Pre-Pandemic Planning
Business Continuity Perspectives
Author: Geary W. Sikich, Principal, Logical Management Systems, Corp.
For the vast majority of business continuity professionals Avian Flu (H5N1) represents fertile ground. As H5N1 continues to spread, with each new flare-up creating a media feeding frenzy business continuity professionals are becoming more and more involved in developing plans to address this potentially “new crisis”. This has created a myriad of articles and flurry of activities. It has, quite frankly, left me in a quandary with some unanswered questions. My basic question is simple; “If we as continuity planners, claim to address business continuity, shouldn’t the plans we have created be sufficient, with minor modification, to address the issue of a pandemic?” If the answer is “no, we have to create new plans”, then I am concerned that we as practitioners have missed the point of business continuity planning. If we have created plans that we claim are “business continuity plans”, “all hazards plans”, and plans that ensure operational resilience, then why are these plans suddenly insufficient to address the threat of a global pandemic? Have we, as I and my colleague John Stagl wrote in our article entitled, “Are we missing the point of pandemic planning?” missed the point?
As you reflect on this question and the generous amount of information that is being put forth regarding H5N1, you should begin to note that the vast majority of the articles and information is oriented toward mortality and morbidity rates. Even when there is a discussion of the business impact of a pandemic flu, the orientation is focused on the response to the pandemic, a tactical approach. We need to begin to think strategically. Point of fact: we are not going to be able to stop a pandemic from occurring. Applying a first responder model to a pandemic situation that could last 500 – 800 days could be devastating. 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.
Three critical characteristics will be associated with a pandemic today. Speed, is the first critical characteristic. Our highly mobile society travels more frequently and at greater speed, so any pandemic will be traveling quite literally at “jet speed”. Connectivity is second critical characteristic. Supply chains, outsourcing, etc. are interdependent systems (utilities for example). We in the United States import more of our daily necessities that we produce domestically. The third critical characteristic is “economic Inertia”. Today’s business environment is the product of decades of forces acting on it and resulting in a natural “inertia”. The worldwide economy does not have to be started every day or every year, it is in motion and it stays in motion. A pandemic with a time horizon of 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 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.
Introduction
The business community is “not adequately prepared” for a possible avian flu pandemic, says Secretary of Health & Human Services Michael Leavitt. As of July 24, 2006, there have been 231 confirmed cases in humans resulting in 133 deaths (a mortality rate of 57%). The virus has spread to 33 countries through wild migratory birds that have now infected domestic poultry (source World Organization for Animal Health).
An influenza pandemic could sideline 40% of your workforce, shut down foreign trade, and degrade public services. Here are public-health experts’ tips for companies (Data: Trust for America’s Health, U.S. Health & Human Services Dept.):
Public Health Experts Tips – My Assessment
Leave Hot Zones: Make plans to pull people out of countries where the epidemic strikes first, while ensuring that crucial jobs are covered. When are you going to know that you are in a “hot zone”? Second, quarantines may preclude moving people.
Limit Travel: Steer clear of hot zones, and limit overall travel. Airports will be incubators for the pandemic. This may be a given in that we hear about border closures, quarantine, etc. The real issue is if you are traveling and get stranded in a location, not limiting travel.
Focus on Essentials: Identify your company’s irreplaceable functions, and figure out how to keep them going with 25% to 40% of staff out sick. What is essential? Food, water, medicines, fuel? Irreplaceable functions? What functions are not irreplaceable – just ask anyone in your organization if they are dispensable if they say yes you may wish to consider eliminating the position now.
Stock Up: Consider building up inventories in case foreign or domestic suppliers and transport services are paralyzed and “just-in-time” production is threatened. Sure go ahead and make a business case for changing “just in time delivery/manufacture, etc.” to your management, board and stakeholders. Not as easy as it sounded is it?
Go It Alone: Anticipate and prepare for breakdowns in government services, like sanitation, water, and power. What happened to “core business” concepts, outsourcing, etc.? Can you really go it alone? How are you going to create a business case for no customers, suppliers and as for government services, utilities, etc. you may find that going it alone sets you up for having your resources commandeered for the great good.
