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Coronavirus & The Impact On Business

Pandemics are at the top of national risk-management frameworks in many countries – the coronavirus is no exception.

The coronavirus disease 2019 (COVID-19) is an epidemic that could soon become a global pandemic and has emerged from a densely populated manufacturing and transport hub in central China.

It has since spread to 29 other countries and regions, facilitated by the Chinese New Year and international travel.

Every outbreak of a potentially dangerous infection sees authorities and leaders ask rational sets of questions and consider response options that can be implemented as needed. But reality, on the other hand, is usually more disruptive – as national governments and supranational agencies seek to balance health security, economic and social imperatives on the back of often imperfect and developing intelligence.

In this Sunday, Feb. 23, 2020, photo, workers take a rest near the closed restaurant and bank in Wuhan in central China’s Hubei province. Warning that China’s virus epidemic is “still grim and complex,” President Xi Jinping called Sunday for more efforts to stop the outbreak, revive industry and prevent the disease from disrupting spring planting of crops. (Chinatopix via AP)

A masked woman in a plastic rain coat walks on a street in Beijing, Tuesday, Feb. 11, 2020. China’s daily death toll from a new virus topped 100 for the first time and pushed the total past 1,000 dead, authorities said Tuesday after leader Xi Jinping visited a health center to rally public morale amid little sign the contagion is abating. (AP Photo/Andy Wong)

It’s a challenge to governance that can result in long-term consequences for communities, families and businesses. In addition to this, authorities also need to accommodate natural human behaviour.

In contrast to the Western Africa Ebola emergency of 2013-2016, which was more fatal but less contagious and was eventually contained in part by richer countries investing into Africa, the COVID-19 presents bigger, more interdependent economies with management and supply dilemmas.

It has also surfaced during a time of eroding trust within and between countries, with national leadership under pressure from increasing societal unrest and economic imbalances. Effective governance of cross-border crises such as pandemics often involve and demand preparedness, response and recovery at local, national and international levels – quickly.

Epidemic preparedness assessments often reveal many countries, especially in regions vulnerable to pathogens emerging, are not well equipped to detect, report and respond to such outbreaks.

Response strategies vary, whether playing up or playing down crises and businesses remaining open versus seeking to quickly reopen. The coronavirus has highlighted tendencies in many countries to deny or attempt to cover up red flags to avoid economic or political penalties – but it can misfire.

Photo released by Xinhua News Agency, Chinese President Xi Jinping, left, wearing a protective face mask, receives a temperature check at a community health center in Beijing. China’s ruling Communist Party faces a politically fraught decision: Admit a viral outbreak isn’t under control and cancel this year’s highest-profile official event. Or bring 3,000 legislators to Beijing next month and risk fueling public anger at the government’s handling of the disease. The party was already facing criticism of its heavy-handed censorship, on display during the outbreak, and other social controls under President Xi. (Pang Xinglei/Xinhua via AP, File)

Chinese President Xi Jinping has promised tax cuts and other forms of support for businesses as the government tries to alleviate the effects on the economy of the coronavirus outbreak that has infected tens of thousands of people and cordoned off entire regions. (Photo: Maurizio Gambarini/dpa)

With tens of millions of workers now in quarantine and technology parts becoming short in supply, China is struggling to get economic activity and businesses back on track.

The virus has also demonstrated how governance failures may involve inaction or over-zealous action by unprepared authorities acting to regain or maintain stability. Both ends of the spectrum undermine trust and cooperation both nationally and internationally.

Mass quarantines in cities and cruise ships stigmatise those under lockdown, increasing risk of mental health issues as people experience growing stress, anxiety and a sense of loss of control and isolation in their lives.

Travel bans result in economic, political and social penalties that can prevent individuals and official bodies from sharing information and disclosing future outbreaks. In addition, weak or overwhelmed health systems struggle to limit the spread of infection or cope with increasing care needs.

What’s the impact on business?

Travel restrictions and quarantines impacting hundreds of millions of people have left Chinese factories short of labour and parts, disrupting global supply chains and triggering sales warnings across technology, consumer goods, pharmaceuticals and other industries.

Commodity prices have also declined in response to a fall in China’s consumption of raw materials – with producers now considering cutting output.

The mobility and work disruptions have led to significant declines in Chinese consumption, negatively impacting companies in multiple sectors including aviation, infrastructure, electronics, tourism, consumer and luxury goods as well as hospitality.

Overall, China’s GDP growth may decline by 0.5 per cent points this year, taking at least 0.1 per cent point off global GDP growth.

This will have a ripple effect through developed and emerging markets that has a high dependency on China – whether it be in trade, tourism, electronics or investment.

In the longer run, the coronavirus may serve as another reason for companies to reassess their supply chain exposure to outbreak-vulnerable regions and encourage them to reconfigure regionally.

Business that invest, however, in strategic, operational and financial resilience to emerging global risks and outbreaks will be better positioned to respond and recover quickly in future cases.

Apple has been struck particularly hard by the outbreak resulting from the company’s dependance on Chinese manufacturers. (Imaginechina via AP Images)

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