Long-term implications of COVID-19 on business risk - April 2020 - Willis ...
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Long-term implications of COVID-19 on business risk April 2020
As businesses around the world are grappling with the
immediate impacts that COVID-19 is having on the global
system and its resilience, it is important not to forget the slow
burn impacts, as this is where unintended consequences can
create hidden tipping points.
What’s COVID-19 going to do in the future? What might this look like beyond the event? Is it going to
happen more quickly than you realise?
With many countries under ‘lock- impact of that terrible event. However, Should we be prepared for viral
down’ and their COVID-19 death and the modern-day equivalent of those infections becoming a more regular
infection rates rising exponentially, losses could perhaps be translated feature of our lives and will this impact
it is understandable that society’s into how people’s working, leisure and on the way in which we work, travel
focus remains transfixed on how to social lives are affected by the shocks and communicate?
contain and deal with the immediate to the economy globally.
impacts of this virus. Optimistic predictions suggest that by
The H2N2 virus of 1957 also remains late spring we could be over the peak
In the UK, the government’s narrative clear in the minds of many, having of the virus but, as the numbers of
has shifted from one of relative severely challenged the health those affected continue to grow, that
confidence to this being the “worst services of the time and killing over a timeframe seems to be edging further
public health crisis for a generation”, million people around the world3. This away. Some forecasts now point to
with suggestions that the virus could was followed by the Hong Kong flu of late summer if not early next year.
last until Spring 20211. 1968 and the Russian flu of 1977 which
was thought to be a re-emergence of
The term pandemic is often Spanish flu4. Our experiences of such
exemplified by the 1918 Spanish globally impacting viral infections are
Flu pandemic estimated to have not new and they do not appear to
claimed the lives of between 20- completely disappear. However, what
50 million people globally2. Whilst is new is the way in which we can now
acknowledging the tragic suffering connect across the world and the
and loss of life, even today’s worst speed with which microorganisms can
scenarios do not envisage the same be spread.
1
https://www.theguardian.com/world/2020/mar/15/uk-coronavirus-crisis-to-last-until-spring-2021-and-could-see-79m-hospitalised
2
https://www.cdc.gov/flu/pandemic-resources/1918-pandemic-h1n1.html
3
https://www.cdc.gov/flu/pandemic-resources/1957-1958-pandemic.html
4
https://www.bbc.co.uk/news/magazine-21125713
Long-term implications of COVID-19 on business risk 1
A recent impact modelling exercise illustrates the economic, business and financial implications of the impact over several
timeframes and suggests that in a worst-case scenario we could be heading for a multi-quarter and deep global recession,
with entrenched structural business challenges that would take some years to recover: People
Assumptions and expected impacts So, could a world post COVID-19 in 2021 look like?
Most likely Global recovery in Q3 Extended global recession Credit squeeze and defaults For the first time, possibly since 1957, Employers may find themselves not
many people will be forced to comply only having to accelerate investment
Public health policy
Problem transmissions occur
Problem transmissions occur
with seemingly draconian rules to limit in new technology but also to increase
measures are highly effective up to Q3. Public health policy up to Q3. Public health policy
the virus spread. Working from home, their focus on employee wellbeing.
