IN FIRM View On Minimizing The Impact Of A Pandemic

Pandemic Preparedness
(10/01/07 - 06:32 AM)

Are we missing the point of pandemic planning?

For the vast majority of this year management has been hearing and learning more and more about the Avian Flu (H5N1). Through the media we have been able to experience its march across Asia and into Europe. The mortality rate of this unique flu has been almost daily news. As if that was not enough, we have been advised to prepare for this deadly flu by everyone from government leaders, international & national health organizations and most recently the financial industry, which has been weighing in to the discussions suggesting that the impact on the global economy could be more serious than any other event in the past century.

As we have waited for H5N1 to mutate into a form that is capable of being transmitted from human to human, we see the emergence of a new group of forecasters. These forecasters point out that the flu is not currently dangerous to humans, and there is no evidence that it will mutate into a lethal form of flu in the near future. They go on to point out that we should be prepared, but not to panic.

Normally, the flu would not gain this kind of exposure in the press. However, H5N1 has an extraordinary characteristic, it could mutate into a pandemic form of flu. Now we see the entry of a seldom used word into the nightly news lexicon ?? ??Pandemic??. It did not take us long to look up the meaning of this word and find out that scientists were talking about a world wide epidemic ?? a pandemic. Clearly, this was not something to be taken lightly, not if the whole world could be impacted.

As we reflect on the generous amount of information that has been put forth regarding H5N1, we must note that the vast majority of the information is oriented to the mortality and morbidity rates associated with the projected spread of this flu. Even when there is a discussion of the business impact of this flu, the orientation starts with and ends with the illness?? impact on staffing and output. Government reactions mirror this orientation and introduce the ideas of quarantine and isolation of infected areas. Always we look at this potential pandemic in terms of its medical complications and the stresses it will place on the medical industry to deal with it. While the rates of illness and death associated with this flu are not to be taken lightly, they are not the most critically dangerous characteristics.

There are two critical characteristics associated with this pandemic, and for that matter, any pandemic in today??s business environment. The last time we experienced a disease of this magnitude was in 1918 when the Spanish Flu spread across the world. It struck approximately 30% of the world??s population and resulted in 3% mortality of those ill or between 30 & 50 million deaths. This disease took approximately 6 months to spread across the world in 1918 and lasted for almost 2 years. Today, we are concerned that a real pandemic will spread around the world in 30 to 60 DAYS. Therefore, SPEED is the first critical characteristic. Recently, SARS spread from China and in a matter of weeks was in 8 countries around the world. Today??s highly mobile society travels more frequently and at greater speed than in 1918, so any pandemic will be traveling quite literally at ??jet speed??. This presents governments, societies and businesses worldwide with the unsettling realization; that it is probable that infected individuals, who are not yet ill, could be traveling and innocently exposing other individuals to this virus. Therefore the strategies of quarantine and isolation can, at best, be only marginally effective.

The next concept that is important to understand, and is taken for granted is ??Economic Inertia??. Newton??s fist law of motion states that ????an object in motion will stay in motion & an object at rest will stay at rest unless acted on by an unbalanced force.?? The business environment of today is the product of decades of forces acting on it and resulting in a natural ??inertia??. Today??s worldwide economy does not have to be started every day or every year, it is in motion and it stays in motion. Granted there are changes from time to time, but these changes are more evolutionary in nature and occur over extended periods of time. A pandemic with a time horizon of 18 ?? 24 months (roughly 500 ?? 800 days) could disrupt the inertia of the global economy such that restoring it to its pre-pandemic state could be an overwhelming task due to the structure and complexity of the global economy.

The business community relies on this ??economic inertia?? in its daily business activities. Without it, there could be no long term planning nor would investors have confidence to invest in the markets that supply the capital to fuel the business machine. It is not a concept that we spend a great deal of time thinking about, but we all rely on its viability and consistency of performance.

Thus, the second critical characteristic is the world economy??s complexity and ??economic inertia??. It would be difficult to find a sector that is not in some way touched by or that does not rely on international markets in some manner for its operations. Businesses are either marketing internationally or rely on international sources for their supplies. For the most part this complexity is a source of strength in the market. It has resulted in increased revenue and a reduction in expenses for many companies. It also increases the alternatives available to companies ensuring a virtual unlimited supply of needed support or materials for many companies. In this ??complex?? economic business market it would be very difficult to slow or stop the ??economic inertia??.

