By Emmanuel Komolafe; Chief Risk Officer, Deltec Bank & Trust
The Economist Intelligence Unit recently released a report entitled “Top five risks to the global economy in 2020”. It is not surprising that the risk that the COVID-19 takes a lasting toll on the global economy came in third with a likelihood of 20%. The aforementioned report notes that the global economic impact of COVID-19 is expected to be more significant than that of the severe acute respiratory syndrome (SARS) in 2003 due to the bigger influence China has on the global economy today.
The EIU assessed “a probability of 20% that the virus will not be contained in China until mid-2020 and 5% chance that it will remain uncontained beyond 2020”. The spread of the virus to countries across the globe means that the only concern should not be the impact on China. The resulting impact on global supply chains, international trade and economic growth will be far reaching.
Stock markets around the globe have been significantly impacted by the virus with the S&P 500 recording its worst weekly decline for stocks since the 2008 financial crisis. Additionally, economic growth estimates are being cut around world amid fears of a recession and speculation that the Federal Reserve may cut rates if the situation worsens.
The Minister of Health has stated that it is not a matter of “if” but “when” the COVID-19 will reach The Bahamas. There have also been a number of pronouncements and updates by the Minister of Health; this is expected and noted. However, the COVID-19 threat and potential risk to The Bahamas goes beyond public health considerations.
Hence, a national and more holistic approach is required. In essence, we need a comprehensive plan that incorporates multiple sectors, ministries, agencies and stakeholders. We must be proactive and prepare for the worst while hoping for the best. There isn’t much time for preparation, and we must move with haste.
The Bahamas is vulnerable on a number of fronts. As an economy driven mainly by tourism, we depend on cruise passengers and stop-over visitors to inject funds into our economy. Reluctance or fear of travel could impact arrivals and ipso facto inflows, local businesses, workers and government revenue. We are also a nation that imports majority of what we consume; hence, a disruption in international trade and global supply chain will eventually impact us.
The retail sector should be closely watching developments related to this virus. The impact on local businesses and the service sector could be major if (or when) it reaches our shores. This is why local businesses must also begin the conversation if they have not done so already and develop a robust business continuity management plan. This crisis is testament that a robust business continuity or contingency plan cannot just be focused on hurricanes and other natural disasters. It should encompass all potential threats and risks to an organization with corresponding risk mitigation measures.
On the public health front, it is apparent that we welcome millions of tourists from around the world annually. This naturally makes us vulnerable and exposes the Bahamian public in the event that there is a global pandemic or outbreak of a disease. The potential strain on an already stretched healthcare system and impact on productivity as well as government expenditure cannot be overstated.
While the World Health Organization (WHO) has raised the risk assessment for COVID-19 to “very high” and has been reluctant to declare a global pandemic. WHO’s Director for Health Emergencies – Michael Ryan remarked that “to accept that mitigation is the only option is to accept that the virus cannot be stopped”. He did concede that “we need to keep this virus slowed down because health systems around the world are just not ready”.
We must double our efforts to raise awareness and educate the general public on COVID-19 using various forms of media. It is really that serious. We have seen international agencies and global sport organizations calling emergency meetings to reassess their plans and make some important decisions.
This situation brings us back to the discussion on the need for a more robust national risk management framework and potential overhaul of legislation governing this area. Have we completed a detailed threat and impact analysis considering not just natural disasters but epidemics, pandemics, cyber-attacks among others? Have the results been used to develop a holistic plan with specific risk mitigation measures? What are the communication protocols? Is there an established working group involving a cross section of sectors, public and private sector entities, utility companies and key stakeholders? What is the role of NEMA and the Disaster Management Committee based on their mandate that deals with emergency situations? Do we have sufficient equipment, infrastructure and resources to detect, contain, control, manage and address the threats identified; in this case the COVID-19? What is the plan for Education, Tourism, National Security, NIB, Health among others?
While the 2020 Hurricane Season approaches (on June 1), we face a more imminent threat with the COVID-19 and the consequences of inadequate preparation or a deficient plan could be dire. Perhaps there is a comprehensive plan and if that is in fact the case, that is commendable. However, if there isn’t one or there are gaps in the existing one, we need to address this matter urgently.
In relation to the private sector, COVID-19 will test the business continuity plans and by extension the risk management frameworks of entities within the public and private sectors. The time to activate contingency plans and make some decisions to mitigate this risk is now. That being said, organizations will have to be agile, flexible and ready to adjust their operations as this situation evolves.
Measures aimed at enhancing workplace health and safety (e.g. dispensable hand sanitizers, frequent workspace cleaning) as well as protocols around business travels, meetings, sick leave and remote working arrangements will need to be established and implemented as necessary to minimize the impact of COVID-19 and any potential disruptions. Training and awareness is also an important part of any plan. The reality is that for many entities, this is unfamiliar territory; hence they must be willing to learn from others and stay informed on new developments as the number of impacted countries has been growing.
Then there is the potential impact on operations, budgets (revenue and expenditure) and strategy which must all be considered. In essence, Boards and executive management must ensure that their entities are prepared and positioned to address any potential fallout and impact from COVID-19.