– virus spread controlled by is less effective; control is less effective
greater reliance on technology and Recent research on Chinese
Epidemiology mid-Q2 of the virus and social
New cluster cases continue coping with the new ways of working companies6 carried out by Willis
Social distancing measures distancing easing takes in localised waves through will require people to adapt their Towers Watson suggested that
eased in c. 2 months 4 months; with new cluster the northern hemisphere behaviour and learn to live and work one positive impact of the outbreak
cases in localised areas winter in different ways. Social distancing and the subsequent lockdown is
Public health policy
Public health policy
Recovery in factory output may need to continue for some time that employers are taking various
measures are highly effective measures are highly effective is delayed until Q3; until broader immunity is reached additional measures to safeguard
– virus spread controlled by – virus spread controlled by consumer confidence given that, as the Dean of Harvard their employees. Government and
China Chan School of Public Health writes, employers are creating room for
mid-Q2 mid-Q2 recovers only in Q4
“the immediate inconveniences of employees’ health management and
Social distancing measures
Social distancing measures
Slower recovery in export
such restrictions are dwarfed by the insurance/protection. Procedures
eased in c. 2 months eased in c. 2 months sectors
positive outcomes already seen in to support a health and wellbeing
US and Europe have an
Global recession over Q1 to
US and Europe contract countries such as Singapore and strategy, methods for emergency
acute contraction until mid- Q3; US and Europe contract through to Q1 2021 China”.5 contingency plans, business continuity
to-late Q2 significantly throughout Q2
A shock to employment, plans and employee policies and
Highly effective government and Q3 incomes, and global trade insurance arrangements will also
credit support for
Acute, sustained and broad- drives deleveraging given need to be developed.
households / businesses based decline in corporate high debt levels
US and Europe
SMEs are most affected; earnings in 2020
Company funding and
service sectors (aviation,
Large-scale government credit conditions are acutely
travel, tourism) will be credit support for affected leading to defaults
significantly affected households / businesses
Policy is insufficient or
Source: WTW Webcast, COVID-19 Implications
Energy sector of Coronavirus
affected by
for employers, 17/3/2020
Consumer confidence does ineffective; economic recovery
lower oil price to Q3 not recover until Q4 is weak from Q2 2021 5
https://www.weforum.org/agenda/2020/03/coronavirus-covid19-global-academics-insights-pandemic/
6
https://www.willistowerswatson.com/en-HK/Insights/2020/03/3-ways-COVID-19-is-affecting-chinas-business-sector?utm_source=twitter&utm_
Source: WTW Webcast, COVID-19 Implications of Coronavirus for employers, 17/3/2020 medium=social&utm_term=&utm_content=wtwcorporate_d0954728-1056-4f6f-8787-a3406faaf215_&utm_campaign=Other-HCB_
2 willistowerswatson.com Long-term implications of COVID-19 on business risk 3
People
“The immediate However, home working arrangements
may have an invisible cost i.e.
as it relates to their organisation and
accelerate new blueprints for jobs that
inconveniences of creativity, challenge and innovation
may begin to wane as social
can use artificial intelligence (AI) and
robotics, outsourcing and short-term
restrictions such as interaction is reduced. Sharing ideas employment models. Other examples
over a telephone call or skype meeting of the future of work could include:
social distancing isn’t quite the same as sparking
Acceleration toward an agile/
are dwarfed by the ideas off each other in a face-to-face
group setting, and it will take time to flexible staffing model
positive outcomes find new routines. There is also the
challenge of making visible the new
Employers becoming more adaptive
to virtual teams
already seen in ideas and to affect the changes, as
Moves toward e-learning/digital
decision makers are challenged by a
countries such queue of people with more immediate
marketing
access to their time.
Remote working/online
as Singapore and communication
China.” 5 Another longer-term consideration is
a change in the labour pool as a result
Pools of skills made available on
demand and benefitting from the
of layoffs during the crisis. This in turn intra-sector learning
Michelle A. Williams,
Dean of the Harvard T.H. Chan School of offers employers the opportunity to
Public Health, USA recruit fresh talent as well as, where
It is important to remember that
possible, re-employ staff whose
these lessons will be beneficial in
roles may have disappeared due to
the future to create new inclusive
immediate impacts such as lockdowns
workplaces that are accessible to all.
resulting in reduced consumer
For example, disabled staff have had
demand. This may prove the case
to deal with remote working issues
most notably in the leisure, travel and
such as technology, lack of access,
hospitality sectors.
and the slow adoption of agile working
models. A post COVID-19 world could
Despite this there is an opportunity for
embrace these challenges and open
employers to think about “future work”
new opportunities and talent pools
arrangements of the 4th industrial
that have been waiting to be tapped.
