Considerations for business

and risk managers during the

Coronavirus/CoVid19 outbreak
The situation is changing rapidly and we will continue to monitor the situation
closely. Alongside the obvious risks to human health, we are also seeing serious
disruption-related impacts on organisations that are arising from travel and
opening restrictions, event cancellations, workforce issues, supply chain
disruptions, financial and market volatility and cash flow problems.

Those who have studied or trained with us will be familiar with the principles,
tools and techniques of risk management, business continuity and crisis
response that can be deployed to help organisations prepare and respond to
situations like this. Hopefully organisations will have business continuity plans,
and these will form the basis of a response, but it is quite likely that they did not
foresee a situation as widespread, complex and long lasting as we appear to be
facing. And we will also see how well theoretical plans work when faced with
real life situations.

Every organisation will have its own sectoral and individual context.
Organisations must also respond in a proportionate manner. But based on advice
from some of our senior members, here is our checklist of what organisations
should be thinking about:

Risk response

 Review key objectives and priorities in the light of current information

 Balance ‘business as usual’ against new demands and changing priorities
 Ensure you have undertaken risk assessment(s) in respect to the impact of
COVID19 on your key objectives and prepare and implement response
plans
 Stress test various scenarios
 Assess whether you have sufficient expertise available, in risk
management, supply chain risk management, subject matter and
communications
 Check your insurance coverages and talk to your broker
 Be alert to other risks materialising e.g. cyber attacks
 Be aware of possible opportunities and opportunities for research and
learning e.g. improving processes

Crisis management
  Establish an incident management team. Decide what authority it has.
What if the members become ill?
 Ask all departments to review and refresh their continuity plans as
necessary
 Consider any value statements your organisation may have that should
guide your response and communications 

Communications

 Monitor official advice, beware fake news

 Map out who your internal and external key stakeholders are and have a
plan for how and how often you will communicate with them
 Think about how you will keep the message consistent, while
understanding that policies may have to change rapidly
 Keep your staff informed without being alarmist
 Ensure leadership teams are briefed and kept up to date
 Review public announcements (website etc) regularly

Looking after your people

 Conduct and regularly review risk assessments to ensure a safe place of

work for employees and contractors
 Follow government health and travel advice
 Ensure good hygiene practice and appropriate personal protective
equipment where necessary
 Ensure you know about staff that are at higher risk because of pre-existing
health conditions and take action accordingly
 Make and implement plans to reduce travel and facilitate working from
home where possible
 Give employees clear guidance on when they should attend work and
when they should stay away
 Review travel advice on a regular basis
 Risk assess meetings and events
 Review impact of incentive elements of remuneration packages

Supply chain issues

 Confirm business continuity plans of key suppliers

 Ensure you have thoroughly mapped your supply chain
 Take this further and look at your wider extended enterprise
 Talk to your suppliers and to your customers to look at options and
alternatives
 Understand how your contracts work, especially force majeure provisions
 Ensure that you maintain safety and traceability standards if alternative
suppliers are used
 Ensure you have appropriate legal advice
Regulatory, competition law and reporting considerations

 Ensure any home working arrangements maintain standards of data

protection and IT security (e.g. beware Alexa or Siri listening into your
videoconference)
 Consider anti-trust implications if you think about collaboration with other
businesses to maintain supplies
 Be aware that action may be taken by competition authorities in respect
of pricing and unnecessary stockpiling
 Consider any impact on company AGMs and whether an online meeting is
an option
 Consider how the impact of COVID19 will be reported in compliance with
corporate governance codes, e.g. when reporting on principal risks and
uncertainties

Cashflow and liquidity

 Use scenario analysis to examine and stress test liquidity and prepare
response plans
 Be aware of any government assistance e.g. from the tax authorities

The Securities and Exchange Commission on Feb. 19 asked publicly traded

companies with operations in China to disclose any coronavirus (COVID-19)
threats or risks in their upcoming financial reporting.

