LONDON, 17 October 2005 – As the first outbreak of avian flu hits Europe and the World Health Organisation (WHO) urges countries to prepare for the massive social and economic disruption brought about by a pandemic, leading insurance broker and risk management consultant Aon today published its White Paper on the risks faced by businesses (Pandemic Influenza: Managing the Risks of an Invisible Threat) and called on corporates to take action to protect their performance. 

Despite the considerable risks of a flu pandemic, the report highlights that insurance markets currently offer little protection aside from life assurance and sickness cover, pushing the need for robust business continuity planning to the top of the corporate agenda.

The social and economic implications of a flu pandemic for businesses are extensive: the WHO estimates that it may debilitate up to 25% of the workforce at any one time and the UK’s own contingency plan puts this figure as high as 50%. Though less infectious and virulent than avian flu, SARS hit the economies of East and South East Asia hard.  According to the Asian Development Bank, the overall loss in demand and business revenue was approximately US$60 billion.

Aon’s White Paper highlights that an outbreak of the flu pandemic would cause travel, tourism and trade (import and export) to be shut down in an attempt to contain the disease.  Cash flow problems would  impact businesses as employees fell sick or took time off work to care for family members, or could not travel due to quarantine and fuel shortages.  The Government predicts that normal sickness rates of between 2% and 6% would be likely to double in the case of a pandemic and that up to 25% of the workforce would be absent for between five and eight days over a three month period.

Businesses that increasingly use overseas suppliers and integrated ‘just in time’ techniques also face the risk of supply chain interruption. If materials/supplies are quarantined as a result of a pandemic then a direct hit to profit is likely due to the interruption of production processes.  

In spite of these risks, research by the Chartered Management Institute shows that businesses have given little consideration to the possible impacts of a flu pandemic. Business continuity plans are found to prioritise loss of IT capacity, loss of telecommunications, fire, loss of access to site, utility outage and terrorist damage.

Hugh Leighton, risk consultant, Aon Limited, commented, “Businesses must acknowledge that the outbreak of a flu pandemic is a genuine risk and one of the greatest threats to future performance. Experts describe an outbreak in terms of ‘when’, not ‘if’.  However, research and historic SARS experience shows that little is being done to address the risks.  As a result of the experience of SARS and limitations in business interruption cover for infectious diseases, broadly speaking a pandemic will be an uninsured event whereby the cost will be retained by the business.  Contingency planning should be a top priority for directors, who risk failing their business, staff and shareholders by not taking the appropriate preventative or mitigating action.  To ignore this risk is tantamount to a dereliction of duty”.

“We encourage all companies to assess their current level of preparedness and to take measures to mitigate against the disruption caused by a potential outbreak.  Every day that a pandemic is delayed, is another day for business leaders to prepare.  Insurance cover for loss of business is a particular problem, leaving business continuity as the first and only line of defence”, added Mr Leighton. 

Copies of ‘Pandemic Influenza: Managing the Risks of an Invisible Threat’ are available from sally.taylor@aon.co.uk.

About Aon
Aon Corporation (www.aon.com ) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. The company employs approximately 53,000 professionals in its 600 offices in more than 120 countries.  Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.
 
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