revolution (or “the future of work”)
4 willistowerswatson.com Long-term implications of COVID-19 on business risk 5
Investment and return
Both Goldman Sachs7 and JP Morgan8 The suspension of high-profit From another perspective the Bank The situation post-COVID-19 may be
predict a recession in the US and international routes such as of England released a statement further exacerbated by a potential
Europe resulting from the effects Asia–Pacific and many European advising: “Temporary, but significant, risk averse stance that governments
of COVID-19. Warren Buffet, on the routes is likely to result in airlines, disruptions to supply chains and and organisations may take in respect
other hand, said the recent panic airports and the numerous supply weaker activity could challenge cash of removing any bans or restrictions
that’s hit markets isn’t as bad as the chains and stakeholders missing out flows and increase demand for for fear of sparking a new infection
2008 financial crisis9. While economic on the summer peak travel season. short-term credit from households outbreak. Thus, sporting events,
giants may differ in their views the It could also result in bankruptcies, and for working capital from concerts and potentially borders may
recent frenzied activity in the markets for example for FlyBe; the UK companies. Such issues are likely to experience longer term restrictions
point to a decline of some proportion regional carrier, or unsustainable be most acute for smaller businesses. further impacting on recovery and
moving forwards. financial pressures such as that being This economic shock will affect both laying out a new set of slow burning
experienced by British Airways. demand and supply in the economy.”13 norms.
Stock markets may rally once This scenario may though be
COVID-19 is under control but there A greater threat may however be mitigated by holding interest lower for In summary, if the COVID-19 infection
are most definitely some factors hiding behind the long-term fallout longer, ramped up quantitative easing trajectory continues into the year
which will linger and possibly haunt us from the pandemic. Previous years measures or similar. the likelihood of recession post-
for years to come. Some companies of government policy of austerity, the COVID-19 is high or as Larry Elliott,
will not weather the business potential downside of Brexit and the COVID-19 is not one-sided in the the Guardian’s economics editor,
consequences of this event. massive government bill for mitigating sense that only supply will suffer. concludes “The chances are that the
COVID-19 which is a complete Consumer demand is also likely to imminent recession will be U-shaped:
Recent examples include Flybe10 unknown (the recent £330 billion be hit because consumers reduce a steep decline followed by a period
and Laura Ashley11; but theatres, rescue package for UK businesses12 spending as a result of financial of bumping along the bottom. There
restaurants, hotels, pubs and many alone is equivalent to almost three uncertainty and isolation, and will be recovery, but it will take time
more could be in the firing line. times the annual UK NHS budget) may businesses pull back on investment. and only after much damage has been
The leisure sector in general and result in long term public spending The combined effect of a demand caused.”14 Before COVID-19, many
aviation in particular, are experiencing cutbacks in already stretched sectors and supply shock on the economy countries around the world were still
catastrophic impacts following such as social care, transport etc. limits the conventional measures, recovering from years of austerity,
steep falls in traffic, occupancy and such as interest rate reductions or tax and may not have the bank balances
patronage. concessions, that government can needed to weather the storm.
take to address the circumstances.
7
https://fortune.com/2020/03/20/coronavirus-economic-predictions-goldman-sachs-recession-gdp-2q-2020/
8
https://markets.businessinsider.com/news/stocks/coronavirus-fuel-recession-forecast-us-europe-economic-july-market-jpmorgan-2020-3-1028994637
9
https://business.financialpost.com/investing/warren-buffett-says-coronavirus-oil-one-two-punch-still-not-as-bad-as-2008
10
https://news.sky.com/story/flybe-boss-tells-staff-airline-going-into-administration-11949899
11
https://www.cityam.com/laura-ashleys-administrators-make-268-staff-redundant-and-furlough-1700/
12
https://www.gov.uk/government/news/chancellor-announces-additional-support-to-protect-businesses
13
https://www.bankofengland.co.uk/news/2020/march/boe-measures-to-respond-to-the-economic-shock-from-covid-19
14
https://www.theguardian.com/business/2020/mar/15/prepare-for-the-coronavirus-global-recession
6 willistowerswatson.com Long-term implications of COVID-19 on business risk 7
Cyber
Most would agree that COVID-19 At a business level there have also The shift to remote working
presents a serious risk in many been examples of fake virus tracking
different ways, but to some it also map or medical advice links which, creates a more complex
presents a great opportunity. once opened, deliver well-known – and potentially more
malware.
