When the first reports appeared of a new flu in Mexico, Sandra Carson, vice president of risk management at Houston-based Sysco Corp., a $37.5-billion food service provider, activated the company's pandemic response plan.
“We had developed a plan during the avian flu scare,” Carson says, “and have updated and practiced it every year.” That plan calls for stockpiling masks and disinfectant, and educating employees about how to treat and avoid spreading the disease. It also involves altering the company's product mix. “We knew that if this flu hit, many of our customers, like schools and hospitals, would have fewer workers available to prepare meals, so we shifted to easier-to-prepare meals,” she says. Sysco notified suppliers about its changing supply needs and warned them that deliverers needed to meet its tightened sanitation guidelines. The plan also involves curtailing executive travel plans and “nonessential group meetings.”
The last thing American companies confronting a severe economic crisis needed is the threat of a pandemic–a surprise outbreak of a strange new strain of flu just across the border. How companies respond to the threat offers both lessons and warnings about the importance of thinking systemically about risk.
“It could turn out that this flu won't be a pandemic,” says Carson, “but then we'll have the competitive advantage of having a tested plan for dealing with the next flu epidemic.”
The flu had seemed on the wane in the U.S. until last Thursday, when three schools in New York City were closed and hundreds of students reported ill.
“This flu crisis caught a lot of people by surprise,” says Gary Lynch, global leader for supply chain risk management at insurance broker and risk consultancy Marsh. “People had their continuity plans for events like earthquakes and hurricanes, but not for a situation where demand and supply get hit everywhere at once.”
With a pandemic, a clear understanding of all the components in an entire value chain is essential, he adds. “This kind of crisis is where continuity planning becomes general enterprise risk planning.”
The event has already taught risk managers some valuable lessons. “Thinking that supplies like antivirals and masks will be readily available is a flawed assumption,” Lynch says. “So is thinking that every country will respond the same way. Countries like Canada and Hong Kong established strict quarantines, while other countries did not, for example.”
The influenza A (H1N1) threat has also highlighted an insurance gap. “Most insurers don't cover pandemics,” warns Lynch, “so if a company suffers an economic loss because of disease, it is probably not recoverable.” He notes that in the U.S., only AIG/Lexington even offers health loss underwriting (Zurich offers such coverage in Europe).
Sibson Consulting, an HR consultancy, recommends that employers educate their workforce about the flu and advise workers to stay home if they have symptoms, telecommuting where possible. Sibson also warns employers that a pandemic could mean health insurance claims beyond just the bills for those who get sick, as “people with colds and allergies decide to see their doctors in case they have H1N1.”
Meanwhile, medical experts are cautioning that history shows a new flu in the spring can return with a vengeance in the fall, sometimes in a more virulent form.
Carson reports that Sysco is contemplating stockpiling Tamiflu for the fall. “This is still unfolding,” she warns. “Being unprepared is not an option.”
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