David A. Brown
SEC chairman Jay Clayton acknowledged that the material effects of the
coronavirus may be difficult to measure and predict and will likely vary
across industries. Since then, the situation has rapidly evolved, with parts of
China easing restrictions and quarantines, while at the same time the virus
has spread to other countries, including the United States.

It remains too early to measure the impact the coronavirus will have on
companies. However, here are three strategic risks CFOs and other top
executives should consider when assessing the threat.

Company Liquidity
The coronavirus may have an impact on a company’s revenue through
production slowdowns, difficulties in delivering goods or services to the
market, significant drops in demand for the company’s goods or services,
and delays in customers paying outstanding invoices.

The coronavirus outbreak may not impact a company’s balance sheet or

cash flows until a quarter or two in the future, so CFOs should think ahead. If
the disease slows or disrupts a company’s revenue stream, it may put a
strain on its cash holdings or force it to dip into liquidity reserves.

CFOs should review their companies’ existing credit and debt facilities to
ensure that cash is available. This review should include a close examination
of any financial covenants and potential monetary and legal penalties for
late or missed payments. It should also include an assessment of the impact
a disruption of revenue could have on the company’s ability to access credit
facilities or the capital markets.

Luke Trompeter
Finance chiefs should also be in regular contact with lenders and rating
agencies to discuss the impact a slowdown in production may have on their
ability to meet current lending requirements. Delayed or missed payments
may require additional borrowing or result in a lower credit rating, which
could negatively affect the company’s bottom line far longer than the
coronavirus itself.

Many companies have in place business interruption or contingency plans for

when production is unexpectedly disrupted. CFOs should review the viability
of those plans and ensure that the plans are effective over the short, mid-,
and long terms for a contingency such as the coronavirus and make any
necessary adjustments now.

If a company does not have an adequate plan in place, it’s not too late to
implement one.

These plans will likely need to be reviewed regularly and adjusted as the
situation continues to evolve. In the short term, companies with plans to
repurchase shares or increase dividends may need to forgo or delay them
until their cash flows stabilize.
Reducing costs in other parts of the company may also be effective in
addressing production slowdowns. In the mid- to long term, a company may
consider implementing hiring freezes or putting existing employees on
furloughs to minimize labor costs.

The ultimate impact the coronavirus will have on business operations may
not be realized immediately and may ultimately be modest. However, well-
developed and well-implemented contingency plans can minimize any such
impact and put a company in a better position to recover.

Supply Chain Concerns

Visibility into a company’s supply chain is crucial to the company’s success
because it allows responses to unexpected disruptions. Delays or disruptions
in receiving materials from suppliers may in turn lead to late deliveries to
customers and could strain or end existing customer and supplier
relationships.

Companies should evaluate the potential impact any such delays or

disruptions could have on these relationships and keep key customers and
other business partners informed of the situation.

Additionally, companies should be prepared to potentially prop up or float a

key or sole supplier to maintain its own customer relationships and delivery
obligations. As mentioned, utilizing capital from other parts of the company
to ensure on-time delivery to customers may lessen the stress on a
company’s supply chain.

Furthermore, a breach of contract with a supplier or customer for failure to

deliver on time could impose additional liability on companies beyond  just
lost revenue. CFOs should review their business interruption insurance and
evaluate what is and is not covered by coronavirus-related production
slowdowns.

Similarly, some supply contracts include force majeure clauses, which allow
parties to delay or, in some cases, terminate performance of contracts
because of a “superior force” making performance impractical or impossible.
This may differ from “Act of God” clauses that typically only protect against
natural disasters like hurricanes or tornadoes.
Companies should review their contracts and consider if they contain any
similar provisions that could apply to pandemic health issues like the
coronavirus.

If a coronavirus-related disruption to a company’s supply chain has the

potential to become material, additional disclosures to investors and the
public may be necessary in a company’s periodic reports.

