Has your food business addressed the possibility of a flu pandemic?

by Joe Lederman © Lawmedia Pty Ltd, July 2007
Food Lawyers and Consultants

It is a wise management philosophy to plan for business risks and to consider worst case scenarios, irrespective of unpredictability. The Federal government has developed detailed plans and checklists for businesses to prepare for the contingency of a bird flu pandemic. This article provides further background and guidance.


Last year (2006), researchers at the Lowy Institute in Sydney modelled the potential human and economic costs of a global influenza pandemic (see Warwick McKibbin and Alexandra Sidorenko, Global Macroeconomic Consequences of Pandemic Influenza, Lowy Institute, 2006). Their estimates figured from about 1.5 million deaths worldwide and a cost of more than $300 billion, to more than 140 million deaths and economic losses well over $4 trillion.  Others have estimated the death toll could be 300 million.  Eight years ago, the world prepared for the Y2K bug.  At the time, there were apocalyptic predictions as to what potentially could happen as we began the new millennium.  So too, it may be that in spite of or because of the enormous combined efforts of governments and individuals, a human influenza pandemic of catastrophic proportions may never eventuate.  Even if a pandemic does eventuate, it is impossible to predict what its characteristics will be:  whether it will be widespread or localised; what percentage of the population will be infected; how severe the disease will be; what impact the health and emergency systems will have on mitigating the disease’s effects.

The Australian Health Management Plan for Pandemic Influenza was released on 30 May 2006.  It puts into perspective the Australian government’s strategies for managing pandemic influenza.  The following information, extracted from that Plan, is submitted as a point of reference:

Australian Government’s Health Management Plan

The Australian Health Management Plan for Pandemic Influenza relies on two main strategies.  In the first instance, the focus will be on containment of the spread of the virus to make time for a vaccine to be produced.  Containment strategies may include reducing travellers to Australia, infection control, social distancing, short-term home quarantine for those exposed to the virus, and the targeted use of antivirals.  If containment is no longer possible due to rapid spread of the virus, efforts will concentrate on maintaining essential services to keep society functioning until a pandemic vaccine becomes available or the pandemic abates. 

The Australian Health Management Plan divides a pandemic into the six global phases as detailed by the World Health Organization, and there are also six phases in Australia, as well as a recovery stage. Currently, Phase 1 has not been reached in Australia, while overseas, Phase 3 has been reached. This means that there have not been any effective human-to-human infections overseas and no cases reported in Australia, even in birds.

The Business Continuity Guide for Australian Businesses

The Australian government also prepared a Business Continuity Guide for Australian Businesses to assist businesses respond to the challenges and effects of a human influenza pandemic.  In general terms, it sets out information about the disease and establishes key assumptions about its impact, including its different expected phases.  Details of that Guide are extracted here as a point of reference:

“The prospect of an influenza pandemic is real.  The very nature of an influenza pandemic in Australia will be unlike any other modern disaster and will create new challenges for business continuity planners.  It may:
  • Arise rapidly and spread quickly;
  • Make people very ill and many could die;
  • Generate unprecedented levels of fear and anxiety;
  • Occur in several waves, each lasting for several months;
  • Require full community mobilisation;
  • Result in health care services not being able to provide direct care in some cases; and 
  • Result in very high staff absence rates for some periods during the pandemic.”

“The most significant impact on Australian businesses would be on staffing levels.  Experts suggest that business should plan for 30-50 per cent staff absences at the peak of the pandemic.  For some businesses, these kinds of absences would be devastating – particularly in our essential service sector.”
Characteristics of a Pandemic

According to the Business Continuity Guide for Australian Businesses:

“The likely impact of a human pandemic depends upon characteristics of the virus such as the infection rate, the proportion of the population infected in each age group, and the severity of illness caused. 

“In the last century, pandemics have spread to all parts of the globe within less than a year and affected more than a quarter of the total population.  The ability of health and emergency systems to respond can be put under pressure by the rapid increase of illness in the community. 

“Historically, there is a tendency for pandemics to occur in waves, so a second and sometimes third wave may begin simultaneously in different parts of the world, and should be expected.  However, this pattern may change as a result of interventions such as the use of antivirals, vaccination, infection control practices or social distancing measures.  Each wave could typically last about eight weeks, building to a peak in week four before abating again. 

“A pandemic among humans will not be like a natural or physical disaster that may have been experienced previously, there will be a wider variety of variables that may affect businesses.

“The impact of a pandemic could be widespread, even nation-wide, or may be localised to a single area through the use of containment practices.  If other areas are also affected by the virus, outside assistance could be limited.”

“To date, there have been avian influenza clusters (small outbreaks) in some overseas countries.  A cluster occurs in limited settings indicating a single source point, for example, a family or a group of people, in a hospital or a town.  Many existing business continuity plans assume some part of an organisation is unaffected and can take up the required capacity for the organisation to perform at the required level – this may not be the case with a pandemic.”

Furthermore, the effect of absenteeism in a pandemic situation may not have a uniform effect at all levels of a business organisation.  In particular, there might be differing impacts from the absence of numbers of staff at particular critical points in the chain of command (e.g. absence of a key person in a senior management position) and in the chain of supply (e.g. the absence of a key person responsible for logistical systems) and in the chain of distribution (e.g. an absence of large numbers of permanent and casual check-out personnel who are familiar only with the business’s systems). The different impacts of absenteeism may require changes to be made to the usual Business Continuity Plan of different businesses in order to avoid a sudden corrosion in the effectiveness of the usual operational systems or causing a failure in infrastructure or its maintenance.

