Marsh Mac’s Mercer Finds Lack of Pandemic Planning

March 30, 2006

A global survey study conducted by Marsh Mac’s Mercer Human Resource Consulting has determined that while “evidence of the global spread of avian flu increases, there is a striking gap between companies’ concern about the impact of a human pandemic and actual pandemic planning.”

Other results of the survey, released by the Company’s Singapore office, found the following:
— Some 70 percent of businesses surveyed believe a pandemic would damage profitability, but only 47 percent have a business continuity plan in place and just 17 percent have budgeted for pandemic preparedness.
— Companies in Asia are the best prepared — 25 percent have established a pandemic preparedness budget compared to 12 percent in Europe and 7 percent in the US.
— Telecommunications and pharmaceutical companies are the most likely to have developed a pandemic preparedness budget while few retail companies have done so.

Over the first two weeks of March Mercer polled 450 companies in 38 countries and 26 industries. It “is believed to be one of the most comprehensive and global surveys conducted on the subject to date,” Mercer said.

“Despite the rapid spread of avian flu worldwide and critical concerns that a pandemic would significantly affect companies’ profits and productivity, Mercer’s survey established that only 47 percent of firms have started a business continuity plan and just 17 percent of organizations have a pandemic preparedness budget,” noted Rosaline Chow Koo, head of Mercer’s Health & Benefits business for Asia Pacific. “Yet some 90 percent of the survey participants expect a moderate to high impact to their organization from high rates of absenteeism and nearly 70 percent expect profitability to be adversely affected if a pandemic occurs.”

The survey found that Asian companies, particularly in Singapore, are furthest advanced in pandemic preparedness plans. “About one in four Asian survey respondents have budgeted for preparedness, compared to 12 percent of the respondents in Europe and 7 percent in the US,” Koo indicated. “This may be because Asia is at the epicenter of the avian flu outbreak and Asian companies were directly affected by the 2003 SARS crisis.”

She also stressed that “a pandemic will severely impact consumer confidence, and industries that depend upon heavy foot traffic or people congregating in enclosed spaces could take a hit in a pandemic. Nevertheless, there is a gap between concern and specific planning actions to date.”

As a result Mercer found that “80 percent of survey respondents in the hospitality and recreation sectors believe a pandemic would have a negative effect upon consumer demand and on revenue, but only 20 percent have established a budget for pandemic preparedness. Similarly 86 percent of survey participants in the transportation sector are concerned about how their revenues would be affected, but only 18 percent have established a preparedness budget. For the retail sector, 65 percent believe a pandemic would have a negative effect upon consumer demand, but only 6 percent of the survey respondents said their company has established a pandemic preparedness budget.”

Mercer even found a small upside in the survey, notably among insurers. The report said: “A substantial minority of respondents in four industries expect that a pandemic would increase customer demand for their businesses. In insurance, 39 percent of the respondents said customer demand would increase, while 36 percent said their company would experience a decrease in demand. In pharmaceuticals, 38 percent of those surveyed saw a pandemic leading to increased customer demand vs. 50 percent who forecast a decrease. Some 24 percent of respondents in telecommunications predicted increased customer demand in a pandemic, while 38 percent forecast a decrease. Similarly, 24 percent of those in health care forecast positive customer demand while 47 percent predicted a decrease. The balance of respondents felt a pandemic would have no effect on demand.”

The report then gave the following breakdown by region of preparedness efforts:
Hong Kong and Singapore — equal preparation efforts, divergent forecast of impact – Mercer’s survey indicates that Hong Kong and Singapore, both affected by the 2003 SARS crisis, score among the best prepared geographies for a potential pandemic. Factors taken into account include establishing a budget for preparedness, forming a crisis management team, developing a communications strategy, and undertaking a skills inventory.

There is a significant divergence, however, in the expectations of respondents from these two locations of the impact on profits. Only 9 percent of respondents in Hong Kong expect that a pandemic would have a positive effect on their company’s profitability and 80 percent expect a negative impact. By contrast, 22 percent of the Singapore respondents project a positive impact on profitability should a pandemic occur, with 56 percent expecting a negative effect. “This discrepancy may be due to the positive manner in which the Singapore government managed the SARS crisis.” Koo stated.

Europe and US — Preparedness for an avian flu pandemic in Europe and the US lacks the urgency of participants in Asia, according to the Mercer survey. “There are two key reasons for this divergence,” Koo explained. “First, both the US and Europe were largely spared the scourge of SARS. Second, Western Europe has experienced no human fatalities while the US bird and human populations have, so far, escaped avian flu unscathed.”

Jim Reynolds, MD, a principal in Mercer’s office in Denver noted: “In the event of an avian flu pandemic, 80 percent of the US respondents expect a negative impact on their company’s profits, but only 7 percent of these respondents said that their organizations had as yet established a budget for pandemic preparedness.

“Should a pandemic develop, however, US companies are prepared to throw money at the problem,” he continued. “Some 39 percent of US companies surveyed said they would increase pay to employees who are required to take on additional responsibility, compared to a global average of 26 percent. About 11 percent of US companies said they would increase pay for employees working from home, compared to 7 percent of the global respondents. We believe that, to be effective, investments are better made at the planning stage. Once a pandemic occurs, such expenditure may be seen by some employees as a bribe to risk contracting life-threatening illness. Therefore this approach is unlikely to be the most effective way to address a crisis.”

Charles Nelson, worldwide partner at Mercer in London, indicated however, that the “data from Europe is less conclusive overall, but of those that replied only 12 percent have budgeted for pandemic preparation measures. This is probably reflective of a ‘wait and see’ view from European leaders. It remains important, however, that a systematic approach is taken to business continuity and planning a response to this potential pandemic.”

The bulletin also noted: “More than half of the 450 companies that responded to the survey were willing to be named in the survey report. These respondents included AIG, American Express, AT&T, Aviva, BHP, Daimler Chrysler, Dow Chemical, Dupont, Fujitsu, Intel, Kraft Foods, Kimberly Clark, Merck, Molex, Motorola, Nike, Novartis, Levis Strauss, L’Oreal, Minter Ellison, Owens Corning, PepsiCo, Schering-Plough, Siemens, Tyco, and Zuellig.

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