Company Guidance and MD&A Disclosures

Shareholders and potential investors rely heavily on earnings releases and
guidance when making investment decisions. The recent market volatility
demonstrates substantial investor uncertainty regarding the severity and
duration of the coronavirus.

In light of the fast-evolving situation, CFOs should consider their company’s

recent guidance to determine if it is appropriate to provide any updates to
the market. They should be aware that confirming guidance may be
considered either updated or new guidance.

Therefore, companies should take measures to ensure that they update or

affirm guidance in a manner compliant with Reg FD and take care when
speaking with investors or analysts in one-on-one settings or at conferences.

Reviewing internal processes and guidelines on discussing guidance will help

avoid any foot-faults. When asked about guidance, companies can state that
any guidance or forecasts speak as of the date given and the company is not
giving any updates or confirmations at this time.

Companies likely have already acknowledged in their public disclosures that

the coronavirus may pose some risks to their business. If those risks become
known trends and uncertainties, it should be covered in the Management
Discussion and Analysis section of their public filings.

Companies should begin considering how the coronavirus may impact their
business and how it will be discussed in the MD&A in future periodic reports.

At this time, it’s likely too early to determine the impact the coronavirus will
have on a company’s bottom line, and the true impact may not be felt for
some time. However, companies need to be prepared without acting
irrationally.

CFOs should evaluate their liquidity position, communicate with customers

and suppliers, and consider their guidance as they position their companies
to weather the uncertainty associated with the coronavirus.

Coronavirus has suddenly emerged as a critical risk factor for businesses

around the world. Companies like Apple computers are
especially vulnerable because of their large customer base in China and the
dependence of their supply chain on Chinese manufacturers. No wonder Tim
Cook cited the impact of Coronavirus as a significant source of uncertainty in
the company’s recently concluded quarterly earnings call. However, a big
silver lining at this worrisome time for the company is its $200 billion pile of
cash. Cash balance is the best vaccine against unpredictable events such as the
spread of Coronavirus. In fact, cash is the best hedge against any risk that
cannot be identified or quantified ahead of time.

CFOs spend considerable time figuring out their firms’ risk exposures and
devising strategies to manage them. A good chunk of their time is spent on
quantifying exposures to market-based sources of risk that come from
fluctuations in interest rates, exchange rates, and commodity prices.
Accounting statements are full of disclosures to these sources of risks, their
impact on the business, and how the firm manages them. But some risks are
not quantifiable in a traditional sense; much worse, some risks are not even
identifiable ahead of time. Who could have predicted, even three months ago,
that Coronavirus will be Apple’s main concern at the beginning of 2020?

Academic literature, including some of my work, emphasizes the need to

hedge risk when firms face a higher probability and cost of financial distress.
The idea is straightforward: hedging exposure to commodity prices or
exchange rates minimizes the possibility that a firm finds itself in financial
difficulty. This, in turn, allows the managers to focus on their core businesses
where they can create value for the stakeholders. Thus it is advisable for highly
indebted firms or firms with high volatility in their core business to hedge
their exposures to market-based sources of risk. There are other motivations,
other than minimizing the cost of financial distress, behind hedging too. Some
managers prefer smooth earnings, and hedging allows them to do so. Smooth
earnings can also be used as a strategy to minimize the tax burden of the
company in some cases. But in this discussion, there is very little attention
paid to unanticipated event risks such as the outbreak of Coronavirus. Perhaps
this is a wake-up call for all.

The obvious question is what can the managers do to manage risks that are
not even identifiable? Unlike exchange rates or commodity prices, there are no
market-based derivatives contracts that can be used to hedge such a threat.
And that’s where the role of a healthy cash balance comes in. Cash is the
ultimate hedge against uncertain, unexpected events: against the unknown
unknowns. Conservative financial policy, such as keeping relatively lower
levels of debt, can be a reasonable tool to fight against such anticipated events
too.

