Emergency Preparedness and Pandemic Management Services. Will your business continuity plans survive a pandemic? With the recent declaration of the World Health Organization that we’re now experiencing an influenza pandemic, only one question remains — “how bad will it be?” The impact can range from loss of revenue for service contracts from failure to provide service or meet service levels to additional cost of working; administrative costs; travel and subsistence. Experience shows that only around 40% of actual loss is covered by insurance.
Impact on individual behaviour
Individuals are assumed to change their behaviour in the face of the pandemic by (a) reducing air travel in order to avoid infection in the enclosed space of a plane, (b) avoiding travel to infected destinations, and (c) reducing consumption of services such as restaurant dining, tourism, mass transport, and nonessential retail shopping. The degree to which such reactions would occur is necessarily uncertain. In this scenario it was assumed that for the year as a whole air travel would decline by 20 percent and that tourism, restaurant meals, and consumption of mass transportation services would also decline by 20 percent.
Economic impact
The assumed 20 percent declines are well below the peak decline of 75 percent in air travel to Hong Kong during the SARS epidemic and an average decline of 50-60 percent during the four-month period the outbreak was active. Retail sales declined by 15 percent at the peak, and by about 9 percent over the four month period, implying about 15 percent decline from trend (Siu and Wong, 2004) over the four month period or about 5 percent on an annualized basis. Sharper declines on an annualized basis are assumed in these simulations because a flu pandemic would last more than a year (pandemics are typically experienced in at least two waves with peak period of infection during the winter).
Tremendous uncertainties
Given the tremendous uncertainties surrounding the possibility and eventual nature of a pandemic inflation, these simulations must be viewed as purely illustrative. They provide a sense of the overall magnitude of potential costs. Such costs could be on the order of $2 trillion in a moderately severe pandemic and more than $3 trillion in a severe scenario. Actual costs, both in terms of human lives and economic losses, may be very different, however.
- Evaluating the Economic Consequences of Avian Influenza (PDF – 58.4KB) (The World Bank) Read a paper that bases economic impact upon three sources: mortality, illness and absenteeism, and avoidance behaviors. Link.
- The Economic Impact of Pandemic Influenza in the United States: Priorities for Intervention (Centers for Disease Control and Prevention). Link.
- The Global Economic and Financial Impact of an Avian Flu Pandemic and the Role of the IMF (PDF – 229 KB) (International Monetary Fund). Link.