vulnerable – IT environment,
As worldwide measures are being
put in place to mitigate the spread of Companies may need to review their which is fertile ground
COVID-19, the working effectiveness outsourcing policy in respect of IT for phishing attacks and
of many companies is being tested support and services. Some third
in unprecedented ways. At the heart parties may have failed as a business
critically ransomware
of many responses is a huge ‘work- or simply not been able to step up threats.
from-home’ campaign that has put to the new challenge. Either way,
the corporate technology operational dependency on third party services Over the coming months,
framework at the centre of the may be financially attractive but technological solutions for keeping
strategic response to the crisis. The potentially operationally fatal. services running, business working
simple step of allowing employees to and people healthy will be key to our
dial in to their companies’ networks The resilience of companies will collective response. Technology’s
en-masse has led to unprecedented depend on how quickly they can ability to provide innovative solutions
levels of traffic across networks. redeploy and reskill talent, and how quickly and efficiently is at the heart
effectively they can blend technology of many operational plans across
The unprecedented shift to remote with a plurality of work options (full- the business landscape. However,
practices may pave the way for time employees, part-time employees, those companies with a strategic
companies to review their working contractors, gig talent, staffing view on the role of technology may
practices and continue with a greater agencies, consultants and so on). well find themselves with a bigger
level of remote working. This in The pace of change and the evolution advantage in the challenging times
turn creates a more complex – and and emergence of new technology ahead as we navigate new ways of
potentially more vulnerable – IT offerings is a point of pride for working. Greater dependency in digital
environment, which is fertile ground many. The pandemic is reconfirming communication at scale also requires
for phishing attacks and critically the need for data security and the a rethink in business continuity plans
ransomware threats. Cybercrime is adoption of Artificial Intelligence (AI) and ways of building capacity and
one element where we are already for many organizations. providing secondary and tertiary
seeing examples of bogus tax refund facilities in the event of compromise
offers or donation requests15. or failure.
15
https://serocu.police.uk/covid-19-pandemic-fraud-cybercrime/
8 willistowerswatson.com Long-term implications of COVID-19 on business risk 9
Business resilience
A common concern within the Supply chain impacts will linger longer at full capacity. Moreover, plants that the National Assembly19. It remains to
context of COVID-19 is supply chain than the COVID-19 outbreak, and this depend on Chinese output (which be seen whether this supplementary
continuity. implies that equity market volatility will is to say, most factories around the budget will provide a sufficient
remain high. Emerging Market (EM) world) have not yet experienced the cushion for the businesses and local
South-east Asia is especially assets and commodity markets initially brunt of the initial Chinese shutdown economies affected by the outbreak.
vulnerable to the economic risks bore the brunt of the fallout from and could likely experience inventory
associated with COVID-19 mainly the outbreak of the COVID-19 virus, “whiplash” in the coming weeks. One Perhaps the biggest uncertainty
because the region’s supply chains, but since the last week of February clothing factory that is in the process for supply-chain managers and
labour flows and tourism industries developed markets have also been of starting back up relies on fabric production heads is customer
depend so heavily on China, where the hit by the selloff. Markets are almost from Italy and the company believes demand. Customers that have pre-
virus originated. Meanwhile, the threat pricing in a global recession but if the it has enough stock to last until April booked logistics capacity may not
to public health from the spread of outbreak ends by April-June, there is if they reduce production17 – we are use it; customers may compete for
the virus brings political risks for the a high chance that this the impact will seeing incredibly complex supply prioritisation in receiving a factory’s
region’s governments, and countries be reduced. chain dynamics reveal themselves, output; and the unpredictability of the
with weak healthcare systems, would and this will be one of the greatest timing and extent of demand rebound
struggle to deal with severe COVID-19 Investor sentiment will hinge on the slow burn risks. will mean confusing signals for several
outbreaks. magnitude of the damage to activity in weeks.
