Coronavirus a rising risk for Australian businesses
Companies are being urged to take extra precautions in their response to the coronavirus outbreak, with many insurance policies unlikely to protect against interruptions to business.
SA Business
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Australian businesses are cutting non-essential travel, cancelling conferences and events and introducing other measures to protect their staff and clients from coronavirus.
And others that haven’t responded to the outbreak are being warned they could be left out of pocket due to disruptions caused by the surging health crisis.
Adelaide-based MGA Insurance Brokers is warning business owners to take extra measures to mitigate the risks to staff, customers and business operations, given a standard exclusion commonly found in business interruption insurance policies.
According to MGA managing director Paul George, the standard exclusion covers any disease notifiable under the Quarantine Act, and was introduced after modelling following the SARS outbreak of 2013, showed claims arising from a major pandemic could not be met by global insurance and reinsurance funds.
He said coronavirus had been a listed disease under the Quarantine Act since the end of January.
“While business interruption insurance may cover a localised disease outbreak, such as Legionnaires disease that could close a single building preventing a company from operating, it cannot cover the impact of a major pandemic,” he said.
“Business disruption claims arising from a pandemic would wipe out the industry.”
Most major companies have by now suspended non-essential travel, while many have taken additional measures including restricting external visitors from attending work sites, cancelling events and encouraging staff to work from home.
Locally, the Adelaide office of property firm Knight Frank this week postponed a 2020 Outlook event it was due to host for clients and staff next week.
Adelaide Airport and the Adelaide Convention Centre have both increased the frequency of cleaning at their facilities, and provided additional hand sanitisers for visitors.
“Adelaide Airport has increased cleaning within the terminal and is taking additional measures to minimise risks,” the airport said this week.
“We are also actively protecting employees by encouraging them to practice and promote frequent hand washing and good respiratory (cough) etiquette. Masks are also available for customer-facing staff.”
By mid-February, Roy Morgan found that around one in six, or 15 per cent, of Australian businesses had already been affected by the coronavirus.
Respondents to the Roy Morgan survey highlighted several issues, including employees being kept away from work, the impact on supply lines for the import or export of goods and parts to and from China, the decline in bookings from Chinese tourists and the general hit to consumer confidence.
Around two fifths of manufacturers had reported being affected, closely followed by a third of businesses in the education sector and wholesale industry.
“The tourism industry is also in the firing line as Chinese tourists, the largest inbound tourism market, are barred from visiting Australia until further notice,” Roy Morgan chief executive Michele Levine said.
“In addition, the all-round impact of the coronavirus is having an increasing impact on general confidence, which in turn has a negative effect on retail foot traffic.”
Damon Hunt, a special adviser with FTI Consulting, said while there was no need to panic, companies in Australia should be refreshing their crisis management plans and undertaking “specific scenario planning” to mitigate the rising threat.
“If the threat materialises, then the crisis management team can be activated, and strategic and decisive decisions can be made rapidly using the processes already in place,” he said.
“Australian CEOs have still got time to prepare and be one step ahead. For sure, they can pray and hope the COVID-19 doesn’t get out of hand here and it all just settles down.
“But the risk is real and rising. So, now is the time to dust-off that crisis management plan and get a strategy to deal with the threat.”
In its weekly newsletter this week, Business SA kicked off a weekly series of coronavirus updates for members.
“As the coronavirus continues to spread internationally, businesses have been contacting us for advice on travel policies, export and importing advice, staff leave and health and safety issues,” the newsletter says.
“Business SA has been advising members about the importance for workplaces to source reliable, informed advice and not to rely on sensational headlines or rumours.”