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Lloyd's: Spotlight on risk: H1N1, Swine flu

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  • Lloyd's: Spotlight on risk: H1N1, Swine flu

    Spotlight on risk: H1N1, Swine flu
    8 July 2009

    The H1N1 ?swine flu? pandemic, which has sparked widespread fear and disruption across the globe, has shone a spotlight on a risk that many companies have disregarded in the past few years.

    The threat of a pandemic has fallen down most companies? list of major risks since the outbreak of SARS in Asia in 2003.

    Issues such as the recession, increasing regulation and climate change have dominated risk discussions in company boardrooms, at the expense of a risk that last occurred 40 years ago.

    Off the risk radar

    ?Some companies don?t have very well thought-out plans, because it?s off their risk radar,? says Julia Graham, Chief Risk Officer of DLA Piper, and the person heading AIRMIC?s swine flu initiative.

    ?Ever since SARS there have been lots of warnings that a pandemic would soon come, but one never did. As a result, many companies came to think it wasn?t ever going to happen? Other issues have gone up their list of priorities,? Graham says.

    Not in the top ten risks

    It did not feature among the top 10 risks for global businesses in 2009, compiled in the influential Ernst & Young report; neither was it among the 15 other big risks on companies? minds included in the report.

    In a survey of UK companies conducted by Marsh earlier this year (before the swine flu pandemic), 41% of respondents said they did not think a pandemic would occur within the next 10 years.

    Among financial sector players, this figure rose to 59%.

    As a result, many firms have been caught out by the recent pandemic declaration by the World Health Organization.

    Swift development of pandemic

    Even some firms that did have contingency plans in place have struggled to keep pace with the virus?s rapid transmission.

    ?Of those who do have plans, most companies gear their response to the World Health Organization phase levels. Swine flu raced through the levels at break neck speed, which left many firms breathless. They geared their plans around a very mechanistic process and it hasn?t worked that way,? Graham says.

    Current situation

    The death toll from swine flu stands at 429 (out of 95,412 cases), according to WHO figures of 6 July.

    Its effect has been light so far in comparison to the much more lethal H5N1 ?bird flu? outbreak in 2007, which many feared would turn into a pandemic.

    ?This event is really a moderate event for the time being, because the numbers are high but the disease is overwhelmingly mild," WHO spokesman Gregory Hartl told Reuters Television.

    The pandemic is already having a devastating impact on some businesses, however.

    Mexican resort Canc?n is virtually deserted, despite having relatively few cases of the virus, the Financial Times reported.

    Hotels and restaurants have been forced to shut as the city loses around $6m a day, the paper reported.

    One hotel has resorted to offering a ?flu-free guarantee? to try to encourage holidaymakers to stay there.

    Fears of mutation

    Although it is mild at the moment, health officials worry that swine flu could mutate during the southern hemisphere winter and return in a more virulent form in the northern hemisphere this winter.

    ?If the numbers of people becoming ill rises exponentially in combination with a display of increased virulence by the H1N1 virus, staff shortages will become the dominant concern for business and service continuity,? says Exclusive Analysis in a report.

    Not a rerun

    Trevor Maynard, Head of Emerging Risks at Lloyd?s, warns that companies should be careful not to concentrate on dealing with a rerun of the 1918 ?Spanish flu? outbreak.

    ?You may mislead yourself, because although 1918 was quite an extreme pandemic, it had a number of individual characteristics,? Maynard says. ?Businesses should plan for a range of scenarios, not simply for one.?

    The Marsh survey found that 31% of respondents said they were not adequately prepared for a pandemic.

    Not only will those firms be far more vulnerable to the effects of a pandemic, they may be at risk of being sued by disgruntled shareholders if they lose out to better-prepared rivals.

    ?If you stand out from your peers for having done a particularly bad job in planning, then there is a chance you may be sued under your D&O policy for being negligent,? Maynard says.

    Averting a major crisis

    A major crisis may be averted, as drug makers are on course to have a vaccine ready for widespread use in the northern Europe autumn flu season.

    Firms are now using the breathing space afforded by the northern hemisphere summer to draw up plans to deal with a more virulent wave in a few months? time, in the event that pharmaceutical firms fail to produce enough vaccine or one that can deal with a mutated version of the virus.

    ?What a lot of businesses are doing I think is using the current situation as a wake-up call or a dress rehearsal,? Graham says.

    ?Those who have plans can sit down and work out how they performed and whether they were as good as they should have been. They can use the current environment to prepare themselves.?

    Last updated on 08 Jul 2009