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Article:

Security and Functional Continuity in Times of Crisis - The Example of the Coronavirus

16 March 2020

Oded Raz , Managing Partner, Shafran |

General

On January 30th, 2020, the World Health Organization declared the rapidly spreading outbreak of the Coronavirus as a global health state of emergency.

On March 11th, 2020, the World Health Organization went on to declare the COVID-19 (also known as the Coronavirus) as a pandemic (a global epidemic). It further estimated that the Coronavirus could lead to a 2.2% - 4.8% loss in global GDP.

In parallel to its devastating effect on human life, the outbreak has already had a significant global impact on employment and financial health of businesses, with increasing implications on global chains of supply and global business activity.

The ability and degree of readiness to deal with any out of the ordinary event, particularly a health-related event causing an epidemic, requires pre-emptive thinking and formulation of plans at the national level, by both the Ministry of Health and all of its affiliated systems, as well as by other government offices. This type of event entails rapid intervention of decision-makers at the highest levels due to the complexity of the challenges it creates on a national level, the international implications (ranging from loss of income through to bankruptcy) and the tremendous economic damage incurred at a national level.

Dun & Bradstreet analyzed the situation and emerging trends to assist companies that are connected in one way or another to the areas that have been immediately affected by the outbreak of the new Coronavirus so that they can assess the possible impact on their business activity and chains of supply, and on the economy in general. Main findings: since the initial outbreak of the new Coronavirus on January 23rd, 2020 in Wuhan in the Hubei Province in China (one of the largest business and industrial centers in China) - the virus spread throughout the entire area very rapidly, and has expanded beyond the borders of China to every corner of the world. It is still too soon to determine the precise extent and degree of damage to global businesses and economies, however in general -  experience with epidemic-based crises has helped to develop a scenario-based assessment of the economic conditions in the short and medium terms, which in turn – could help companies to estimate the level of risk and possible implications on activities and risks, and lead to changes in their business activity. Data on the supply chain coupled with Dun and Bradstreet's analytical capability and insights, as well as systems developed by other companies that are currently active in the market, enable businesses and organizations to assess and verify direct and indirect suppliers, and help companies to gain a better understanding of inter-corporate relationships to gain transparency and insight regarding the risk profile of their suppliers.

In addition to the above, companies and organizations need to plan and make sure that they have an organized program/plan in place that will ensure functional continuity as the epidemic continues to spread, and if the need for more drastic preventive steps becomes necessary.

 A good BCP (Business Continuity Plan) must address a variety of issues, the most important of which are presented herein:

 

1. Internal Processes:

Create safe/alternative work environments:

  • The increasing scope and potential of infectionare forcing organizations to face challenges in both the short and medium terms. As such, action needs to be taken to create work environments that enable safe activity within the company's premises (and its associated facilities), and to ensure that there are operable digital tools and methods to enable working remotely.
  • Definition of policy and tools that support working remotely (including from the employee's home), while examining the feasibility of working remotely at high capacity, for a lengthy period .
  • Adopting methods and tools that enable them to work remotely in an optimal, secured (from an information perspective) and efficient manner, and can be implemented within a short period.

 

Preventive Actions at the Work-place:

  • Helping employees to identify symptoms, quarantine, and accompanying those who are sick to prevent spread of infection.
  • Operational actions to minimize infection – conference rooms, employee entrances, employee conventions, food-courts/dining rooms, elevators, protective gear, vehicle fleets, reception/visitors area, disinfectants (personal/public), areas that are treated with clean/purified air

 

  • Critical issues with respect to the management of personnel in a state of emergency:
    • The need to protect employees, sick leave and sick pay, absence and significant/crucial activities, forbidden traveling and quarantine, changes to the roles filled by employees, firing/termination (of employment), etc.
    •  Alternatives if there is an extreme shortage in personnel – substitutes, special roles assigned to employees in times of emergency, external personnel, prioritization of areas in which activity is to be decreased in time of emergency, alternative technology

 

Local and global management of the business:

  • Pre-definition of critical suppliers/suppliers in strategic areas of activity.
  • Advanced formulation of a plan to identify sources of supply (sourcing).
  • Management of risk and diversification in procurement, including identifying and establishing connections with alternative suppliers.
  • Assessment of suppliers, as well as of their sub-suppliers, based on a structured assessment model.
  • Definition of the current (ongoing) level of stock, and  safety stock.
  • Establishment of a format for assessing "evolving" situations and planning for the next phase, including simulations/"war games"
  • Spokesperson and internal/external communications as a critical element of the business' ability to cope/reputation.

 

2. The Human Element in Stressful Situations and Emergencies

A traumatic event such as a pandemic has the potential to significantly disrupt and affect day to day  and affect the ability of the organization's management and employees to operate and maintain functional continuity.

On top of the pressure that employees and management experience in the workplace, they also experience significant pressure in their personal/family surroundings.

Information, awareness, involvement ,and support provided by the company/organization's human resources to the employee's family/personal surroundings – all these can help to alleviate the employee's sense of stress and free him to concentrate on his work.

 

3. Relationship with the Authorities

The relationship between company management and the local authorities in the area in which it operates is very important. It can positively affect the flow of information, contribute to good coordination regarding activities that the company needs to undertake and enable local authorities to provide help if needed.

 

4. Tracking, Monitoring ,and Control

Dealing with emergency events and irregular incidents requires that the company/organization possess the ability to function independently, to create optimal and effective synchronization and interconnections between all the relevant elements within the company (and at times – even beyond).

The decision as to whether a control center will operate in the routine as well as in an emergency, or only in the event of a scenario in which it is required (based on an orderly protocol) will be made in accordance with the characteristics of the company/organization's activity.

This decision will be derived from the formulation of an emergency organizational scenarios along with their (respective) required response.

 

Summary

The data, analysis and unfolding reality support the preliminary assumption that supply chains are not necessarily limited to a specific area in which there was an outbreak, but rather have a broader effect on a number of key industrial levels, thereby endangering business processes throughout the world. It is already evident that the outbreak of the Coronavirus has led to a significant slowdown that has hurt the local economy and is expected to affect global growth. Although there is still uncertainty with regards to the ultimate effects on companies and organizations – it is recommended to take immediate steps to minimize the continued risk to the supply chain of your company.

 

Recommended work methods for the short term:

  • Adopt the guidelines described above, and emphasize  an assessment process based on risk analysis that will help you to identify and continuously follow the range of risks that you might be exposed to which could hurt the productivity of your supply chain.
  • Conduct an assessment of suppliers, including their sub-suppliers, to ensure that they will not have a negative impact on your business.
  • Make sure to follow risks that are associated with the suppliers of your systems and components to ensure that your company/organization is able to form a full and complete picture of the supply chain.
  • Identify alternative suppliers in areas that have not significantly suffered from the outbreak in other places around the world in order to diversify your supply chain and to limit dependence on a given supplier or geographic area.

 

Recommended work methods for the long term:

  • It is necessary to formulate a policy and put together an emergency plans for your supply chain in order to ensure the functional continuity of your business.
  • Identify suppliers from diverse geographic areas so that you can include them in your activity in times of emergency.
  • Map the supply chain for your critical components and establish a double source/supply channel for them. 
  • Make sure to conduct a periodic situational analysis.
  • Conduct ongoing as well as periodic examination and update of your strategy so that it takes your company's organizational growth as well as environmental changes into consideration.