However, the law of inertia applies equally to physical elements and economics. So, in the unlikely event that the global economy was to slow down or stop due to a pandemic, it could be an overwhelming challenge to restart it and restore its inertia. Yet this is a very real possibility if H5N1 were to become a pandemic. A pandemic creates a whole new economic dynamic. Because of the widespread impact of the illness, both the consumption element, as well as the supply element, of the economy will be simultaneously impaired. This occurs on a global basis and is not confined to any specific area. Because pandemics by their vary nature impact multiple countries, and because of the speed with which a pandemic will spread today, disruption occurs everywhere at the same time.

We have not experienced such economic disruption since the 1918 influenza (Spanish Flu) or possibly the Great Depression. Even World Wars I and II did not create economic disruptions of this magnitude. On December 8, 2005, the Bloomberg news service carried an article entitled, ??Bird Flu Pandemic May Cost U.S. Economy $675 Billion.?? In the article Senate Majority Leader Bill Frist is quoted as saying, ??A pandemic of bird flu in humans may cost the U.S. economy $675 billion, including lost work time and disruptions in supply chains.?? Senator Frist was quoting from a pending report. In the same article, it cites the Congressional Budget Office estimate that direct and indirect costs would reduce U.S. economic production by 5%; stating that last year, the U.S. economy generated $11.7 trillion in gross domestic product, the broadest measure of the economy.

In the United States revitalizing the economy after the Spanish Flu in 1919 and the Great Depression meant getting a ??domestic?? economy restarted. Today, we no longer have the luxury of restarting just one economy; economic recovery after a pandemic will be an international undertaking. For this reason the economic implications of a pandemic will last substantially longer than the medical and social implications. The pandemic will most likely subside within 18 ?? 24 months. However, economic implications will last for years after the pandemic. The only way to shorten this recovery cycle will be to rethink how we are doing business. This may require that we establish new processes and procedures to take advantage of the intermittent recovery opportunities that will arise during the span of the pandemic. With the passage of time, there will be lulls in the intensity of the pandemic that may allow sectors of the global economy to partially recover. To wait for a full economic recovery (all sectors returning to pre-pandemic state) will be a very risky strategy. Intermittent recovery will provide some measure of financial relief and at the same time establish market share for those companies able to effect recovery while other companies are absent as a result of not planning or as a result of plans that have focused on the wrong recovery strategy. This will require a whole new operational response strategy. Thinking and reacting to a new planning paradigm will have to become common place if economic recovery is to materialize.

The implications associated with a pandemic are admittedly both extensive and far-reaching. They are equally unpredictable, and consequently can be easily overlooked when developing strategic plans and in developing business continuity plans. With today??s businesses focusing on maximizing the effectiveness of scarce resources it may appear frivolous to dedicate time to planning for an unpredictable event such as a pandemic. This logic could lead to ramifications resulting in the total failure of the enterprise. Because of the speed which a pandemic could spread globally, reaction time (i.e., reactive planning) will be almost non-existent.

A virologist recently stated that, if the flu is identified in San Francisco on Monday, it will be in New York by Saturday and every city in between. The currently anticipated morbidity and mortality rates will be well beyond anyone??s experience; thus generating fear, panic and potentially chaos throughout our global society. As we enter the initial phase of a pandemic trying to develop plans to address the immediate problems will prove ineffective and as such, will not be the time to devise strategies for business future operations when the future is shrouded in uncertainty. Be advised, more people will survive the pandemic than will perish (estimates are that 90% will survive).

While H5N1 may never materialize in pandemic form, there is little doubt that the world is having to deal pandemics such as AIDS and will, sooner or later, have to deal with a pandemic that due to its transmission capability will expose more of society to its effects. There is also little doubt that the international business community is inadequately prepared for the unique problems that will arise from such a wide spread illness. By examining the implications associated with the Avian Flu as a pandemic we will have established the needed orientation to deal with the immediate medical impact of a pandemic and at the same time prepared a company to survive the long recovery period associated with an international economic collapse.

Geary Sikich
Chicago