Based purely on stock market reactions, it seems that investors are not
assigning a substantial probability to catastrophic consequences of the virus
outbreak. This is based on past experiences where such outbreaks have been
either short-lived or did not leave a significant impact on the markets.
However, if the crisis prolongs for some time or takes a turn for the worse,
highly indebted companies and companies low on cash balances may quickly
find themselves struggling to survive.

Apple’s enormous cash balance has been a subject of hot debate for more than
five years now. Activist shareholders such as David Einhorn and Carl
Icahn have often argued that Apple has too much cash, and paying it out via
share buyback or some other means will unlock shareholder value. A quick
look at Apple’s balance sheet makes it clear that the company does indeed
have a lot of cash for its size, perhaps too much cash than it needs. But today it
is in a much better position to weather this storm precisely because of this
balance. If the firm wants, it can shift its supply chain to other countries,
thanks to its cash balance. To be sure, any disruption in the supply chain is
going to be costly to the firm, but it is unlikely to be catastrophic because of its
ability to move things around. If the firm experiences a significant drop in its
global sales, it will still be far away from any realistic threat of financial
distress, thanks again to its cash balance. And if production costs go up due to
these disruptions, it can still remain competitive in the market, thanks again
to its cash balance.

It is unlikely that Apple’s cash management strategy was designed with a focus
on fighting such uncertain events. Most likely, Tim Cook and his team have
built up this balance to be able to make quick acquisitions or to engage in R&D
projects. In hindsight, this also looks like a reasonable risk-management
strategy from which other CFOs can learn a bit.
Risk
Risk refers to threats an organization faces -- loss of earnings, loss of
reputation, or harm of any kind.  These articles explore the challenges
of preventing, identifying and mitigating risk. Risk can come in many
forms, including financial issues, legal liabilities, strategic or
leadership errors, or accidents and natural disasters. Today,  IT- and
data-related risks are growing concerns. The following articles about
risk look at the issue from many angles, especially from that of
compliance officers risk managers.

Vicky Yu has seen the effects of the coronavirus

firsthand. Here, she offers lessons learned, hopefully
to protect those organizations who may yet get an up-
close-and-personal view into the outbreak.

Since the coronavirus outbreak in China late December 2019, many

Chinese companies or multinational companies that have offices in
China are facing stress from government regulations and their own
employees. As a compliance professional currently in China, I have
some insight into how risk and compliance professionals can build a
stronger system in light of the coronavirus. 

An Emergency Management System is

Essential
Though it is impossible to anticipate all potential risks (certainly with
an epidemic like this), setting up an emergency management system
will help companies be prepared organizationally to respond to an
emergency, which is key to avoiding panic among employees in the
first place.

An emergency management system will let employees know who they

can contact in an emergency, who the first responsible person is in an
emergency and the level of authority he/she has in responding to the
situation. Given how quickly and dramatically the Coronavirus
situation evolved, companies in China had no time to lose in
responding. If the decision to purchase masks for their employees was
not made quickly, the company might have ultimately found no masks
available for sale.

Many local government regulations to prevent the virus spreading

include governance requirements. For example, the Shenzhen
municipal government requires that: (1) every company needs to have
a system to prevent and control the virus at their facility with
designated personnel in charge of implementation and (2) the company
needs to have policies in place to encourage migrant employees to
work from home. Other provincial governments have similar
regulations asking for stronger governance during the emergency.
Therefore, it’s necessary to thoroughly discuss how to set up such a
system that fits into both the company’s governance and the local
context. Best to prevent everyone going to the CEO for help in an
emergency.

Following Up on Government Regulations

Can Be Challenging
The outbreak of coronavirus has left no one enough time to prepare,
and corporations’ actions have mostly been reactive according to
government regulations. Therefore, knowing the latest national and
local regulations is key to schedule and plan changes for the business
and to ensure compliance.

