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COVID-19 (Coronavirus) Alert Bulletin

Bulletin 4 - Monday 24th February, 2020

Overview

The following update is designed to provide you with important information regarding the current COVID-19 (aka 2019-nCoV) outbreak. Information is sourced from the World Health Organisation (WHO) and Australian Government information sources. Further updates will be issued as new information becomes available. The WHO has officially declared this to be a Public Health Emergency of International Concern (PHEIC). This declaration activates a range of support and funding arrangements to enable better coordination of the outbreak at a global level.

Current Situation

  • 78,914 confirmed infections from 31 countries including China (John Hopkins University dashboard).
  • Over 1,700 confirmed cases of transmission outside of China.
  • 2,467 deaths, 2,242 of these in China and 25 from other countries.
  • 3.1% fatality rate (WHO Sitrep 34 23 February 2020).
  • 22 confirmed cases in Australia with no documented cases of human-to-human transmission.
  • All planned repatriation flights to evacuate Australians from high-risk areas to isolation sites on Australian Territory have concluded.
  • Restrictions preventing people from China entering Australia have been extended to 29 February, excluding some limited exceptions for some high school students. Only Australian citizens, Australian residents, their dependents and spouses are permitted to enter the country. Travel bans are reviewed on a weekly basis by the Australian Government.
  • Australia’s National Incident Response Centre remains active, primarily supporting deployment of additional medical staff at primary border sites.

Whilst reported infection rates in China have slowed in the past few days, China confirmed on Friday that they have changed their measurement approach again. Areas of concern include rapidly increasing human-to-human infection rates in South Korea (602), Italy (155), Japan (135) and Iran (43). Indonesia is still reporting zero infections.

Impact on Supply Chain

Whilst the human impacts of COVID-19 have been relatively minor here in Australia so far, economic and business implications are considerable due to Australia’s close trading relationship with China. Industries that have already been heavily impacted include tertiary education, retail and tourism. Impacts are also starting to be felt by the resources sector, businesses that reply heavily on China for production of goods and businesses where there is a perceived risk of transmission to customers. I.e. restaurants.

Rather than being a people issue, the COVID-19 outbreak represents a major supply chain risk for Australian companies. How significant this risk ends up being depends on:

  • how long it takes for Chinese factories to resume full production,
  • whether restrictions on the movement of goods to and from Chinese ports are relaxed, and
  • the extent of travel bans for inbound passengers to Australia.

If the outbreak gains a foothold in neighbouring countries, then the human, financial and strategic impacts are likely to be exacerbated here in Australia.

An important area for discussion is whether Business Interruption (BI) insurance will cover organisations that suffer financial losses caused by supply chain disruption or restrictions on their ability to do business. In most cases, the answer to this question is ‘No’. We do however recognise that each policy wording is different and recommend that you seek formal advice from your insurance broker.

Unfortunately for most companies that have BI insurance, exclusions apply unless the event occurs specifically to your business or on your premises, or an alternative endorsement has been developed.

Given the limitations of typical BI insurance coverage and the risk of COVID-19 causing further disruption to global supply chains, we recommend that you:

  • Review your existing insurance coverage including all exclusions, endorsements and policy sub-limits. You may need to make contact with your insurance broker to assist with this review.
  • Identify potential supply chain risks including use of single-source suppliers in China. It is also good practice to review the volume of stored inventory held in Australia or other accessible locations.
  • Review your Business Continuity Plan to ensure that it is capable of supporting you to mitigate the effects of a supply chain disruption and any uninsurable losses that may result. More specifically, your Business Continuity Plan should contain a recovery strategy for Supply Chain issues.
  • Quantify potential financial losses and communicate actions being taken to mitigate these losses to senior management.