Avian Flu And The Risk To Business Continuity

March 2006

Avian or bird flu has recently been a major news item. There is significant concern that the virus may mutate and cause a flu pandemic with disastrous consequences for business.

Avian Influenza (bird flu) is caused by the H5N1 virus. This has caused deaths amongst humans in Cambodia, China, Indonesia, Thailand, Turkey and Vietnam. Whilst outbreaks of the disease in humans, have already occurred this has been due to handling infected birds rather than a human strain of the virus. The concern is that the more people that are infected by the virus, the greater the likelihood of it mutating into a new strain that is readily transmitted between humans. If this occurs, the fact that few, if any, humans have a natural immunity to the disease could readily give rise to pandemic, the potential impact of which on global business and the world economy as a whole cannot be ignored.

A pandemic is the spread of an infectious disease across borders, normally with significant fatalities. In the current outbreaks in Asia and Europe over 50% of those reported as affected by the disease have died. However, it is thought possible that many cases where symptoms are altogether less severe are not reported. The last major pandemic was the Spanish Flu pandemic in 1919.

The World Bank has estimated that a flu pandemic could kill 200,000 worldwide (other estimates are even higher) and that the resulting reduction in economic growth could be as much as $800 billion. In the light of this it is vital that the risk be addressed as a part of any business planning process.

In acknowledgement of the potential risk the FSA has listed global pandemic as a business continuity issue in its Annual Risk Outlook for 2006 (published on 25th January 2006). Whilst the FSA does not propose to be prescriptive over the steps that businesses should take, it is urging firms to devise contingency plans to deal with a possible pandemic.

The concerns arising from the threat of a pandemic differ significantly from those related to infrastructure (e.g., IT and premises). Issues of mass absenteeism caused by illness, quarantine restrictions and disruption of transport systems together with unprecedented potential mortality rates will all need to be addressed and planned for. Firms should consider the contingencies they face. Planning measures could include:

flexible working;
working from home;
knowledge management (including distribution of knowledge throughout teams and geographic locations);
succession planning;
communication needs.

Some of these issues will integrate with existing business continuity/disaster recovery strategies, whilst others will require new solutions.

The financial services industry will also need to address concerns that are unique to their business or exacerbated due to the nature of the business. Labour intensive businesses are at increased risk of disruption due to the very nature of their business (with many people working in close proximity with one another). A pandemic may also affect specific classes of business e.g., reducing long-term liabilities for certain pension schemes or affecting future annuity sales, increasing sales of life insurance and mortality claims on life policies.

We have attached a short checklist / prompt to assist you in the planning process. We sincerely hope and pray that the fruit of such planning will not be needed, but we strongly recommend you consider the potential risks to your business with some urgency. Planning For Pandemic In The Financial Services Industry - A Checklist

Business Implications

Knowledge Management

1. Identify all non-critical operations which can be reduced or suspended for a period
2. Identify all critical operations and set priorities
3. Cross train staff from non critical operations to operations which are critical
4. Plan for succession for non returning staff

Operations

5. Examine supply chains - including product supply and service supplies e.g. IT resources - ensure that suppliers have addressed the issues properly to limit disruption to your business and if not examine the possibility of using additional/backup suppliers to spread the risk - if possible use a spread of suppliers in different geographic areas
6. Examine your customer base and identify areas where a flu pandemic may affect their requirements and behaviour. This includes the possibility of alterations to the profile of different service lines or product sales (may sell more of some and less of others and have a differing claims profile - staff planning will also need to reflect this) and the possibility of an alteration in the numbers using different service delivery routes - e.g. more telephone/internet usage and less face to face contact
7. Place customers in priority order - if you can't service them all - service by priority
8. Consider putting in place an infrastructure to permit more home working - including IT and other communication upgrades
9. Consider the splitting and segregating of staff involved in critical operations - quarantine completely from one another where feasible
10. Review insurances - including business interruption cover and possibly health/death cover
11. If there is significant likelihood of a reduction in business, ensure that the need for financial resources is adequately covered

Communication

12. Ensure management of customer expectations - e.g. need to ensure that service levels promised can be adhered to
13. Expansion of telecommunication facilities should be considered. Please make resources available for necessary upgrades
14. Expansion of teleconferencing facilities and videoconferencing should be considered to enable the cancellation of face to face meetings and to cater for possible long distance travel restrictions
15. Upgrade and amend internal monitoring systems to ensure that staff absences and working arrangements can be monitored

Security

16. Consider the need to upgrade security for business and staff as police and other security services will also be affected

Employee implications

Homeworking

17. Plan for absence due to illness / caring for sick relative / school closures / transport restrictions
18. Ensure that policies are in place to deal with the above scenarios to ensure consistent treatment
19. Plan for home working in event of above scenarios (where employee not ill) - ensure resources for systems upgrades/telephones etc

Health issues

20. Monitor uptake of / provide vaccine to employees
21. Improve cleaning / disinfection of offices
22. Consider putting in place quarantine restrictions where staff have been taken ill at work / isolate ill staff immediately / arrange for immediate sending home
23. Put in place disinfection procedures where staff have been taken ill at work
24. Plan to transport staff to work by private car / coach or provide additional on-site parking

Staff roles

25. Consider more public roles for staff who have returned following illness and are thus immune
26. As above - need to cross train additional staff to critical areas
27. Division of critical staff into segregated teams

Communication

28. Educate staff over hygiene issues
29. Have in place a team to respond to concerns and rumours
30. Ensure staff are kept updated with regular bulletins over the impact on staff and business as a whole

Quarantine Measures/Travel Restrictions

31. Prepare for quarantine zones and subsequent restrictions on movement / travel
32. Where employees travel widely (within the UK or overseas) prepare for the possibility of staff being temporarily stranded by travel restrictions / quarantine measures

External communication/liaison

33. Have a list of authorities, organisations and businesses with whom to obtain information and share best practice
34. Co-ordinate efforts with other organisations - particular implications for overseas businesses

WARNING
Errors and Omissions Excepted. This communication is for the general information of subscribers. It is not a professional opinion relating to a specific set of circumstances or a specific client. Recipients must not place reliance upon it in relation to their own specific circumstances without seeking professional guidance specific to those circumstances. Unless recipients are current clients (full service or Compliance Counsellor service), Grainger Consulting will not enter into correspondence with recipients in relation to the content of this communication or provide further guidance or opinion.

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