New facts are available daily regarding the coronavirus. There is much we still don’t know, yet there is also much that we do know. 

We do know that risk managers don’t simply manage risks, and should play a critical role in creating business reliance and contingency plans. Risk managers help guide decisions related to business uncertainties. Risk management does not tell an organization what path to follow. Risk managers do plan for various outcomes. High severity, low frequency outcomes like the current view of the coronavirus impact, are some of the least evaluated yet potentially the most damaging. These same outcomes are also among the most catastrophic. Risk managers also know that insurance is an important vehicle for transferring risk, and that most business risks are not insured. 

Most importantly, risk managers plan for uncertainties. Decision making outside of crisis time is significantly more effective than in the throes of a crisis. Regarding the coronavirus, risk managers are staying calm, mostly because of outstanding planning. For organizations without a business continuity plan, today is the day to start thinking about one. For organizations that have a business continuity plan, today is the day to review it and refresh it.  As you review and refresh, also keep in mind that the plan does not need to be so specific to address a particular virus, at a given time. That would require clairvoyance. Rather, it should address types of scenarios and outcomes that could occur. More general thoughts on emergency planning can be found here.  

Specifically, what do we know relative to the coronavirus?

The Center for Disease Control provides significant, daily updates to the situation that all businesses should follow. As of March 2, 2020, the CDC reports 43 confirmed and presumptive positive cases in the United States, including multiple deaths. Those cases have been reported in 7 states including WI, IL, MA, WA, OR, CA, and AZ. As of this writing the number of cases in the US is rising daily. While the largest share of cases is still in China, cases have also been reported in 59 other countries. There is no effective way to stop the spread into a given country or geography. The World Health Organization provides the best daily updates for the global situation. The WHO reports 87,137 global cases and 2,977 deaths. The death rate is still a bit unclear, however, most recent data indicates a rate that is at least 20 times higher than traditional flu and the transmission rate is far greater than the flu. Despite those sobering statistics, the CDC continues to report as of today that the risk to the general population is considered low. The risk to individuals where community spread has been identified is elevated, but still considered low. 

We also know that for many of the most likely adverse outcomes, insurance may not be available for risk transfer. Review your specific policies and situation for coverage evaluation with your insurance consultant, however, in areas like business interruption, coverage requires physical damage to property which likely would not occur in this case. In addition, many policies have specific virus exclusions. That does not change the role or goals of the risk manager. The risk manager still needs to review outcomes and make informed businesses decisions based upon the potential situational analysis.

What specific areas of the business continuity plan should be prioritized?

Each business needs to consider specifics related to outcomes that may be unique, however, the most likely areas of focus should be:

  • Employee safety
  • Supply chain disruption
  • Third party responsibilities
  • Personal protection

In terms of employee safety, the CDC recommends a few key areas of consideration. Most obviously, encourage any employee who does not feel well to stay home. Beyond that, consider policies related to business and personal travel and the potential to need to require an individual employee to stay away from the workplace. Finally, and perhaps most importantly, consider the continuity of your business if all employees need to stay at home for an extended period. What processes could continue? What processes would need to be modified? What pre-planning is needed to accommodate telecommuting? The CDC provides some great guidance for additional questions and planning for businesses to consider. Remember as you plan, the likelihood remains low, however, risk managers plan rather than panic. 

Perhaps the most immediate concern for many businesses relates to supply chain management. Again, it is important to understand the supply chain in the absence of the coronavirus outbreak. Even if this event does not impact the supply chain, the next event might do so. Supply chain management begins with a full understanding of where material, supplies, and parts come from and how they arrive. That includes not only the immediate supplier, but also at least one level upstream. It also includes an evaluation of transportation methods. Once the supply chain is understood, the next step is to consider potential breaks in that chain. What could happen to impact the delivery of critical materials and supplies? Finally, what alternatives and redundancy exist to mitigate a disruption? Are those alternatives in place? The likelihood for supply chain impacts is elevated currently, but regardless of the level of current concern, risk managers plan so they don’t need to panic.

Many businesses also have interactions and responsibilities with third parties and the general public. That might include residential living, commercial properties, healthcare facilities, and schools. This area of planning requires yet another set of questions. When would it be prudent to limit normal commerce or activities? What decisions or actions can the organization take now to mitigate potential impact later? What restrictions might be in place related to public spaces?

While the focus of this discussion relates to business continuity, each individual shares a personal responsibility to plan, and not panic. This includes understanding the needs of friends and family, creation of an emergency contact list, and generally practicing good health habits. The CDC provides good details in this get your household ready section. 

These examples just touch on a few possible areas of consideration for your business. For more details and ideas related to your business, review the most recent Harvard Business Review article. Each business is unique, yet the common thread is to create an environment and process that requires informed decision making and planning. Decision making is best outside of a crisis. Risk managers can’t stop the spread of a virus or many other potential risks, yet they can provide that process and structure to make certain businesses can stay calm and are prepared for any outcome. 

 Contact the author at – Seth Hausman, Managing Director, Kraus-Anderson Risk Innovation, (763) 233-2057;