To slow the virus spreading, the central government announced the

extension of the Chinese New Year holiday on January 26, which was
only four days before the actual holiday ending on January 30. In this
case, if a company was not actively following regulations, they may
have found that they did not have enough time to rearrange work
schedules and inform their employees.

Following up on regulations from different provincial and municipal

governments makes the situation even more complicated. Because the
virus impacts various provinces and cities differently, each level of
government has its own ways of dealing with it. For example, Hubei
province basically stopped public transportation, as well as travel into
Hubei from other provinces; Jiangsu, Shanghai and Guangdong
provinces announced that companies cannot resume work before
February 10 unless otherwise approved. To resume work after
February 10 – take Shenzhen city in Guangdong province, for instance
– companies must prove they have adequate resources (such as masks
and medical alcohol) and an emergency system to tackle the outbreak.
Simply following through with all these requirements can be a little
overwhelming, especially for companies with their main compliance or
HR functions in countries other than China, not to mention doing all
the work to be in compliance. For multinationals with offices across
China, it is recommended to have at least one person locally in charge
of learning all the local regulations, filling out all the government
papers and coordinating with HR. Again, this is why it is important to
have a system in place to “level up” your preparedness.

HR Compliance Needs to Be Strong

HR must have been very busy during this outbreak, because there
were a lot of questions about resuming work and salaries and leaves
because of the extension of the Chinese New Year holiday. As
mentioned, there are several provincial governments prohibiting
resumption of work before February 10. Since the Chinese New Year
Holiday ended on February 2, people were concerned about how this
would affect their salaries from February 3 to February 7 if these were
not considered working days.

Personally, when I learned about the news, I contacted HR to get

clarification about the salary and work arrangement during these days
so I could plan my schedule in advance. Given the unique situation
(postponing the resumption of work has rarely been used by local
governments), they did not have a clear answer for my salary
questions that same day. Just imagine all the other employees who,
like me, must have rushed to HR for answers to questions about their
paychecks.

Due to the extension of the holiday, HR was under pressure from both
compliance and the business. To reduce the turbulence caused by the
extended holiday, some companies arranged key functions to work
from home from February 3 to February 7 and promised to compensate
them according to the regulations when clear answers were available
from the government.

For foreign-invested companies in China, this could be a little

confusing and complicated. In supporting these companies,
organizations like the American Chamber of Commerce (AmCham) in
China have published guidance for their audiences. For example,
this article from AmCham focused on legal do’s and don’ts during the
coronavirus outbreak, and the British Chamber of Commerce in China
collected official notices and policies in their article. Again, we can
see that it asks for dedication and energy to respond to the outbreak
from HR – particularly when it comes to being responsive, dealing with
constant changes in a short time, and working closely with
compliance.
No one could have anticipated what a virus outbreak would mean for
compliance, nor could we have known how to be fully prepared.
Hopefully we can do better next time it happens and minimize the
damage it may have to ourselves and our businesses. Though different
companies have different strategies, I believe an emergency system
coupled with a strong legal and HR compliance function can lessen the
damage.

Risk Management Lessons from Coronavirus

 Daniel Wagner

 March 5, 2020

Each new, unforeseen black swan event highlights valuable lessons for businesses and
risk managers about how to respond. The coronavirus (COVID-19) outbreak is no
exception. Based on what is known so far about the disease, we can already draw
some general conclusions about how such events should be addressed in the future.

Businesses
When it comes to threats like COVID-19, businesses stand a better chance of surviving
and recovering when management is prepared to address it head on. This applies not
only to businesses with operations in challenging locations, but to businesses anywhere
in the world. Because of the COVID-19 outbreak, travel and business operations
throughout the world are already being significantly impacted, even in countries that
have not yet recorded any official cases of the virus. To be prepared for such an
eventuality, businesses should consider implementing the following general practices:
 Establish specific protocols that should be followed when local, national or global health

emergencies occur, including what sick employees should and should not do when infected.

