10 Key Actions for Enterprises in An Epidemic
At this moment, with China fighting an epidemic, many enterprises are actively fulfilling their social responsibilities. As key contributors to the country's economy, the basic social responsibility is to conduct business well and organize employees properly. In the face of the current epidemic, Deloitte believes that the greater the urgency, the more rules need to be in place to face challenges calmly.
The ongoing development of the new coronavirus has prompted the World Health Organization (WHO) to discuss whether the epidemic is a Public Health Emergency of International Concern. (PHEIC). Meanwhile, enterprises could face various strategic and operational risks, such as delayed or interrupted supplies of raw materials, changes in customer demand, cost increases, logistics shortages leading to delays in delivery, employee health and safety protection issues, insufficient manpower, and logistics and settlement challenges related to import and export trade.
Based on our analysis of the leading practices of multinational companies in Business Continuity Planning (BCP), emergency and major emergency management of infectious atypical pneumonia, H1N1 influenza, Ebola hemorrhagic fever and other major infectious diseases, we recommend Chinese companies take the following 10 actions to address future uncertainty:
1. Establish emergency decision-making teams.
- An enterprise should immediately set up decision-making teams for temporary major issues, such an "Emergency Response Team" or "Major Emergency Management Committee", to build the whole objectives and emergent plan and ensure the fastest possible decisions can be made in various situations.
- For committee members, enterprise should evaluate its own professional strengths and, if necessary, bring in professionals to match its business and regional characteristics.
2. Assess the risks and clarify emergency response mechanisms, plans and division of labor.
- Many multinational companies have established "emergency contingency plans" or "business sustainability plans", usually implementing these immediately in the event of a major emergency.
- If a company has no such plan, it should conduct a comprehensive assessment of all risks straight away, including employee, outsourcing, government, public and supply chain issues. According to risk assessment, the company should respond to issues around office space, production plans, procurement, supply and logistics, personnel safety and financial capital, as well as arrange other major matters related to emergency plans and division of labor.
3. Establish a positive information communication mechanism for employees, customers and suppliers, and create standardized communication documents.
- It is important to stabilize supply chains and the mindsets of internal employees and external partners, as well as strengthen the management of publicity and customer services to avoid negative public opinion caused by negligence or inconsistency.
- At the same time, a company's existing information system should be used to collect, transmit, and analyze epidemic information and issue prompt risk warnings.
4. Maintain the physical and mental wellbeing of employees, and analyze the nature of different businesses and jobs to ensure appropriate resumption of work.
- According to Deloitte’s latest human resources survey on epidemic responses (click for the report), 82% of companies believe "flexible work arrangements" are now the most important means of employee management. We recommend companies immediately establish flexible vacation and work mechanism, using technical means to establish non-face-to-face or off-site work parameters during special periods.
- Besides enterprise should establish a staff health monitoring system and keep employees' personal health information confidential.
- Enterprise should ensure the safety of working environments by strictly cleaning and disinfecting workplaces in accordance with national and regional public health authorities' hygiene management requirements for periods of major infectious diseases.
- Enterprise should strengthen epidemic safety education, establish fact-based employee self-protection guidelines, and increase awareness of safety and risk prevention.
5. Focus on supply chain risk response plans.
- Multinational companies usually arrange to utilize "redundant" office facilities, production capacity plans, and raw material procurement channels in multiple countries or regions in advance, so the work in the "infected area" can be quickly undertaken or production will not be stopped due to lack of capacity or raw materials.
- In inventory management, organizations must consider the prolonged inventory digestion cycle caused by blocked consumption, the corresponding increase in financial costs, and pressure on cash flow. At the same time, in industries with long production cycles, organizations must prepare in advance for a rebound in consumption once an epidemic has eased to prevent the risk of insufficient inventory.
6. Develop solutions to compliance and customer relationship maintenance risks arising from the inability to resume production in the short term.
- After an outbreak, organizations should cooperate with downstream customers to understand changes in client and market conditions, and confirm the impact of resumption, order delivery, demand, and market changes.
- Laws around the performance of civil and commercial contracts may come into play, as not all non-performance during an epidemic can have no legal consequences.
- Enterprises should identify and evaluate those contracts whose performance could be affected, and promptly notify the related party to mitigate possible losses, as well as assess whether it is necessary to sign a new contract, and retain evidence to use in possible civil lawsuits.
7. Practice social responsibility and stakeholder management, and incorporate sustainable development strategies into decision making.
- Enterprises should obey the unified planning and arrangements of the government.
- Proper corporate information disclosures can enhance an enterprise's public image.
- For Chinese companies, the most important leading practice is being able to implement corporate social responsibility from the perspectives of the environment, society, economy and employee stability, as well as coordinate relationships with the community and supplies. They should assess the possible impact and duration of the epidemic, adjust plans, and, at the shareholder or board level, communicate proposed measures and assessment results.
8. Build management plan of employee master data, information security and privacy.
- Enterprises should establish good employee master data management mechanisms, and register internal and outsourced personnel, suppliers, partners, and other personnel with whom they have contact.
- They should also formulate timely information security emergency response plans to ensure the security, stable operation. To arrange remote and on-site staff to carry out their duties, establish 7*24 hours remote and on-site support to ensure the monitor on computer rooms, networks, systems, applications and resources.
- Companies should also protect personal privacy and clinical trial data, especially to those patients (whether customers or employees), strictly control access to, transmission and usage. For clinical and medical data, access control and protection level should be set up.
9. Companies need to consider adjusting their budgets and implementation plans, cash flow plans, and early warning mechanisms for international trade.
- According to Deloitte data, 46% of companies plan to lower their performance hurdles for 2020. At the same time, we would advise companies to pay attention to cash flow, arrange cash scheduling to ensure the safety of funds according to the rhythm of upstream and downstream suppliers and employees' work plans.
- In addition, they should pay close attention to the international import and export trade situation, particularly sudden changes or disasters in locations from which major products originate, which will impact trade and potentially give rise to huge losses at the company itself. To prevent such incidents, companies should establish emergency "scenario plan" responses for basic providers as soon as possible, which can include plans for hedging using futures, international trade and transportation, and alternative suppliers.
10. Upgrade enterprise's risk management mechanisms.
- Deloitte's Enterprise Risk Management Survey report for global entrepreneurs shows that 76% of risk managers believe their company could respond effectively if a major emergency occurred tomorrow. Yet only 49% of enterprises have developed relevant manuals and conducted pre-tests based on emergency scenarios, and only 32% of enterprises have conducted "major emergency simulation exercises" or training.
- We believe most enterprises could face unexpected risk events at any moment —it's a question of when, not whether. Enterprises should establish or upgrade their risk management systems to identify the key risks and build risk mitigation plan. Strengthening risk management system is just as important as dealing with negative events when they arise.