27 Feb Risk Management Importance – The Coronavirus
As the coronavirus continues to spread throughout China and the rest of the world, we’re seeing serious effects on businesses. From shuttering factories to employee death, the influence of the coronavirus (COVID-19 ) is definitely playing itself out as a worst-case scenario. However, one of the few silver linings we can identify among many tragedies is that the outbreak creates a present-day example for risk management.
As of today, there are over 80,000 people that are known to be infected. It is suspected that this number is grossly underestimated, as many people are expected to be infected but non-symptomatic. Deaths from COVID-19 have risen to nearly 3,000. For up-to-date statistics, please visit here.
*Please note that our intent is not to feed into any hysteria created by the media, but want to articulate the importance of risk management and addressing potential risks. Stay safe and follow your local government’s directions.
Currently, we’re seeing different responses to COVID-19. These cause interruptions to businesses and analysts speculate the long-term impacts of these actions are just beginning to appear.
Impacts of the Virus
China is the largest market in the world, meaning that while shops are closed and people are staying home instead of shopping, those who sell to Chinese citizens are seeing substantial hits to revenue. This includes food vendors, retailers, and service providers.
We’ve also seen reports of numerous factories completely shutting down, affecting their output. Here in the United States, businesses are reporting delays in their expected shipments of over a month thus far. Apple, for example, is widely discussed for expecting delays in iPhone production. Companies that relied on Chinese factories are now scrambling to find other suppliers. Disney theme parks in Hong Kong and Shanghai have closed as well, each expecting over $100 million loss in Q1 profits. T
Travel to and from China and its neighbors has plummeted, making it harder to do business. This hurts transportation companies in particular and makes shipments more difficult. Major airlines such as United and Delta are both experiencing hits as they project flights to China will be canceled until April, and tourism to Europe has slowed.
Unsurprisingly, the stock market experienced an almost unheard of 1,000 point drop February 24th and continues to drop. This is largely regarded as a result of the coronavirus.
People who don’t appear to be sick can still transmit the virus, making efforts to contain its spread more difficult. Decision making for leaders equally becomes more difficult as they attempt to balance the safety of their employees and the health of the company. Cities like Shanghai are almost completely shut down.
So what is the key takeaway? Preparation through risk management.
Risk Management Guidelines
As we observe the risks that have come to fruition and contemplate on those expected to follow, we can’t help but think about what could have been prevented with proper risk management planning. Now, not all risks could have been avoided. For many companies, the idea of a widespread contagion was probably considered a low-likelihood risk that was accepted.
To clarify, risk management is the process of identifying, assessing, and controlling risks. This is a very broad term, but within this, we will discuss some of the specifics of just a few risks related to the coronavirus.
A prevention policy is necessary, in the case of illnesses, to prevent catching and the spread of the virus. Make sure such a policy is implemented and enforced in your organization that promotes frequent hand washing/ sanitation stations (yes, even in offices), covering your mouth when sneezing, and most importantly, staying home when sick! Simple policies prevent the spread of germs and reduce employee absence. In the case of widespread illness, it can be the difference in a facility or office staying functional.
Having a policy in place that enables employees to complete all or part of their job from a remote location, securely, is necessary for reducing physical risks. This reduces dependency on a physical location and is perfect for situations such as with the coronavirus. In China, many companies have forced employees to work remotely in an effort to minimize disruption to normal business, but seemingly grudgingly. Employees are complaining of being asked to keep work journals, share their location on their phone, or even keep a live stream of them at work.
Clearly, remote work is an afterthought for many of these companies. To ensure a seamless transition from office to home, policies need to be discussed as well as expectations of working remotely. Many companies will have productivity tracking software enabled on work devices or establish a level of trust with employees that will allow them to just submit required work. Whichever method a company chooses, connections and access need to be secure. Service providers, such as help center employees, can be just as effective in performing their jobs remotely as they are in an office.
Having an alternative supplier means that a part or product will be supplied by more than one company or single location. Selecting an alternate supplier should follow the same vetting process you used to select your current supplier, such as testing compliance to standards, reviewing risks, and testing quality. Companies should always have a backup supplier that is able to provide the same or similar quality goods to you at the same quantity. To achieve this goal, you may need more than one alternate supplier.
In instances such as the coronavirus causing factories to shut down, companies without backup suppliers are struggling to continue to meet demand.
Remote Data Centers
This doesn’t appear to be a publicized problem yet, but should a location be unable to retrieve data from a physical location, it would be crucial to have a remote data center. Colocation and cloud hosting, for example, are a convenient option for most businesses. As a bonus, a data center often does a better job at protecting your data assets. One instance is having 24/7 staff and monitoring. In this instance of a service interruption attack that occurs outside of normal business hours, you would be more vulnerable.
Business Continuity Plan
A proper business continuity plan is fundamental to the success of any business. It’s the process of developing systems of prevention and recovery in response to potential threats a company can face. Threats include cyberattacks meant to collect data, or widespread illnesses such as the coronavirus. A continuity plan is a large subset or risk management and ensures core business functions and operations are not severely impacted by a disaster or unplanned incident.
To begin, start by determining which business processes are essential to your organization These typically include product production, payroll, and shipping (varying per industry and business). Evaluate what services, products, and procedures need to continue if you have limited employees or are unable to use your physical facilities. Create a comprehensive list of all functions that need alternative plans. This plan would most likely include several of the previously mentioned strategies, such as establishing a remote work policy and alternate suppliers.
Planning Your Risk Management
Let us help you manage your risks efficiently and effectively with our risk assessment software. At no cost, you can use the RiskWatch platform to perform 3 assessments, which will help identify your highest areas of risk. In addition, you can address the areas mentioned above if you’re concerned you may become impacted by the coronavirus or similar risks.
The platform automatically creates a full audit trail of recommendations offered for security and compliance gaps or findings. Recommendations can be assigned to individuals as tasks to be monitored by the managers. The platform constantly learns from its users as assessments are performed, at every stage of their assessment process. Data gathered can even be repurposed in workflows to calculate and display trends in data year over year, making users at every level more productive.