(This may even apply when someone has a cold, to avoid making other employees sick.)

 Assign specific individuals in advance to address the inevitable issues related to an

outbreak and empower them to act, consistent with the above-referenced protocols.

 Establish in advance a relationship with local, national or global organizations and get on

their mailing lists, so you can receive and create a current and reliable flow of information.

 Do not penalize employees for bringing health-related issues to management’s attention.

Set the example of transparent information flow from the top of the organization as a routine

matter of fact.
Risk Managers
A critical part of any risk manager’s job is to anticipate the unforeseen and plan in
advance for how to address it effectively. When unforeseen events occur, senior
management will inevitably be turn to risk managers. Coming to the table prepared with
answers in advance requires foresight, planning and time. While no risk manager can
possibly foresee a viral outbreak, past outbreaks like SARS in 2002-2003 can teach us
lessons for what should be done to manage such risks. (Although it should be noted
that COVID-19 already has had a more significant economic and public health impact in
two months than SARS did after more than a year). Some of the steps risk managers
should take include:

 Obtain requisite forms of business interruption and related coverages and ensuring that

they are current and adequate to account for up to medium-term interruptions.

 Establish corporate procedures or relocating employees and replicating their workflow at

another location.

 Identify alternative sources of supply in advance that may be implemented on short-

notice.

 Create a standby budget for such emergencies that can be utilized at a moment’s notice.
Be Prepared
No amount of advanced planning can possibly account for every contingency that may
occur in a world filled with unknown unknowns, but it makes little sense to presume that
black swan events will not impact your business. Too many business practitioners pay
too little time accounting for the unforeseen, as they are simply too busy either putting
out fires or prioritizing near-term needs. That approach will only take businesses so far.
Those that will survive, and perhaps even thrive, in the current environment will have
taken many precautions. Given the growing and ongoing clash between man-made and
natural risks, it is probably only a question of time until a black swan comes knocking on
your door. Use COVID-19 as the impetus to create or enhance the risk preparedness of
your organization.

The Coronavirus (COVID-19) outbreak continues to develop, with impacts felt globally,
affecting daily life and the financial markets.

Firms of all sizes and sectors have been taking urgent steps to prepare and respond,
with business continuity and incident management teams heavily engaged. Their work
includes a large amount of information sharing, refreshing business continuity plans and
refamiliarizing staff. Plans are being tested or invoked, including "work from home"
arrangements.

Business Continuity: Assessing Resilience of Third Parties

Banks, other types of financial services firms and, indeed, most major non-financial
companies have significant networks of third parties, which include vendors,
outsourcing partners, and others. In the financial industry, some of these relationships
represent critical dependencies for regulated functions.
In "business as usual" times, procurement and third party risk management teams carry
out due diligence and ongoing monitoring on these third parties across a range of risk
domains, including information security, and business continuity.

With events such as COVID-19, firms move swiftly to review the vendor population and
determine which are critical, operate in affected regions or are likely to be impacted.
Those vendors representing the most material operational risk are targets for outreach.
This outreach is usually supported by a questionnaire enabling the vendor firm to share
details of whether and how they are affected, and the steps they have taken to prepare,
mitigate and manage their response.
COVID-19: A Coordinated, Cross-Industry Response
In previous events which challenged business continuity, such as Superstorm Sandy,
SARS, and Hurricane Katrina, financial services firms conducted their vendor outreach
independent of one another. Vendors were deluged with due diligence requests. In part
because each company was asking for different information, the quality of vendor
response was uneven and the outreach process inefficient and subject to delays.

Fortunately, things are different in the case of COVID-19, thanks to the Significant Event
Notification and Tracking (SENT) system. The SENT Committee comprised of global
and regional financial services organizations, decided on March 10 to issue a new event
with an agreed set of standard questions to help coordinate a cross-industry response.
This SENT event went live on March 11th and is being used to carry out COVID-19 due
diligence across hundreds of vendors.

