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Agricultural Insurance
Tuesday, August 1, 2006
Lack of planning

Current media headlines about the potential impact of avian influenza, or H5NI, alternately emphasise its statistical and imminent probability, or discount it entirely as any threat to the business world.

Hugh Leighton, a prominent risk consultant from Aon Corporation, a global provider of risk management services, flew into South Africa April to present a white paper on the topic. He is a global specialist on the impact of pandemics and the resultant business continuity management required. He said the most important risk to business lay in the lack of planning.
“The SARS virus in 2003 cost east and south-east Asia around US$60 billion and accounted for direct medical costs in the US alone of $100 billion. However, one of the hidden costs in any pandemic is the cost of absenteeism and the need to replace these people with temporary staff, often lacking the required skills.”
Speaking as a representative for Aon SA at an SA Institute of Risk Management breakfast, Mr Leighton said recent research by the Chartered Management Institute revealed that loss of personnel ranked in the top five risks for business, yet was not covered by the surveyed business continuity plans.
“Scientists agree that the influenza pandemic threat is a question of when, not if. Therefore directors could be accused of dereliction of duty if they failed to safeguard their businesses, staff and shareholders,” he warned.
“Changes in the insurance market’s perception of risk in recent years mean that, outside the life assurance and sickness markets, there is often very limited or no protection against many of the risks that come with a pandemic. Traditionally, cover for loss of business is related to a material or tangible event, such as fire. The illness or absence of staff usually falls outside the ambit of this type of insurance – which leaves business continuity management as the first and only line of defence.”
Mr Leighton and the co-authors of the white paper on avian flu believe that, while international organisations will be tracking and dealing with the threat of most pandemics, the effects of a pandemic on individual businesses will be very much in the hands of the business itself.
“Only by objectively analysing the risks can businesses hope to manage whatever scenario a pandemic might bring. Many pessimists are taking the view that each day the world is closer to a pandemic. We take a more pragmatic view: every day without a pandemic means more antiviral drugs are produced that will be vital in stopping the spread of the disease or, if it is does spread, lessening the illness that can accompany the virus,” he says.
“Every day is also another opportunity for a company to ensure its business continuity plan is practical, achievable and, most of all, as effective as it can be. Preparedness, as always, will pay dividends even against this invisible threat.”
Mr Leighton urged South African companies to analyse carefully their business continuity plans and implement appropriate measures to counter any widespread loss of personnel, however temporary.

Copyright © Insurance Times and Investments® Vol:19.4 1st August, 2006
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