LESSONS FROM SARS

Financing and business are industries whose status depend on the slightest changes in the social makeup of various nations. This makes predicting market shifts very hard and precisely why modern economic theorems are very complex.

For example, Fool.co.uk Mortgage Calculator - one of the most advanced financing comparison tools in the world wide web - even factors in climate changes, political status, etc. in their database to come up with the most accurate figures for their user. This underscores how unstable financing and business is.

To give you a better idea, let's take a look at the impact of SARS on HongKong exports.

A study conducted by the Hong Kong Trade Development Council (HKTDC) following SARS revealed a very interesting statistic. Most of Hong Kong businesses, some 65% in fact, suffered to some extent in their bottom line with many of those going under, permanently. 33% however, managed to survive unscathed, but fascinatingly an incredible 2% of businesses actually saw an improvement. So how come they were ready to take up the slack? It was because they had some sort of plan in place, even if it wasn't designed for something like SARS.

Yes, some of those enjoyed increasing profits because they supplied hygiene products, but the numbers are compelling. Having contingency plans does make a big difference when disaster strikes, often irrespective of what the disaster is.

Going to the graph, relatively speaking, jewellery was most hit by SARS, while electronics were least affected. The ban on Hong Kong companies to exhibit at many of the world's fairs amid the outbreak of SARS did by and large disrupt the marketing activities of Hong Kong's exporters. The incident has barred and discouraged direct business contacts between overseas buyers and Hong Kong suppliers, which are crucial for the trade because a larger collection of jewellery items are usually showcased to potential buyers face-to-face for security reasons and cost-effectiveness. Many electronics companies, however, already completed their face-to-face negotiations with foreign customers in major events like the Las Vegas CES Show and the Hanover CeBIT Fair prior to the SARS outbreak.

While visits to overseas markets by Hong Kong businessmen did become less convenient, the SARS outbreak also frightened many overseas buyers away from travelling to Hong Kong and the Pearl River Delta region. 84% of the respondents indicated that some of their buyers had cancelled their business trips to Hong Kong. 35% said indeed visits by their buyers did come to a near halt in the wake of the SARS outbreak. Fortunately since then, most overseas buyers have continued to place orders even without normal business contacts, as 92% of the respondents expressed that their buyers had kept placing orders even not coming to Hong Kong.

To put it into perspective, less than 900 people worldwide died from SARS, a very small fraction of the deaths witnessed each year, year-on-year from 'regular' pathogens such as TB, AIDS and 'normal' influenza. These relatively small numbers however hide the most damaging aspects felt by SARS. It was the public reaction. People simply stopped going out for several weeks during and following the outbreak. Offices were empty and the streets were reminiscent of the Chinese New Year break when a large proportion of Hong Kong's population are either out of town (visiting relatives in mainland China) or at home with their families.

The floor fell out of Hong Kong's visitor arrivals, and rumours were rife that passengers arriving on flights from Hong Kong would be subjected to 10 days quarantine. In cities around the world, people crossed over to the other side of the road rather than risking infection by passing close to anyone they knew as being a Hong Kong resident.

This of course was ridiculous, yet the public's ignorance to what we were dealing with led them to err on the side of caution, and the same will happen again.

A pandemic outbreak of Influenza, be it Avian Flu or any other kind of influenza for that matter will no doubt lead to even greater public panic than that witnessed during SARS. If businesses want their staff to come to work they'll need a proper response organised which has been tested and communicated to staff before the pandemic hits. To wait until it does will already be too late.

Staff writer. 01 August 2008