland Teo, risk manager in a Singapore health care group and board member of PARIMA (Pan-Asia Risk and Insurance Management Association) and RIMAS (Risk and Insurance Management Association of Singapore).
He told StrategicRisk: “Particularly in Singapore, over the years the government has supported companies (especially the small and medium enterprises) with the implementation of flu pandemic programme. Once the outbreak was identified in South Korea, [Singapore] has been on high alert.
“However, key threats are lapses due to complacency of healthcare workers, staff and organisations not familiar with pandemic protocol and lack of collaboration between the private/public sectors. When that happens consequences to the economy and reputation of that country and region would be extreme, just like what has happened to South Korea.”
JLT head of risk consulting Craig Paterson says these key threats are some of the reasons that insurance cover for pandemics is currently limited.
“Pandemics are different [to other disasters] because if there’s a flood a bomb or a fire, you have a definitive time when something happens. You know it’s a flood because your feet are wet or you know it’s a fire because the fire engines have turned up. That doesn’t happen with pandemics.
“You can have a pandemic in Singapore and everyone’s just got masks on so there’s a big issue around when do you start to kick in what you have to do and when does it become a pandemic.”
Paterson says there are some contingent business interruption policies on the market but he expects the number of standalone policies to increase.
“Ten years ago if you’d have said we really need to be thinking about taking terrorism out of property and liability and making it a separate very specific risk, everyone would have laughed at you. Fifteen years ago people would have said the same about cyber,” he says.
“So the question is, has it reached a stage where you need a separate policy for pandemics?
“One of the things that beings discussed as a solution is coming from the capital markets: when you buy an option to buy pandemic cover and you pay a fee for that and then if you activate it you pay the premium to get the money.”
Only time will tell if pandemic insurance will become the next must-have for multinationals. Or, indeed, if MERS does become the next pandemic. But one thing is for sure, those firms that have learned the lessons from past events like SARS, will be the ones left standing if it does come to pass.