Coronavirus, supply chains and insurance
14 February 2020: coronavirus reports are shocking and sad; but the outbreak also has impacts for business. We ask ICAEW’s business and financial services experts how the virus should shift business thinking.
There’s no point quoting the statistics. By the time you read this they will have risen and we will have received copious advice about face masks, hand gel and travel. Added to those numbers we will have figures on global economic impacts to conjure with.
There will be some sobering thoughts dominating the minds of business as the havoc wreaked by the virus dawns on us both professionally and personally.
First comes to mind the supply chains built by manufacturing as it has sought to lower its cost base and access the huge pool of labour South-East Asia has to offer. As images of empty factories, offices and transport systems emerge from China, businesses will be wondering if their supply chains will hold.
Iain Wright, Director for Business and Industrial Strategy at ICAEW, comments: “It is essential that UK businesses should undertake a risk assessment to determine the likelihood and impact of their exposure to the coronavirus.
“UK firms whose employers have been travelling to and from China, in particular, and Asia, in general, as well as those businesses whose supply chains operate in the countries affected may be particularly impacted. However, news that the virus has arrived in the UK should mean that all businesses consider steps to keep their employees safe and their business operations viable.”
At this worrying time, Wright points out that good communications from businesses are essential, both to inform and limit the spread of the virus. This is a time to take stock. He says: “Ultimately, good businesses in this context need to fully understand their operations and employees and manage identified risks as swiftly and comprehensively as possible.”
There are implications for insurance too. Philippa Kelly, Director, Technical Strategy Business Group at ICAEW, says: “Businesses should look closely at the terms of their insurance cover. Policies don’t always cover epidemics or outbreaks as standard.
“Some insurers will offer specific policies which cover communicable diseases ie, in relation to event cancellation. The downstream business interruption coverage could also vary depending on policy terms with many companies preparing to take a financial hit from the effects of the virus.”
She points out that insurers themselves may be starting to estimate losses, but these will not become clear for some time. And she adds that individuals will most likely be covered by travel insurance policies as long as they are following government advisory notices.