Catching the Third Wave

With the spike of H1N1 virus cases in October and November 2009 largely subsiding, and the classification of influenza indicators moved to low, public awareness and media monitoring of the virus has shifted to the back burner. While there is still some disagreement about the possibility of a “third wave” of H1N1, the emerging consensus is that many countries, including Canada, have weathered the worst of the pandemic.

In Canada, as of mid-February, there were a total of 8,596 hospitalized cases, including 426 deaths from the H1N1 virus, according to the Public Health Agency of Canada (PHAC). This is far below Health Canada’s previous estimates of a pandemic flu resulting in 11,000-58,000 deaths. Globally, the World Health Organization announced in early February that more than 212 countries have reported confirmed cases of pandemic influenza H1N1 2009, including at least 15,292 deaths.

In late January, PHAC indicated the second wave of pandemic H1NI had tapered off. There is still speculation that another round of the swine flu could yet hit for the late winter and early spring period (technically until April), but many public health experts believe the effect will be minimal due to widespread vaccination.

“We think the vaccine had an effect on curtailing that second wave very abruptly,” Dr. David Williams, Ontario’s associate chief medical officer of health told the CBC in early February. “And of course we are optimistic it will avoid a whole third wave. I would say if there is any third wave, or further activity for H1N1 in the coming months, it’s likely to be very much smaller than we’ve seen in the past.”

EMPLOYEE ABSENTEEISM

The surge in flu virus activity in November spawned the most obvious effect on companies and organizations: employee absenteeism. A Statistics Canada study released in November showed that 1.5-million employed people reported they were absent from work in November 2009 as a result of the H1N1 flu. The total number of hours lost for working Canadians during that period was just under 30 million. Stats Canada says the impact of H1N1 and seasonal flu on hours worked was comparable to that of the Ontario-U. S. power outage in August 2003.

The spike in employee absences in November acts as a reminder of what could happen if a truly virulent pandemic flu strain were to strike. And many say companies and organizations in Canada are still unprepared in their business continuity and emergency response procedures.

“Despite the daily reminders that H1N1 may result in widespread illness … and the experience of the SARS epidemic of 2003 still fresh in our minds, most businesses are not fully prepared with a business continuity plan,” says Len Crispino, president and CEO of the Ontario Chamber of Commerce. In a survey conducted by the Chamber, less than 50% of respondents had a pandemic plan in place to protect their operations from any possible business disruption.

This is fairly consistent with other studies. In what is believed to be the largest and most comprehensive survey of pandemic flu preparedness, Mercer Consulting polled more than 450 companies spanning 38 countries and 26 industries in 2006. It found that while 70% of businesses surveyed believed a pandemic would damage profitability, only 47% had a business continuity plan in place and just 17% had budgeted for pandemic preparedness. In a more recent survey conducted in May 2009, Mercer found that, among more than 400 mid-size and large organizations worldwide, nearly half of employers said they did not have an HR policy in place regarding health-related emergencies and pandemics.

The corresponding emphasis on the need for business continuity planning has eclipsed concerns about insurance coverage issues related to the pandemic. While some reports from Marsh, Aon and Munich Re, as well as several legal firms, have alluded to potential coverage under commercial general liability, business interruption and professional liability policies, there are few signs of claims activity in Canada related to H1N1. Insurers contacted for this article reported no claims related to commercial insurance coverage. Insurance Bureau of Canada (IBC) spokesperson Pete Karageorgos says the trade association does not track claims activity for the industry, but an advisory wording for a pandemic flu endorsement, approved by IBC board of directors in September 2009, would extend the term of expiring policies (or policies pending cancellation) for a specified period of time if a state of emergency were declared. No such “declared emergency” was made in Canada, aside from that of the Manitoba First Nations assembly of chiefs in June 2009, during the first two waves of the H1N1 pandemic to trigger any potential endorsements.

MAINTAINING BUSINESS AS USUAL

Instead, the prime area of focus for H1N1 has been on the importance of business continuity planning. Several larger brokers, such as Marsh and Aon, have published H1N1 flu reports and emergency planning measures. In Canada, AXA and Cowan Group have also issued tips and recommendations for business continuity plans

These reports emphasize the need for a business continuity plan that takes into account the unique characteristics of this type of “disaster”–lengthy period of infection (likely in waves), employee absenteeism, macroeconomic downturn, service supply chain interruption and travel restrictions.

Many sources of information outline day-to-day challenges that companies have faced, and will continue to face, in any pandemic flu scenario. In particular, health care experts predict employee absenteeism rates of 25-30% (or higher). Widespread infection rates could mean the virus spreads to every part of the country, and many regions of the world, as seen with H1N1, making off-site operations or the moving of office locations difficult. Health care and government departments could be extremely burdened in the event of a pandemic, leading to a decrease in the provision of services. In addition, a company’s supply chain of service providers may also be affected, leading to potential disruptions in delivery of products and services.

“The hardest hit companies in any industry are likely to be those with worldwide operations, global supply chains and/or international customers,” according to the Marsh influenza report.

Marsh lists several areas of operational concern facing the business sector:

• Can the company operate with 25% or greater absenteeism for prolonged periods? What are management policies for supporting quarantined staff?

• Can the company have employees work remotely? What infrastructure is needed?

• How does the company know that supply resources are not contaminated?

• How will clients be assured that products are not contaminated?

• Will there be a disruption to the company’s supply chains?

• What are the procedures to protect or decontaminate facilities and heating, ventilation, air conditioning systems, electronic equipment and other materials?

• What assurance procedures exist to inform employees they are safe at work?

• What policies exist to promote hygiene and ensure non-transmission at work?

• At what point does the company prohibit staff from travelling to certain regions?

• What escalation procedures exist to get additional resources?

• Is there a trained crisis-management team that includes on-call staff?

The question of supply chains is a particular area that requires greater focus. While some firms have completed internal business continuity plans, “too many companies lack a basic knowledge of their suppliers,” according to an Aon white paper on pandemic flu. “There is no point in identifying alternative suppliers of a particular item if they are based in the same region as the original supplier.”

It is difficult to gauge the level of preparedness among busin
esses, even within the Canadian property and casualty insurance industry itself. A survey of property and casualty companies in 2006 by the Office of Superintendent of Financial Institutions (OSFI) showed an uneven level of preparedness and business continuity planning.

“The general indications are that companies are at varying degrees of preparedness,” says Penny Lee, managing director of OSFI’s financial institutions group. “Many are incorporating the threat of a potential pandemic in their business continuity plans and many are considering the potential that a pandemic can occur in waves. However, some either have not or are only now looking are reviewing pandemic plans of their external service providers.”

Companies looking to start a pandemic flu business continuity plan should consider four key steps, according to Ralph Dunham, business continuity management practice leader for Marsh Canada. These questions include:

• Is there an existing business continuity plan (BCP) with recovery procedures for critical locations and business functions?

• Has your organization completed a recent in-depth BCP review?

• Do existing recovery processes consider significant staff reductions and loss of support resources over an extended period of time?

• Have your recovery plans been adequately tested?

The H1N1 flu pandemic was not nearly as lethal as many had projected. And some have commented that the swine flu scare was over-hyped by the media and government — particularly if there is no “third wave” this spring.

But, somewhere in between alarmism and apathy is the realistic response that global pandemic flu outbreaks have occurred in the past, and, according to health care experts, will certainly occur in the future. Companies and organizations can either hope it won’t disrupt their operations or make comprehensive business continuity plans to address the threat of a widespread pandemic.

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Stats Canada says the impact of H1N1 and seasonal flu on hours worked was comparable to that of the Ontario-U. S. power outage in August 2003.