Isolate the Sick: Try to limit the flu’s spread in the workplace by improving air circulation and filtration. Stock up on masks and sanitizers, and consider staggering work hours to limit the size of gatherings. How do you know what they are sick with? Could be the common cold and not the pandemic flu. When will the pandemic strike? Stocking up means “from now until forever” as you will have to maintain these stockpiles until the pandemic materializes.
Spread Out: Supply employees the equipment and support they need to telecommute if their jobs allow. As you make your business case for some of the above items, consider that local infrastructure will in most cases not support the environment that your employees have in their offices today.
Roll Up Your Sleeves: Help employees get flu shots, but don’t count on medicine to stop the pandemic — there’s no vaccine for H5N1. As this tip already points out there is no vaccine for H5N1. Sanofi Pasteur vaccine seems to be effective only in large doses (evidently, six times the normal dose of flu vaccine). Can you really “roll up your sleeves” and think that you are protected?
Beef Up Job Security: Make sure your sick-leave and pay policies don’t discourage workers from staying home when they’re ill. This requires a potential change in policies that could have legal ramifications beyond the unknown and undetermined strike date of the pandemic. Remember – “from now until forever” when you begin to look at policy creation and change.
Keep Talking: Let your employees know what you’re doing — and what they should do — to limit the pandemic’s impact. This is perhaps the best tip of all. Communication will be a key to diffusing panic, chaos and fear during this and/or any other “crisis” event. Trained people are more likely to act as you want them to act based on the training to act.
While there is merit to the above suggestions for steps that your organization can take, the concern should not be about responding to the pandemic itself (we are missing the point) the concern should be for the speed of its spread throughout the worldwide population and the economic consequences that will result as the complex global economy is shaken to its foundation.
According to an International SOS survey; 91% of the respondent companies consider preparedness for Avian Flu ‘Important, Very Important or Critical’; yet only 26% have begun to implement a pandemic preparedness plan and just 1% have completed a plan, according to the survey of 200 Fortune 500 companies and other large organizations (Source International SOS).
Complexity – Criticality
In his book, “The Collapse of Complex Societies”, Joseph A. Tainter states, “Human societies and political organizations, like all living systems, are maintained by a continuous flow of energy.” He further states, “More complex societies are more costly to maintain that simpler ones, requiring greater support levels per capita.”
Economic interactions, once conducted on a localized basis, are today conducted worldwide in a myriad of combinations and with a speed that is almost hard to conceive. The worldwide economy is so interdependent that an event, such as a pandemic, could send shockwaves reverberating throughout it. Restarting the world economy will be an undertaking of unparalleled dimensions. When a pandemic materializes, it will bring troubled and uncertain times for a fragile world economy. In the recent past we have seen twenty of the world’s biggest economies in some phase of recession. These economies account for 60% of the world’s output. World trade growth, which held up throughout both the world recessions of the early 1980’s and 1990’s, fell twelve percentage points in 2001.
When the Pandemic is Declared
How long will the pandemic be underway before it is declared a pandemic? Experts at the World Health Organization (WHO) and elsewhere believe that the world is now closer to another influenza pandemic than at any time since 1968, when the last of the 20th century’s three pandemics occurred. Currently it takes four – five days for the symptoms of H5N1 to manifest such that the patient goes to the hospital. In that time the virus is highly contagious and can spread rapidly. Sampling, testing and diagnosis also take time. Currently a window of ten – fourteen days exists for intervention. A spokesperson for WHO said, “We’re not going to know how lethal the next pandemic is going to be until the pandemic begins.” How does one begin to plan for the pandemic? The answer involves more than planning to respond to the medical aspects of the pandemic; one’s methodology matters as much as the question itself. As businesses identify their planning focus it will be important to choose the proper methodology and correct focus of the planning effort. Indeed methodology will matter more than anything else.