China and to global supply chains, as What effect will COVID-19 have on
As supply chains are curtailed and well as when cases of the virus peak the Korean economy? Even prior The immediate, if indirect,
labour flows are interrupted, GDP outside China. Amid worldwide fears to the virus’ spread to South Korea, consequences of the supply chain
growth across South-east Asia is about the impact of the COVID-19 Korean companies such as Hyundai issues may be clear, but a further
forecast to slow. Wealthier states are outbreak, the US Federal Reserve were temporarily shuttering domestic consideration is that in some cases
likely to resort to costly fiscal stimulus (Fed) cut its main fed funds rate production of automobiles due to the effect may be felt several years
to mitigate the economic effects by 50 basis points, but Fed Chair the unavailability of auto parts made later as Boeing found out after the
of COVID-19. However, the region’s Jerome Powell warned – perhaps in China and used in production in 9/11 terrorist attack. In this instance
tourism industries will likely take a unnecessarily – that while the cut South Korean plants18. Such supply when Boeing’s orders for a new plane
significant hit. should reduce the cost of capital chain disruptions, along with slowing started to roll in - six years after the
and prevent a further tightening of domestic economic activity resulting attack - they found out that their
Exposure to global supply chains financial conditions, it would not from self-protection measures and principal supplier of specialised nuts
could be crucial to how long it takes “reduce the rate of infection” or “fix” reduced public dining and social and bolts had laid off half its workers
sectors and countries to recover. supply chains16. activities, will drive the domestic and could not keep up with demand20.
Supply chains may be slower than economic impact of COVID-19. In From a supply chain perspective,
many domestic sectors to recover In the next few months, the phased response to the COVID-19 outbreak, the 9/11 terrorist attack, whilst vastly
because they are more likely to restart of plants outside Hubei (and on March 4 the South Korean Ministry different in terms of event, impacted
encounter bottlenecks as different the slower progress of plants within of Finance introduced an 11.7 trillion four American companies in three
countries remove travel and business Hubei) is likely to lead to challenges in won stimulus package for approval at different industries across different
restrictions at different rates. securing critical parts. As inventories timeframes and in different ways21.
Countries reliant on trade will be are run down faster, parts shortages
vulnerable to disruption long after the are likely to become the new reason
When the global system gets up and running – whenever that
virus passes. why plants in China cannot operate may be – who will be left standing, who is going to disappear,
and who will need time to warm back up?
16
https://www.nytimes.com/2020/03/03/business/economy/fed-rate-cut.html
17
https://www.thejakartapost.com/news/2020/03/26/chinas-factories-reopen-only-to-fire-workers-as-virus-
shreds-global-trade.html
18
https://www.nytimes.com/2020/02/04/business/hyundai-south-korea-coronavirus.html
19
https://www.cfr.org/blog/long-term-impacts-coronavirus-south-korea
20
https://www.coursehero.com/file/p8fdqj/He-said-Boeing-is-already-seeing-improvements-but-expects-the-
supplies-to-be/
21
https://www.amazon.co.uk/Political-Risk-Businesses-Organizations-Anticipate/dp/1474609821
10 willistowerswatson.com Long-term implications of COVID-19 on business risk 11
Climate and environment
The current and reported geographic spread of COVID-19 offers an interesting perspective in
terms of a correlation between territories in the southern hemisphere, with a markedly lower
number of cases, compared to those in the northern hemisphere. It is of course too early
to say and possibly also influenced by other factors such as population density, reporting
capability and travel patterns.