In contrast to the decentralized approach to assessing vendor resilience in the past, all
communications are secure and audited on the platform and vendors can share their
questionnaire answers efficiently with any number of customers requesting the
information, including attaching any corporate statement they have on the subject.

SENT is part of the KY3P® (Know Your Third Party) third party risk management
solution from IHS Markit.
KY3P customers can also efficiently monitor and receive alerts for a range of third party
operational health and news sources about their vendors, including negative news,
financial stability, sanctions and screening, and cyber health.

Specific Areas of Focus for COVID-19

Multiple factors were considered by the SENT Committee in developing the
standardized questionnaire. These included:

Economic Shock: The pressure of cancelled contracts or high levels of unfinished goods
and exposure to high risk countries may present a financial stability risk which requires
careful monitoring.
Access to Critical Services: Vendors may face impacts due to restricted movement or
higher than normal absence levels. Key person risk may be a factor, should employees
with specialist expertise become unavailable. Previously shared SLAs may no longer be
achievable based on the circumstances of locations where the service is supplied.
Fourth parties (suppliers to your suppliers) may be a factor and should be identified and
considered.
Access to Critical Goods: Limited availability of parts for critical infrastructure could be a
factor. For Financial Services firms, examples of relevant critical goods could include
replacement parts for IT infrastructure. Firms will typically be confirming their internal
and vendor stock levels and will continue to monitor the situation through the rest of the
year.
Risks & Controls: Moving operations to alternative locations carries risks. One example
is working from home, which could carry information security risks which need careful
management. Compensating controls may need to be re-examined. Any location-
specific dependencies such as clean rooms must be understood and continuity plans for
these functions examined.
Centralizing the assessment of vendor resilience during periods of disruption and
heightened risk represents a major operational advance for the financial industry. It also
enables vendors to provide higher quality responses to questionnaires and more
fruitfully engage with financial institutions on BCP issues.
Beyond vendor assessments, monitoring and analyzing news and economic
developments also plays a vital part in business continuity. This includes sourcing
reliable data relating to the outbreak and its economic, political and logistical impacts
across the world. It is also important to monitor vendors' current financial stability and
company-related news.
IHS Markit's Economics and Country Risk (ECR) team, comprised of 80 full time country
risk analysts and 110 economists, provides quantifiable forecasts and analysis on
emerging political, economic, operational, and security risks in 211 countries around the
world. With global risk monitoring and coverage, ECR is helping clients to quantify and
assess the current impacts of COVID-19 to their operations, to forecast how their risk
profiles may change in the coming months, and to develop more resilient and profitable
strategies for the future.

What is the risk of severe disease associated with COVID-

19 for the EU/EEA and the UK (as of 25 March 2020)?
The risk of severe disease associated with COVID-19 for people in the
EU/EEA and UK is currently considered moderate for the general
population and very high for older adults and individuals with chronic
underlying conditions.
This assessment is based on the following factors:

 COVID-19 cases have been reported in all EU/EEA countries and the
UK. The overall 14-day cumulative incidence rate for the EU/EEA and
the UK has increased from 3.3 cases per 100 000 population on
11 March to 36.1 cases per 100 000 population on 25 March 2020.
There is a growing number of cases in many countries without
epidemiological links to explain the source of transmission. Based on
the predicted development of the 14-day cumulative notification rate,
similar levels to those seen in Hubei providence are expected to be
seen in all EU/EEA countries and the UK in a few days to a few weeks.
Although uncertainty remains about the extent to which the prevention
and control measures introduced may slow the speed of transmission,
the probability of further continued transmission in the EU/EEA and the
UK remains very high.
 The evidence from analyses of cases in China is that the disease is
mild (i.e. non-pneumonia or mild pneumonia) in about 80% of cases;
most cases recover, 14% develop severe disease, and 6% experience
critical illness. Recent data from EU/EEA countries indicate that 30% of
 cases are hospitalised, and 4% require critical care. Severe illness and
death is more common among the elderly and those with other chronic
underlying conditions. These risk groups account for the majority of
severe disease and fatalities to date. Mitigation measures to slow
transmission have been introduced at different points in the epidemic
and at varying intensities across EU/EEA countries and the UK. The
effect of these measures in slowing the transmission of COVID-19 in
the general population more broadly, and in vulnerable populations of
older adults and individuals with chronic underlying conditions
specifically, is not yet possible to evaluate. Once infected, no specific
treatment for COVID-19 exists, however supportive therapy, if
healthcare capacity for this exists, can improve outcomes. In sum, the
impact of COVID-19, if acquired, is assessed as moderate for the
general population and as very high for elderly and individuals with
chronic underlying conditions.