The WHO utilizes a six phase pandemic alert system to inform the world of the seriousness of the threat and actions that should be undertaken. The world is presently in phase 3: a new influenza virus subtype is causing disease in humans, but is not yet spreading efficiently and sustainably among humans.
There are three elements to a pandemic. First, a virus emerges from the pool of animal life that has never infected human beings, meaning no person has antibodies to fight it. Second, the virus has to make us seriously ill. Third, the virus must be capable of moving swiftly from human to human through coughing, sneezing or just a handshake.
For avian flu, the first two elements are already with us. Well over half the people who have contracted it have died. The question now is whether the virus will meet the third condition: mutating so that it can spread rapidly from human to human.
A Possible, Plausible, Pandemic Economic Scenario?
The following hypothetical scenario is presented to highlight potential consequences of a pandemic. It is designed to illustrate, as well as, stress the need for cooperation between public and private sector entities; and cooperation between and among private sector entities, not only in responding to the pandemic (the tactical level), but in addressing the longer term consequences of a pandemic (the grand tactical level) and its aftermath (the strategic level). The scenario unfolds over a period of 500 – 800 days, the relative timeframe for previous pandemics.
Phase # 1: Shock and Awe – Reactive (60 – 180 days)
The WHO declares Phase 6 and the world sets out to minimize the impact of the pandemic (tactical response). Mobilization of assets begins. This may be too late for effective tactical response as the pandemic has already spread and now defensive actions are the only and very limited option. In this scenario a reactive fear based response is the overriding driver.
When the pandemic is declared some countries react by closing their borders. This action while purely a defensive reaction has many implications from an economic perspective. Other countries begin to close their borders in reaction to the spate of border crossings further exacerbating the situation. As borders are closed international trade is brought to a standstill or is carried out on a very, very limited basis. If the H5N1 pandemic in any way parallels the influenza of 1918 – 1919, it is estimated that approximately 66% (two-thirds) of the deaths will occur in a period of 24 weeks (approximately 168 days) and more than 50% will occur in even less time, roughly within the first 90 days. The potentially staggering death toll and the reactive response to the pandemic will lead to slowdowns of already fragile economies leading to accelerations of workforce layoffs worldwide as markets react, rapidly shrink and/or completely cease to exist.
Faced with suddenly idled workers worldwide and the need to provide medical aid to populations that are succumbing to a global pandemic, governments are thrown into chaos. How will they deal with this? Keep in mind that governments are generally funded through the collection of taxes (individual and corporate). Without its revenue base (taxes) a government’s ability to assist will be restricted. Government assistance will be further restricted as government will be faced with the same problem that non-government entities are faced with: a workforce that is stricken with the virus.
Traditional services of government, such as, military, police, fire, emergency medical services, administrative and tax functions are soon strained to the point of breaking. Governments worldwide begin to organize military forces to keep order internally and to supplement police, fire and emergency medical services. The situation is soon exacerbated by many of the government’s own falling victim to the influenza.
While this picture of the first phase of the pandemic is pretty bleak it is not without precedent in recent history. We have experienced violence and looting after hurricanes, earthquakes and other natural disasters. The world, unfortunately, is still not as civilized as we would like it to be.
Phase # 2: Dynamic Consistency Problems – Paralysis (180 – 320 days)
As the world settles in to the reality of the pandemic, adjustments are made. The UN, WHO and other entities (CDC) set out to contain the outbreaks that continue to materialize. Businesses readjust to the realities of a changed and changing operating model. It is no longer business as usual. Supply chain adjustments are being made, albeit slowly and sporadically due to disruption of transportation systems. Service center operations (call centers, etc.) are being reconfigured to adjust to the need to focus on geographical areas currently less affected by the pandemic.
Assets mobilized by WHO, the international community, governments and industry after reassessing their status and effectiveness; begin to adjust their efforts. Death tolls show signs of leveling off and even declining in some areas. This may be a false positive in that pandemics have been shown, in the past, to be cyclical in the rise and fall of death tolls. In this phase a paralysis begins to take effect as economies, affected by the reaction of governments (border closures, quarantine, etc.) become bodies at rest, not bodies in motion.