Geographic distribution of COVID-19 cases worldwide, as of 20 April 2020
The scientific community is actively elements of climate change, global billion of GDP@Risk* in part due to
collaborating to share insights, and travel patterns, technology advances, the potential infection vector provided
as more data emerges this will help animal-borne diseases and the rise by airports and international travel
to refine assumptions and build up of multi-drug resistant organisms all and trade28. The Cambridge Centre
pandemic models that reflect the significantly impact the frequency and for Risk Studies has made a range of
characteristics of this virus. scale of events25. scenarios accessible at varying levels
of severity for stress testing potential
This is leading to a communication The ‘Minsky Moment’ described by business impacts, and has started
challenge, where efforts to open up the Bank of England for climate risks26 a new hub dedicated to COVID-19
models to help coordinate within the – mixing economic disruption, policy analysis.
scientific community, are resulting in responses, and overnight shift in
these outputs making their way to market sentiment – is happening now, In a post-COVID-19 world, it will be
Number of cases audiences they were not intended for at scale, for COVID-19. We are also critical to maintain momentum and
< 99 – the general public. starting to see stress test examples interest in this area, especially as this
100 - 999 emerge from various groups that will could accelerate the broader appetite
1000 - 9,999
What it does flag is the importanceof continue to be improved as the event towards environmental, social and
modelling environmental effectson unfolds, such as the six scenarios corporate governance. Climate risks
> 10,000
your business model and having from the 2 Degrees Investing act as a threat multiplier29, and should
Countries and territorities
reporting cases access to experts who can translate Initiative27. be considered across all business
Source: European Centre for Disease Prevention and Control22 those effects into business insights. operations – and we should remember
This is reflected in the broad people, The Cambridge Centre for Risk that we can respond to stresses, and
capital and risk expertise thatmakes Studies at the Judge Business think about how to make changes to
up our Climate QuantifiedTM School, University of Cambridge, move to a more resilient state while
It has also led to some suggestions
From the evidence so far, the
There is no reason to believe that
proposition.24 is a partner of the Willis Research we have the opportunity. For example,
that regions with hotter climes may COVID-19 virus can be transmitted cold weather can kill the new
Network that produces an annual future climate scenarios may change
be more resistant to the virus. The in ALL AREAS, including areas with coronavirus or other diseases. The
This is incredibly relevant for climate study—the Cambridge Global Risk disease spread and again this should
important thing to note is that it is hot and humid weather. Regardless normal human body temperature
risks and considering pandemic risks. Index—that has seen pandemic risks be factored in when considering
too early to make any assumptions of climate, adopt protective remains around 36.5°C to 37°C,
Outbreaks of new communicable consistently in the top five threats investment/territorial strategies, risk
around this, and the WHO has added measures if you live in, or travel to regardless of the external
diseases are typically seen as a rare, since the index began. Their pandemic appetite, strategic business model
two ‘myth buster’ infographic cards to an area reporting COVID-19. The temperature or weather. The most
one-off events. The interconnected threat estimates a potential $48.6 developments.
their website around these topics23: best way to protect yourself against effective way to protect yourself
COVID-19 is by frequently cleaning against the new coronavirus is by
your hands. frequently cleaning your hands with
alcohol-based hand rub or washing 24
https://www.willistowerswatson.com/en-GB/Insights/trending-topics/climate-risk-and-resilience
them with soap and water. 25
https://www.willistowerswatson.com/en-GB/Insights/2020/02/geopolitics-of-pandemics-diagnosing-threats-to-organizational-resilience
26
https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/a-transition-in-thinking-and-action-speech-by-mark-carney.pdf
27
https://2degrees-investing.org/wp-content/uploads/2020/03/Stress-testing-COVID-19.pdf
28
https://cambridgebusinessriskhub.com/erm/auth/linkedin?next=%2Ferm%2Fportal%2Fpublication%2Fcgri_2020_exec_summary
29
https://www.acq.osd.mil/eie/downloads/CCARprint_wForward_e.pdf
*GDP@Risk is the average annual loss (also known as the “expected loss”) to a selected location’s economic output from each threat or threat category.
22
https://www.ecdc.europa.eu/en/geographical-distribution-2019-ncov-cases Another way of thinking about GDP@Risk is the amount a city would have to save each year to pay for the costs of the disruptive events in the long run,
23
https://www.who.int/emergencies/diseases/novel-coronavirus-2019/advice-for-public/myth-busters averaged out over time.
