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Planning for the inevitable.

For Factiva, a pandemic that could force its employees to work from home wouldn't be so different from a normal day--since over 700 of its 800 global employees already have the capability to, and do, work remotely a good part of the time. However, as a provider of news and information aggregated from 10,000 sources, Factiva doesn't want to miss a beat in electronically delivering content to its worldwide customers.


"In some respects, we have a bigger burden than a lot of companies, because we are the information source," says Kristine Breuer, vice president, Global Human Resources, for Factiva, a joint venture of units of Dow Jones and Reuters.

With a culture that Breuer describes as one that "tries to provide the most flexible and adaptable work environment," something like, say, pandemic planning is a "natural extension of some of our work practices," she says. Should a pandemic strike, the company would make operational the components of its continuity plan for communicating with its employees, vendors and customers.

Not every business is as flexible as Factiva, so it's never too soon to get a plan in place.

Global health experts say it's inevitable that an influenza pandemic will strike the U.S., and with pandemics occurring around the globe on an average of three times per century--every 10 to 50 years--that it's just a matter of time before the U.S. is hit. "Pandemic" is defined as a new strain of the influenza A virus that strikes humans, spreading from person to person and causing serious illness and a high death rate.

When they strike, experts say, pandemics have the capability of killing over a half a million people in the U.S., hospitalizing more than 2 million and costing the U.S. economy a staggering $160 billion to $675 billion. In contrast, annual seasonal flu causes approximately 36,000-40,000 American deaths, while 200,000 are hospitalized and the cost to the U.S. economy is over $10 billion in lost productivity and direct medical expenses. Clearly, the scale of pandemic flu dwarfs seasonal flu in both numbers and severity.

Under such a scenario, consider the business impact if 40 percent of your employees were too sick to get to work for up to three to four months. Consider, too, the same 40 percent loss of all those in your supply chain--your vendors, customers and more. Would your business come to a screeching halt?

Whether a natural disaster, terrorist attack or other large-scale business risk--local or global--it is critical to be prepared. Following last year's devastating hurricane season, businesses have likely reviewed their disaster recovery and/or business continuity planning, but many are likely not prepared for a health emergency of pandemic magnitude.

With word that cases of "bird flu" are spreading (226 cases worldwide led to 129 deaths resulting from avian flu, reported the World Health Organization in June), and in light of the heat it took for its response to Hurricane Katrina, the U.S. government has taken early steps to prepare for an avian flu outbreak. Such preparations can also apply to other health-related events, such as a terrorist attack with chemical or biological weapons.

The government website (Pan or provides an overview, checklists and related links for business planning. (For more websites, see the box on page 30.)

A U.S. Chamber of Commerce brochure notes that in the event of a pandemic, "government health officials may have to implement dramatic measures, including shutting down certain businesses that involve high levels of interaction with the public. They may also have to restrict travel, cancel public events and close schools."

The Chamber's brochure notes that while many existing business continuity plans anticipate disruptions such as fires, earthquakes and floods, these events are restricted to a certain geographic area, with time frames that are fairly well-defined and limited. In contrast, planning for pandemic flu "demands a different set of continuity assumptions, since it will be widely dispersed geographically and potentially arrive in waves that could last several months at a time."

Watson Wyatt Worldwide reports that companies around the globe are concerned and planning to some degree. A survey of 90 multinational companies in March found that 74 percent of companies operating in Asia-Pacific were greatly or moderately concerned about avian flu and 32 percent had plans in effect. In Europe, 45 percent were concerned and 11 percent had plans in place; in the U.S., 34 percent were somewhat concerned and 15 percent had plans.

"A good first step for companies is to note what worked and what didn't in their planned responses to past threats such as SARS (Severe Acute Respiratory Syndrome)," says Robert Wesselkamper, director of International Consulting at global human-capital and financial management consulting firm Watson Wyatt Worldwide. However, experts agree that SARS, which flared in Asia a couple of years ago, was mild compared to the potential impact of an influenza pandemic.

Wesselkamper says it's wise for companies to communicate their formal plans to manage through any business interruption--including alternative work arrangements and reimbursement for preventive and onset treatment--to the entire workforce, particularly associates responsible for deployment. Bottom line, he stresses, "It pays to be proactive when dealing with a virus that could have such a big impact on the workforce."

Karin Borchert, chief operations officer for Factiva, explains that the company's umbrella business continuity plan covers many scenarios that focus on specific operational locations, communication and recovery. The pandemic plan homes in on two main areas: ensuring that employees and their families are kept healthy and "that we're able to run our business very smoothly and without major interruption."