The world begins to realize that the energy required to regenerate global economic motion will be massive. Speculation and fear could be replaced by paralysis, despair and retrenchment during this timeframe.
Phase # 3: Worst Case – Collapse (320 – 600 days)
The world suddenly becomes larger as localization takes root. Realizing that surviving the pandemic will require a rethinking of business strategies many sectors see a reverse in trend as large, integrated companies are forced to downsize and localize. As the world settles in to this new reality more adjustments are made. The UN, WHO and other entities (CDC) while still combating outbreaks are less effective due to local constraints put in place.
Governments, businesses and consumers readjust to the realities of changes in economic models. Goods and services revert more and more to reflect the localization brought upon by disruptions to transportation channels. While it is no longer business as usual, some local economies begin to revitalize as access to raw materials or changes in demand are compensated for by readily available products. Supply chain adjustments continue to be made as countries dependent on external resources are seeing the balance of power shift. Consumer societies are being forced to face sobering realities.
Death tolls may again begin to rise as local efforts to stem the continued pandemic and deal with normal medical issues are faced with lack of materials (vaccine, medicines, etc.) due to the impact of the past 320 days of the pandemic.
In this phase paralysis gives way to collapse as localization changes the economic model. Collapse is not to be viewed as a return to the “stone age” rather it is a collapse of global trading systems and a refocusing of these systems to address a more local and/or regional marketplace. The economies (bodies at rest) begin to slowly create localized inertia (bodies in motion). This inertia is limited due to the impact of the pandemic, local restrictions and the localization of good and services that may lead to a change in consumer mentality.
The world begins to realize that the energy being expended on localization could form the basis for the regeneration of the global economy.
Trade talks between consumer and supplier nations dominate the day. Financial concerns in the transportation industry are of major focus as the trade routes are dependent on getting national and international transportation systems recovered. This action begins to revive and expand local economies, but does not instantaneously return us to the pre-pandemic days.
The global economy is still faced with answering the significant question: “How to restart an intricate and complex system that has evolved over time such that it can manage the stresses associated with its functioning?” And the global economy may begin to question which country should lead and manage this undertaking.
Paralysis, despair and retrenchment are replaced with local revitalization and rediscovery during this timeframe.
Phase # 4: Recovery – Every Time History Repeats Itself the Price Goes Up (600 – 800 days)
The pandemic will gradually subside relieving healthcare systems that are, by this time gasping for survival. The world enters a very slow and potentially torturous recovery mode.
Tainter in his book, “The Collapse of Complex Societies,” cites four concepts that would lead to an understanding of collapse:
Taking these four concepts and projecting them into the pandemic scenario, we see that societies that increase in complexity do so as a system. The interlinked parts are forced in a direction of growth and the touchpoints (not directly linked) are required to adjust accordingly.
If we consider the last point made by Tainter, that increasing complexity often reaches a point of declining returns, we can project that at this stage of the pandemic that attempting to maintain the status quo regarding our complex global economy may actually exacerbate the recovery from the pandemic.
The economic stakes at this stage are going to be very high. Governments, businesses and consumers will have to work hand-in-hand to realize the revival of the global economy. While localization has provided a basis for a surviving the pandemic, new growth on a global scale will be slow in coming. This may partially be due to fear that a return to the “norm” might just invite a recurrence of the pandemic to areas that are considered virus free.
If the pandemic does indeed cost the U.S. the staggering sum of $675 billion, as cited by Senator Frist, what will be the impact on the global economy? If the Congressional Budget Office estimate is correct, that direct and indirect costs would reduce U.S. economic production by 5%; what will that mean on a global basis?
The U.S. economy is part of a complex global economy. And, as Tainter points out, increasing complexity often reaches a point of declining returns. Will we have the wherewithal, as nations, to fight off the temptation to “go it alone”? Each cog (nation states) in the global economy is like the links in a gigantic supply chain. Where a country fits into that chain is of critical importance to the recovery process. While the U.S. economy generated $11.7 trillion in gross domestic product, will it be at the head of, middle of, or at the end of the chain?