12 willistowerswatson.com Long-term implications of COVID-19 on business risk 13
Reputation and trust Geopolitical implications
COVID-19 will produce winners The media, as one would expect, is We started 2020 in a world where nations like Italy by providing vital in the Western Pacific and SE Asia33.
and losers. The larger impacts on fully engaged and providing 24/7 areas that were once regarded as equipment such as ventilators, Although the inference may be
the aviation, leisure and hospitality news. A golden thread linking all this predictable and stable became Personal Protective Equipment (PPE) clear, there are many nuances such
industries have already been activity is reputation. When some form volatile, and changes in international and blood. as reporting protocols, average
touched on in this paper but food of normality is restored governments policy were bringing new uncertainty population ages and different
retailers may see an actual increase and organisations will be judged to long running conflicts. In the This kind of collaboration sets the strategic responses by countries, so
as people exaggerate their buying according to how well they managed release of their ‘10 Conflicts to watch scene for closer trading and political comparisons need to be put in their
patterns for fear of supply drought. under pressure. in 2020’ report, President and CEO of links over time. Conversely, actions contexts and time, and international
It has been reported that in the UK Crisis Group, Robert Malley, summed such as offers for exclusive rights to a cooperation will be needed to
consumers spent an extra £1.9bn on Companies may be viewed through up the challenge; “the understandings COVID-19 antivaccine to be used only understand the full picture.
‘contingency buying’ in the run up to the lens of social and moral and balance of power on which for a particular country exacerbates32
the Coronavirus restrictions30. responsibility and as such how the global order had once been relations both within and between Whatever the case, post COVID-19
policies in areas such as employment, predicated – imperfect, unfair, and geographies. nations may retreat to a more
Pharma companies, especially pay, pricing and supply are established problematic as they were – are no protectionist stance, especially as a
COVID-19 testing kit and pain and communicated may define how longer operative.”31 COVID-19 brings Currently, the WHO global case potential global recession begins to
relief manufacturers, are likely to perceptions are shaped in the future. new dynamics and the global ripples numbers at 19 April 2020 suggest bite. Multinational businesses with
boom during this period but also False media should be anticipated, are continually happening. that over 87% of the world’s many operations centres, multiple
engineering companies and consortia and will require extra mitigation and confirmed cases are now in Europe markets and complex supply lines are
whose normal production has been attention during such information rich A post-COVID-19 world could see and the Americas, with 7% in the going to need to be vigilant to finance,
substituted by emergency medical scenarios. the formation of a new geopolitical Western Pacific and SE Asia regions. economic and trade risks that area
equipment such as ventilators. landscape. Despite the huge WHO recorded deaths across the going to emerge as a result.
impact COVID-19 has had on major world suggest that 91% of deaths
economies some countries have have occurred in Europe and the
moved quickly to support stricken America’s, whilst 4% have occurred
31
https://foreignpolicy.com/2019/12/26/10-conflicts-to-watch-2020/
32
https://www.businessinsider.com/coronavirus-germany-covid-19-vaccine-not-for-sale-donald-trump-2020-3?r=US&IR=T
30
http://news.sky.com/story/coronavirus-16319bn-grocery-stockpiling-spree-ahead-of-lockdown-11966036 33
https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200419-sitrep-90-covid-19.pdf?sfvrsn=551d47fd_4
14 willistowerswatson.com Long-term implications of COVID-19 on business risk 15
What should organisations be doing given this new reality?