Business Continuity Plans “…may also assume the event is short/sharp and that recovery can start immediately.  A pandemic would not be a short, sharp event leading immediately to commencement of a recovery phase.  It is not possible to predict exactly how long a pandemic may last or when it may occur” (see page 16, Business Continuity Guide of  Australian Businesses).  However, the Federal governments’ own management plan indicates that a pandemic might last six months (see The Australian Health Management Plan for Pandemic Influenza). 
“It is quite likely that there will be some advance warning from the development of the pandemic overseas, but it is always possible that any warning period may be minimal. Should pandemic influenza spread within Australia it will probably be some weeks before the full impact on the workforce would be felt, although there may be some very early impacts resulting from closures of schools and similar containment measures” (see page 16, Business Continuity Guide of  Australian Businesses).

The Business Continuity Planning Guide issued by the Federal Government does assume that “a pandemic will be widespread and will impact businesses in several ways – employee absenteeism will probably have the greatest effect.” And “…there would also likely be shortages of supplies/resources, reduction in customers, and venue/event closures, are also possible” ” (see page 16, Business Continuity Guide of  Australian Businesses).

Staff Absenteeism

The Federal government planning guide in continuity of business states that “businesses should plan for 30-50 per cent staff absences at the peak of a pandemic” (see page 16, Business Continuity Guide of  Australian Businesses):

“Staff absences can be expected for many reasons:

  • Illness/incapacity (suspected/actual/post-infectious);
  • Some employees may need to stay at home to care for ill family members;
  • Others may need to stay at home to look after children (as schools/child care centres are likely to be closed);
  • People may feel safer at home (e.g. to keep away from crowded places such as public transport); and
  • Some people may be fulfilling other voluntary roles in the community” (see page 17, Business Continuity Guide of  Australian Businesses).
Other Immediate Effects

“A pandemic may have other impacts on businesses, for example:
  • “Supplies of materials needed for ongoing activity may be disrupted (e.g. if [foods or other products] are imported especially from a country that may be severely affected by the pandemic; or if local suppliers are no longer able to produce the other goods/services);
  • “Availability of services from sub-contractors or other suppliers may be impacted (this may affect maintenance of key equipment, and is an area that merits close planning attention);
  • “Demand for services may be impacted – demand for some services may increase (internet access is a possible example); while demand for others may fall (certain types of travel may reduce);
  • “Fuel and energy supplies may be disrupted to some locations at times [and in this regard, we note from our discussions with BP and Coles that the supply chain for supermarkets is highly dependant on the continued availability of fuel and energy, directly and indirectly, both to transport food and to operate each store]; and
  • “The movement of people, imports and exports may be restricted/delayed by quarantine and isolation measures both within Australia and overseas.” (see page 17, Business Continuity Guide of  Australian Businesses).
Financial Implications

“Some businesses may be placed under financial stress by a pandemic virus because of the potential disruption to normal activity.  Sales revenues could likely fall because of operational problems or a lack of product demand.  However, payments to staff, suppliers or financiers would be expected to continue where possible.  Consequently, strategies to deal with a sudden slump in activity could assist businesses maintain a sound financial position…”

With the current growing level of private debt and diminishing personal savings, (for example see Parliamentary Library, Monthly Economic and Social Indicators, Household debt and savings ratios and Call for Whole of Community Approach as Financial Stress Hits Home, 13 November 2006) many consumers might lack the financial capacity to respond adequately to the economic consequences of a pandemic. The financial impact on many individuals might be wider than just the direct impact on their personal earnings resulting from the inability to work, business closures or social quarantining.

“According to the Treasury, a global pandemic could have a significant impact on the economy.  While the projected economic effects of a pandemic vary widely, the Treasury’s modelling indicates that staff absenteeism, combined with reduced consumer spending and investment confidence, could lower GDP by more than five per cent over the first year…..The extent to which a particular business would be affected by a pandemic virus depends on a range of factors, including geographical proximity, the nature of the business, and the length and severity of the pandemic.” (see page 17, Business Continuity Guide of  Australian Businesses).

Industry’s reserve capacity

Given the possibility of extreme opposite pandemic scenarios – ‘all or nothing and everything in between’ - it is imperative that food businesses act now to do what is socially responsible and yet cost beneficial.  The burden of ensuring distribution of food during a pandemic crisis would weigh heavily on private industry retailers in particular. The usual chains of food distribution would be impacted as would priorities in the type of foods that could be distributed during a bird flu crisis.

Here is a list of questions that every essential food supplier should consider in planning for a bird flu pandemic:
  1. Is your food an essential food that would find its way into people’s homes during a period when many people are absent from work?
  2. What reserves of food inventory do you hold?
  3. How would you be encouraging your customers to buy extra items to hold some extra food in the home to avoid unnecessary shopping during a bird flu pandemic and to avoid greater contagion in the community?
  4. How would you cope with staff absenteeism?
  5. What is your capacity for food production in a crisis situation? Would the food business be able to access adequate raw materials locally? How would your food be distributed if there were restrictions or incapacities in your normal distribution channels?
  6. What warehousing capacity does your company have to store additional inventory? Where is it located in relation to your customers in the major urban centres?
  7. If in the event of a flu pandemic, transport to and from Australia becomes restricted (including shipping by sea and by air), how would your supply be affected? What risk management and insurances do you have?
Important Business Pandemic Planning Checklists

The Australian Government Department of Industry, Tourism and Resources has published detailed checklists which businesses can work through in order to prepare a business to deal with each phase of a flu pandemic. These checklists are copyrighted and therefore cannot be reproduced in this article, but they can be accessed by clicking here.

This is general information rather than legal advice and is current as of 12 Dec 2015. We therefore recommend you seek legal advice for your particular circumstances if you want to rely on advice or information to be a basis for any commercial decision-making by you or your business.