Following last year's London bombings, Factiva's plans were put to the test. "When you can't get on the phone and reach out to all the employees, you need to use other means to try to get a headcount and track down where people are," Borchert says. The company's process, in place since 9/11, includes phone calls and an email chain. The firm maintains home-contact details for employees. However, keeping employee records up-to-date and accurate is a challenge, which is complicated globally by local privacy statutes and individual privacy requests.

Borchert says Factiva is considering securing a third-party provider of emergency notification services that would enhance its capability to identify where people and their families are, and ensure their safety--in a shorter period of time than the current process can. Using such third-party systems, responses are collected via a variety of technologies, including the Web, voice mail, mobile phones, BlackBerry devices, etc.

Borchert notes differences between disaster recovery from a specific event at one location--say, a major flooding at its headquarters in Princeton, N.J.--compared to a pandemic, which could be lengthy and impact travel globally. Locally, technology backup systems ensure customers keep current and updated. In a global scenario, employees might be asked not to travel, if they were not comfortable. "We've been through that before, when there was SARS," she says.

Overall, Borchert says, Factiva's business continuity plan encompasses the full spectrum--from dire circumstances in a specific location to the much longer term and larger scale that a pandemic would introduce. The plan, which runs about 40 pages in length, identifies varying degrees of issues and follows the World Health Organization's system and responses.

"Communicate with all of your employees and suppliers," advises Borchert. Indeed, she says, customers are asking for documentation of Factiva's plan. She notes this is both "interesting and telling," in that "they want to know that we are looking out for continuity on both sides of that supply chain."

Borchert sounds one cautionary note, however, about the fine line an organization walks at such times. "You can instill fear in your workforce by talking about emergency-preparedness plans." So, while, she suggests companies look into purchasing masks to protect employees going out in public, she advises, "if you're starting to run drills to evacuate a building, you've got to be pretty clear in terms of what your intent is, or people can misread it."

Bottom line, Borchert says, "the communication and the staging of that communication is critical."

A report prepared by The Conference Board says that companies need a more global, holistic approach to prepare for a potential avian flu epidemic. Companies that fail to create detailed crisis management and business continuity plans are likely to find themselves at peril.

Ellen Hexter, director of The Conference Board Integrated Risk Management Program and author of the report, says, "Most crisis management and business continuity plans are built on the expectation of loss of infrastructure or data, for example. An avian flu pandemic would be nearly the opposite, impacting the workforce in one's own company and throughout the supply chain." Balancing corporate needs and human needs is key for planning.

One example cited in the report was Netherlands-based global bank ABN Amro. In October 2005, the bank set up a task force to plan company-wide strategy to deal with a potential flu crisis. It created plans to educate all employees about symptoms and appropriate responses; made the decision to not purchase anti-viral medication as a matter of principle; and emphasized ethical considerations of stockpiling drugs in light of their current scarcity. The group also recommended setting up a task force team in each country where the company operates to monitor the health environment.

Also, The Conference Board report notes that businesses are identifying key people and processes to sustain operations, and many are running scenarios of how to get work done with diminished workforces. According to a July survey, nearly three-quarters of 553 responding global companies either have a plan or are well into developing one, with 85 percent of the respondents having begun planning within the past 12 months.

However, of those without specific strategies, small and private companies represent the majority and, as such, are most vulnerable to the risks of a pandemic, say the survey's authors.

Ensure Insurance Is Adequate

When developing plans, companies also need to consider costs, loss of production, service delivery capabilities and impacts to their cash flow and income. It's likely that companies will continue to pay salaries for employees unable to get to work, as most did during Hurricane Katrina. Besides these costs, many companies are talking to their insurers to make certain they have adequate coverage.

In a recent whitepaper, "Avian Flu: Preparing for a Pandemic," risk and insurance-services firm Marsh says the question on the tip of everyone's tongue is, "Just how worried should we be be about an avian flu pandemic?" The answer is not simple.

For just as those who reside in, say, San Francisco or Toyko live with the knowledge that they are living in an active earthquake zone, the whole world is now becoming aware that we all live in a potential pandemic zone. If the current pandemic threat doesn't materialize, there'll be another on its tail, and it's impossible to predict just how severe an outbreak will be, or the exact strike date of a potentially disruptive terrorist attack. But the level of awareness that's been created--for individuals and businesses--cannot be ignored.

In the event of a pandemic, businesses could suffer economically. At such times, they naturally turn to their insurers. But, if experience from SARS and Hurricane Katrina are models, there are likely to be disputes arising from claims. Thus, here again, comprehensive planning can determine what current insurance covers, where gaps exist and the availability--as well as the cost--of filling gaps.

The main coverage categories that may apply for claims related to avian flu include: general business insurance, which includes commercial general liability (CGL); workers compensation (covering overseas employees, inside the U.S. and infection from returning employees); pollution; and property.