Current events and their future
Mental health: Never has it been
Identify and assess: They should
implications could present a seismic more important for managers to employ all the tools available to
change in the geopolitical landscape know their teams to support mental enable them to collate and interpret
as well as business and societal wellbeing and increase workplace the information and then deploy
environments. The experience of resilience in this time of crisis36 subjective (depth of experience,
COVID-19 underlines the need to industry insight, research and
improve detection and warning and As the situation continues to unfold, analysis) and objective (using
to prevent crises from happening, Boards and their risk managers analytical tools) assessment to
or at least minimise the impact if should be proactive and review their inform the organisations’ decision
they do occur. Crisis management risk profiles and appetites, and ask making.
and business continuity planning themselves where they consider
Prevent and Protect: As the
should be integrated with specialist the tipping points to be. Decisions geopolitical landscape changes,
insurances to support organisations’ around strategy, investment, growth so must the way in which risk
risk appetites and reduce their total and expansion will at the very least leaders protect their businesses.
cost of risk. need to be reviewed in the cold light A thorough understanding of the
of a harsher and more challenging interlinked geopolitical risk drivers
In the short-term, Willis Towers environment. and their impacts provides a strong
Watson has established a dedicated foundation for prevention and
COVID-19 Insights hub where you will Interconnected risks require protection against them.
find thinking from all our teams to help integrated solutions that must be
with your response. For example: tailored and address insurable and However, it may not be all gloom and
non-insurable risks seamlessly. To do doom. The COVID-19 experience
Impact on hourly workers:
this effectively they need to:
COVID-19 is impacting all industries, may bring opportunities such as
and companies must act quickly different and more cost-effective
Understand their new environment
ways of working, a more resilient
to address how to compensate through relevant intelligence,
their hourly workers. As part of a society, larger home markets and
assessment and quantification
series of pulse surveys related to more reliable supply chains. Either
to comprehend the drivers and
COVID-19 (coronavirus), we are way boards need to be ready and able
impacts on a business. Boards must
seeing a shift in attitudes toward the to seize the moment and adjust their
look beyond the most obvious, and
potential impact on business34. course appropriately.
work with stakeholders across their
Employee perspective: This is business to identify interconnected Are we learning from previous
a time when compassion and risks; examining everything from experiences at this scale and should
careful listening are at their most complex supply chains through we re-think what is most likely and
necessary. Many clients are rapidly to human capital policies and what is most dangerous to our
pivoting to regular COVID-19 reputational damage, to help protect business and our well-being? All to be
Pulse Surveys. We have designed the company and fulfil its duty of explored in our subsequent articles.
a COVID-19 Pulse Survey that is care.
available now to all our clients35.
34
https://www.willistowerswatson.com/en-GB/Insights/2020/03/covid-19-coronavirus-impact-on-hourly-workers
35
https://www.willistowerswatson.com/en-GB/Insights/2020/03/covid-19-how-should-we-approach-employee-listening
36
https:// www.willistowerswatson.com/en-GB/Insights/2020/03/COVID-19-and-mental-health
16 willistowerswatson.comContacts
For further information please contact:
Frederick Gentile
Director of Risk Engagement, Willis GB Retail
E: frederick.gentile@willistowerswatson.com
Lucy Stanbrough
Emerging Risks Research Manager, Willis Research Network
E: lucy.stanbrough@willistowerswatson.com
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and
solutions company that helps clients around the world turn risk into a path for
growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees
serving more than 140 countries and markets. We design and deliver solutions that
manage risk, optimise benefits, cultivate talent, and expand the power of capital to
protect and strengthen institutions and individuals. Our unique perspective allows
us to see the critical intersections between talent, assets and ideas — the dynamic
formula that drives business performance. Together, we unlock potential. Learn
more at willistowerswatson.com.
Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances.
For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage.
The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other
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The information given in this publication is believed to be accurate at the date of publication shown at the top of this document. This information may have subsequently changed or have
been superseded, and should not be relied upon to be accurate or suitable after this date.
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be, and should not be, used to replace specific advice relating to individual situations and we do not offer, and this should not be seen as, legal, accounting or tax advice. If you intend to
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publication may be compiled from third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such. The information given in
this publication is believed to be accurate at the date of publication shown at the top of this document. This information may have subsequently changed or have been superseded, and
should not be relied upon to be accurate or suitable after this date. The views expressed are not necessarily those of Willis Towers Watson.
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