Enterprise Risk Management (Preview)

Chapter 1 – Risk Management Awareness 7 Box 1.1 – Headline News: Covid-19 Coronavirus Pandemic According to the World Health Organization, the first human cases of Covid-19, also knows as SARS-CoV-2, were identified and reported by officials in Wuhan City, China in December 2019. The city quickly became overwhelmed with the rapid spread of this new and highly contagious virus, which can cause flu-like symptoms and severe pulmonary infections resulting in death. People sixty years or older, and those with a weak immune system, are particularly vulnerable. Approximately twenty-percent of those infected with the virus develop a severe illness. The case fatality rate, namely the number of deaths to diagnosed cases is approximately 4.5%. By mid-September 2020, approximately 29 million people had been infected worldwide. From those cases, close to 1 million people had died, and 20 million recovered, leaving approximately 8 million active cases. More than half of the diagnosed cases were in the United States, India and Brazil. The spread of the virus was also significant in Europe, with more than 4 million diagnosed cases at the time of writing, compared with 6.5 million for the United States. The rapid spread of the virus in early 2020 led governments around the world to impose travel restrictions, business lockdowns, school closures, social distancing rules, and limits on the gathering of people. The effects on the economy were severe. More than 30 million employees lost their jobs in the United States. The gross domestic product (GDP) of the United States contracted by an annualized rate or more than thirty percent during the second quarter of 2020. The situation was similar in Canada and parts of Europe. Many industries were severely impacted. Airlines, tourism, entertainment, professional sports, and restaurants were particularly hard hit, as well as all manufacturers and retailers of non essential goods and services. Demand for oil declined dramatically. Governments provided emergency payouts to support employees and companies, which resulted in massive deficits. For many countries such as the United States, these huge deficits are causing government debt levels to surpass the size of their economy, which has not been seen since after the second world war. Such debt levels are not without concern and may limit future economic growth. For their part, companies continued to slash spending costs, layoff employees, halt dividend payments, and increase their borrowing in desperate attempts to shore up their cash reserves and survive the pandemic. The Covid-19 pandemic revealed a general lack of education and preparedness for pandemics, despite multiple recent occurrences of similar diseases, and repeated prior warnings from communicable disease experts that a devastating pandemic would eventually surface. Public ignorance, misguided and conflicting messages from elected officials, inadequate stockpiles of testing and protective materials, limited supply arrangements, and ineffective testing procedures, all contributed to the rapid spread of the disease. During the summer of 2020, many countries and states allowed reopenings of public places and businesses without proper safeguards. There was much debate among elected officials about the benefits of wearing face masks, while infections kept increasing. Many organizations such as Apple, Walmart, McDonalds, Best Buy, Starbucks and Costco demonstrated leadership by requiring their customers to wear face masks. “This is an American failure” said Joseph Kanter, regional medical director for the Greater New Orleans area. “We’re five months into this epidemic and we can’t figure it out.” By the end of August, many states had adopted face mask requirements in public places, in accordance with recommendations from the U.S. Center for Disease Control and Prevention. According to health experts who study pandemics, the Covid-19 outbreak should not have come as a surprise. “Epidemics of infectious diseases have become a regular part of the global landscape in the past quarter century (...). The public needs to prepare for more of them” the experts cautioned. At the time of completing this text, research efforts were frantically continuing around the world to develop a vaccine for Covid-19. Clinical trials were beginning and some health officials were cautiously optimistic that a cure might be available by the end of 2020 or early in 2021. In the meantime, health and public officials were renewing their demands for public caution and discipline in containing the spread of the disease. “We’re on the cusp of an economic catastrophe,” said James Stock, a Harvard University economist. “We can avoid the worse of that catastrophe by being disciplined,” said Mr. Stock. Sources: Based on articles from The Wall Street Journal, The Globe and Mail, and National Post.