In the event of a pandemic, Damian Brew, managing director for Marsh in the firm's Financial and Professional Liability practice, would expect to see issues arise from business interruptions due to employee absence, leading to lower revenues and disappointing earnings. "This is a scenario that leads to claims against corporate officers for failure to make adequate disclosures under federal securities laws, particularly where the company's stock takes a major hit," he says.

Also, he comments, there could be derivative claims against corporate officers alleging a breach of duty for failing to make adequate contingency plans in anticipation of economic impact. In such a case, Brew explains, the first-party loss for business interruption would be considered an operational risk that would not be covered under professional policies.

On what coverage is absolutely necessary, Brew says directors and officers' insurance tops the list. "In the event of a pandemic, corporate executives will be required to make a number of difficult decisions regarding the operation of the business that could be the subject of claims by shareholders and even employees." Similarly, he adds, fiduciary coverage may be important for health and benefit plans that will be affected in the event of a pandemic.

So, are you covered? Brew says most companies are likely already protected in the area of financial lines. That said, he advises companies to "carefully review their policies to ensure that there are no terms or exclusions that could negatively impact coverage in the event of a pandemic."

In the area of workers compensation (WC), Marsh Managing Director Mark Noonan, who heads the firm's Workers Compensation practice, says that claims could arise from people on temporary assignments overseas, where exposure can occur. In the beginning of a flu event in the U.S., claims could be expected under U.S. WC--especially for workers in public health and safety. He adds, "Once the flu reaches the classification of 'epidemic,' coverage under WC will be difficult."

As for what coverage is necessary, Noonan says WC is mandatory, except in Texas. He advises that if you have employees going overseas to get foreign voluntary WC; for employees working on contracts overseas, on behalf of the State or Defense Departments, coverage under the Defense Base Act (DBA) is required.

Based on lessons learned from SARS a few years ago, Noonan advises companies to: 1) have a plan for dealing with employees who travel; 2) have a quarantine plan for employees returning from risk-exposure countries to reduce the opportunity for mass exposures; 3) reduce or eliminate travel to high-risk areas; and recognize the potential exists for exposure in transportation, especially airlines; and 4) have a business continuity plan in case of mass illness/closure due to a Civil Authority order that includes a procedure for allowing remote work.

In the property arena, the Marsh managing director who heads its Property Claims practice, Paul McVey, says the biggest problem would be the lack of access to an insured's premises due to a Civil Authority order, voluntary closure of a premises by the insured or just employees' nervousness resulting in a decision to stay home.

Generally speaking, McVey says, without "infectious disease coverage," even closure by Civil Authorities would probably not be covered. He says that most insurers would probably try to invoke the contamination/pollution exclusion and that voluntary closure or just partial suspension of a premises due to corporate decisions or employee "fright" would not be covered.

Before even one case of avian flu appears on U.S. soil, it's a subject that's surely being discussed in boardrooms, and experts say there's still time to prepare. Marsh advises that if avian flu does not emerge, the time spent on planning and preparation will not have been wasted. "After all, avian flu is a good proxy for other potential pandemics; pandemics are a good proxy for potential bioterrorism; bioterrorism is a good proxy for other forms of terrorism. Corporate preparedness is a transferable skill--even if the risk emerges from a totally different direction or source than anticipated."

Pandemic Planning Resources

* American Medical Association:

* U.S. Centers for Disease Control and Prevention:

* U.S. Chamber of Commerce:

* U.S. Government pandemic Web site:

* World Health Organization:

RELATED ARTICLE: Business Questions About Avian Flu/Pandemic Preparedness

* How do we anticipate risks from a pandemic that could harm our company?

* How can we respond effectively to the threat of a pandemic?

* What should we do if employees are exposed to or develop avian flu?

* Can we keep our business operating if employees or a critical employee is infected?

* How can we manage pandemic-related disruptions in our supply chains?

* How should we communicate to our customers, employees and suppliers the steps we are taking to deal with avian flu?

* Will property and/or casualty policies cover pandemic-related claims?

* How much will avian flu cost?

* What are the potential impacts to our markets?

Source: Marsh Risk Alert


* Pandemics are known to strike every 10 to 50 years, and health experts say with the last one in in 1968-9, that it's just a matter of time until one hits the U.S.

* A pandemic could hospitalize 2 million, kill over a half-million and cost the U.S. economy $160-675 billion. The cost of seasonal flu: 36,000-40,000 dead, 200,000 hospitalized and the hit to the U.S. economy, $10 billion.

* Two keys for business planning associated with avian flu: ensure employees and their families' health and ensure business continuity.

* If a pandemic doesn't hit, preparation is transferable to bioterrorism or other large-scale events.
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Title Annotation:business continuity; disaster planning
Author:Heffes, Ellen M.
Publication:Financial Executive
Geographic Code:1USA
Date:Sep 1, 2006
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