05 | 05 | 09 -- Business Owners: The Clock is Ticking
Evidence is accumulating that the first wave of the H1N1 (swine) influenza virus may have peaked in the northern hemisphere. While this is very encouraging, now is the time for business owners to "stress test" their preparedness for a human health crisis.
In prior pandemic episodes, as in 1918, the first wave was relatively benign, only to be followed by a horrible attack of the virus in the fall. While the Centers for Disease Control does not know yet whether this virus has the make-up to become something much worse, putting plans in place now will only help your ability to respond to a wide range of disaster scenarios and could raise your stature with customers who are concerned about their supply chain. According to a 2007 survey, only 25 percent of employers have plans in place to respond to a human health crisis.
If H1N1 mutates and comes back in a more virulent form this fall, during the “normal” northern hemisphere flu season, imagine one hundred Hurricane Katrina's spread across the country.
In a medium to severe pandemic, businesses can expect:
- 25-40 percent employee absenteeism for a protracted period.
- consumer spending likely to drop 10-20 percent creating a near depression for many industries.
- disruption of global supply chains which depend on just-in-time production and distribution networks.
- customers and employees to react out of instinct, fear or "behavioral finance" scripts which will exacerbate the situation.
- small businesses are likely to bear the brunt of the economic impact from a second-wave pandemic.
What can closely-held businesses do to prepare during this window of time before wave two of the pandemic might arrive?
- Assign a senior person to lead an education and planning group with representation from all areas of the company. Include marketing, sales, operations, finance, and especially human resources and information technology.
- Develop several scenarios for how a human health crisis of varying severity could impact your business.
- Conduct drills or "tabletop exercises" to play out the scenarios and identify weaknesses in your initial planning or assumptions.
- Assess the preparedness level of your key suppliers and customers.
- Evaluate your personnel policies for requiring people to be absent if infected -- how will you track which employees are infected, how will you communicate and make decisions, has sufficient cross-training taken place to sustain each of your business processes?
- Consider stockpiling critical supplies for employees or special measures that might be necessary for senior leadership.
- Communicate plans to employees and select customers to instill confidence in your readiness.
Many businesses that we have worked with in this process find that the experience gained strengthens their overall disaster-recovery preparedness. This can be an important project for staff left underutilized by the recession. Try this at your next staff meeting: randomly pass out cards to each employee with one-third red and the rest green. The red folks "have the illness" and must be spectators on the rest of the meeting while remaining members determine how to keep the business running smoothly in their absence.
There are many reasons to be optimistic that a severe pandemic scenario will not come to pass.
- We may have some latent immunity from decades of exposure to other strains of H1N1 through seasonal flu and its vaccines.
- The government is preparing a vaccine specific to this strain of the H1N1 virus which they expect to have ready in sufficient quantities by the fall.
- There is early evidence this virus lacks an important biological trait (protein PB1-F2) which may prevent mutation into a virus with 1918 type virulence.
- The system set-up several years ago has worked quite well to detect, track and implement actions to combat a severe influenza pandemic.
Nonetheless, as we all have experienced in the recent financial crisis, low-likelihood but severe "wildcard risk" events do occur. Our success in recent decades in putting out the human health "brush fires" should not be allowed to create complacency.
Stearns Financial has issued its own "Flu Preparedness Guide for Businesses and Investors," which can be viewed by interested parties free of charge at http://www.sfsg.net/birdflu_update2/2009. More information can also be found from the Financial Planning Association at http://www.fpaforfinancialplanning.org/ToolsResources/Articles/FinancialPlanningfortheSwineFlu/
Stearns Financial Services Group is a fee-only wealth management firm and investment advisor. Stearns Financial offers comprehensive financial & business planning and investment management services to individuals, businesses and foundations. More about the company is available at www.StearnsFinancial.com.
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