What is the risk of occurrence of widespread national

community transmission of COVID-19 in the EU/EEA and
the UK in the coming weeks?
The risk of occurrence of widespread national community transmission
of COVID-19 in the EU/EEA and the UK in the coming weeks
is moderate if effective mitigation measures are in place, and very
high if insufficient mitigation measures are in place.
This assessment is based on the following factors:

 There are rapidly growing numbers of cases in many countries, and

many countries in Europe have already reported nation-wide
community transmission. Mitigation measures to slow down
transmission have been introduced at different points in the epidemic
and at varying intensities across EU/EEA countries and the UK. The
effect of these measures in slowing the transmission of the virus in the
general population and in vulnerable populations is not yet possible to
evaluate, but it is known the virus spreads very quickly in the absence
of effective mitigation measures. Based on the high transmissibility of
the virus and the continued increase in the notification rate in all
EU/EEA countries, the probability of occurrence of widespread national
community transmission is considered moderate if effective mitigation
measures are in place, and very high in the absence of effective
mitigation measures. If mitigation measures are lifted suddenly and too
early, a resurgence of cases is likely.
  The impact of national community transmission would be high,
especially if healthcare capacity is exceeded or if hospitals are
affected and a large number of healthcare workers need to be isolated
or become infected. The impact on vulnerable groups would be very
high, in particular for the elderly.

What is the risk of healthcare system capacity being

exceeded in the EU/EEA and the UK in the coming weeks?
The risk of healthcare system capacity being exceeded in the EU/EEA
and the UK in the coming weeks is considered high.
This assessment is based on the following factors:

 Analyses carried out by ECDC indicate that if the pandemic progresses

remains on its current course without strong countermeasures and
surge capacity enacted, there is high probability that many EU/EEA
countries will experience demands that far exceed currently available
ICU capacity. Furthermore, healthcare staff is under pressure and
resources are strained across all EU/EEA countries; there have been
reports of additional strain or shortages in the following areas:
ventilator availability; sampling material and laboratory materials
affecting diagnostic capacity for COVID-19 testing (which also affects
other laboratory services); contact tracing; surveillance; risk
communication; personal protective equipment; shortages of staff and
space due to increased needs for triage and isolation of suspected
cases. Although the influenza season has peaked in all EU/EEA
countries, some healthcare systems may still be under pressure from
residual and continued severe influenza cases.
 Sub-regions of Italy, France, the Netherlands and Spain have already
reported healthcare system saturation due to very high patient loads
requiring intensive care. The increased pressure caused by COVID-19
on many EU/EEA health system is dependent on the level of
preparedness and surge capacity that a given country or area has
implemented or can implement quickly. If incidence increases quickly
and if additional surge capacity for resources, staff and hospital beds
are not ensured, the impact of COVID-19 will be very high and likely
result in considerable additional morbidity and mortality in COVID-19
cases. This impact will be mostly concentrated in vulnerable
populations of elderly and persons with chronic underlying conditions.
Already stretched capacity would be further exacerbated if substantial
numbers of healthcare workers became infected with the virus.