The cost of investment is predicated on where you are in the chain. If you are a consumer (an importing country) much like the U.S. is (e.g., trade balance) then the cost of investment is related to the availability of alternate sources and nearness to the delivery point that you are to the finished product. However, being a consumer in the post-pandemic economy may be a difficult situation if the consuming nation does not have a strong financial standing and/or readily acceptable trade alternative (i.e., monetized commodities).
If you are a supplier (an exporting country) much like the countries rich in natural resources, you have to determine where along the supply chain your entry point is. However, being a supplier in the post-pandemic economy may be as difficult as being a consumer if other suppliers (i.e., shippers, etc.) have breakdowns due to financial woes brought on during the pandemic.
Your investment (your country’s economy) is going to reflect the degree of damage that the pandemic does to your population and the economic infrastructure that that population supports.
Restarting a complex global economy may initially create a cost benefit curve that looks very promising at first, for the easiest, most general, most accessible and least expensive solutions will be the ones that are attempted first. As these solutions realize maximum value and essentially are exhausted, continued economic stresses will require further investments in complexity. The question will be: “Where do the governments, peoples, businesses of the world come up with the money to pay for investments in complexity that return the global economy to the status quo?” Realize that in the 500 – 800 day timeframe that we envision a lot of the cash reserves of the world’s economies will have been spent fighting the pandemic.
Concluding Thoughts – Beyond 800 days
Current research indicates a small portion (5%) of businesses today, have continuity plans, but virtually all realize they are at risk to the effects of a pandemic. The Center for Resilience at The Ohio State University defines a resilient enterprise as:
“A resilient enterprise has the capacity to overcome disruptions and continually transform itself to meet the changing needs and expectations of its customers, shareholders and other stakeholders.”
Center for Resilience, Ohio State University
Government and business leaders have a responsibility to protect their organizations by facilitating continuity planning and preparedness efforts. Using their status as “leaders,” senior officials, senior management and board members can and must deliver the message that survivability depends on being able to find the opportunity within the crisis. Today we cannot merely think about the plannable or plan for the unthinkable, but we must learn to think about the unplannable.
Humans by their very nature are resilient. We have managed to evolve through the ages and have survived ice ages, volcanic eruptions, wars, pandemics and other maladies. We will survive this challenge too. We may not, however, return to the status quo that we are accustomed to today. Will it be a better world? Will it be a more difficult world? That only time will tell.
The mortality rate of the pandemic will only be the tip of the iceberg, the speed with which it achieves global contamination and economic impact over time will be the major issues to contend with. Preparing yourself and your organization now is one of the key steps to effectively dealing with the disruption that may run rampant. We cannot afford to abdicate personal responsibility for our well being to entities that may not have the capability to ensure our well being. Being personally responsible engenders personal accountability, something that we need to instill now, not when the pandemic is upon us.
About the Author
Geary W. Sikich is the author of “It Can’t Happen Here: All Hazards Crisis Management Planning” (Tulsa, Oklahoma: PennWell Books, 1993). His second book, “Emergency Management Planning Handbook” (New York: McGraw-Hill, 1995) is available in English and Spanish-language versions. His third book, “Integrated Business Continuity: Maintaining Resilience in Uncertain Times,” (PennWell 2003) is available on www.Amazon.com. Mr. Sikich is the founder and a principal with Logical Management Systems, Corp. (www.logicalmanagement.com), based in Chicago, IL. He has extensive experience in all aspects of enterprise risk management; providing his worldwide clients business-continuity, crisis and risk consulting. He has a Bachelor of Science degree in criminology from Indiana State University and Master of Education in counseling and guidance from the University of Texas, El Paso. Geary can be reached at (219) 922-7718 or gsikich@logicalmanagement.com.
Copyright© Geary W. Sikich – 2006. World rights reserved.
Published with permission of the author.
September 20th, 2006 at 3:26 pm
Excellent and informative