The COVID-19 outbreak has led several European countries to issue strong containment measures and close their borders. At the time of the writing, there have been approximately 335,000 confirmed cases , approximately 14.600 confirmed deaths and 190 countries, areas of territories with cases and the epidemic is still growing exponentially. The current isolation measures in place could continue for a long time, especially if no medical solution is found quickly (see below for a discussion of the likely scenarios). After all, China is still not back to business as usual after eight weeks of quarantine. What the outbreak means for companies strongly depends on the industry, but most of them already face heavy uncertainties about what lies ahead. Employees are working remotely for most businesses, with possibly decreased operational activities, or strong unplanned increase, and real liquidity risks. As a Chief Risk Officer (CRO), there are several actions that could be taken to help the organisation to ride these scary and uncertain times.
The second line of defense, in both Risk and Compliance functions, is already familiar with the usual risk profile of the company. Strong competences exist to assess the current and new risks faced because of this outbreak, and to find potential pockets of risks not identified by other departments or by management.
These are immediate actions the Chief Risk Officer (CRO) can take, in order to draw a picture of the risk landscape of the company to be given to the Management, for example:
The CRO is used to project the company and its business in the future, with the potential evolution of the risks. In the current uncertain landscape, this competence is essential. The current crisis will halt at some point (though how and when is clearly uncertain in the current climate) and the CRO can help management to think forward and adapt to the future.
Current paths taken by the authorities
Before coming up with relevant scenarios for its company industry, the CRO needs to have a clear picture of the current paths taken by the public authorities in the countries of operations.
Two main scenarios are currently taken in Europe by the public authorities, which both have issues and risks:
To add to the uncertainty, even successful containment measures do not mean the epidemic is over, as there is a risk of rebound after this containment stops.
Figure 1: Illustrative simulations of a transmission model of COVID-19
In addition, there is also the unknown factor of medical advancements: promising treatments are currently being tested, but a vaccine still appears to be a while off.
In conclusion, containment measures are inevitable, even though their strength will depend on the government strategy. The main unknown is how long the normal course of life will be impacted, and depends on the public strategy, medical advancements and possible rebound epidemics.
Drawing from the circumstance a plan for the CRO’s company
The CRO can base himself upon these different scenarios in order to build up possible outcomes for its industry, both the risks that will linger and the opportunities that could arise. This exercise is essential, in order not to miss future changes in the way of life. For instance, the former SARS epidemic is credited for the rise of online business in China.
Here are actions the CRO could start taking now:
The predictions and actions plans will have to be clear and synthetic, as well as regularly updated by taking into account news and public announcements.
The corona-virus outbreak shows us the need to take into account “black swans”, these unexpected and rare events with severe impacts. These are probably going to happen more and more regularly in the future due to climate change, whether it be other pandemics because of deforestation, severe droughts like in India, catastrophic fires like in Australia, floods, reduces or increased precipitations.
In our uncertain times, it is the CRO’s responsibility to ensure that there is a strong Business Continuity Planning (BCP), for instance, not to be taken by surprise by a lack of sufficient IT infrastructure for remote working.
Therefore, the CRO can make sure that the BCP:
Tests of different risks scenarios must be conducted and planned, and their results reported to the companies, to be sure that the company can be ready in case of the concretisation of one of these risks.
Written by Cécile Marcotte
 R. M Anderson, H. Heesterbeek, D. Klinkenberg, T D. Hollingsworth (2020), How will country-based mitigation measures influence the course of the COVID-19 epidemic? The Lancet