Managing
your China business under SARS
Severe Acute Respiratory Syndrome, or SARS,
needs no introduction. Its effects however upon your business and
ways of managing your business in the current SARS environment do,
for growing the Onion must go on!
The
SARS Business Environment
Those of you living in China are only too aware of
the basic facts regarding this apparently new and deadly strain of
the influenza virus. Thought to have originated in Guangdong last
November, as of April 28th, SARS had spread to more than 25 countries,
killing more than 300 people and infecting more than 5000 others worldwide.
China has been the worst affected area with well over half all reported
cases. The World Health Organisation (WHO) warns that SARS could be
a massive global threat. The potential economic reach of SARS was
demonstrated at April's trade fair in Guangzhou. Last year, more than
120,000 visitors attended the fair, the majority from outside of China,
and they signed deals worth in excess of $16 billion. This year, the
trade fair, say observers, was "effectively dead."
SARS has already started to dominate your conversations
and perhaps affected the way you travel to work each morning, but
how does all this affect your business activities in China? Does SARS
represent a legitimate risk to your business activities in China?
Unfortunately the answer is yes. So far SARS has battered Asian economies,
forcing governments to cut growth forecasts, and hit swathes of business
from retail to airlines to tourism. The Economist recently referred
to the disease as "a plague on all our businesses." A survey
in the US showed that sixty-one per cent of businesses were banning
travel to Asia. The business travel industry will almost certainly
not recover until 2004 or even later.
SARS
in perspective
There's no denying SARS is a serious threat. However,
let's get things into perspective for a moment. A great deal of coverage
has been afforded to the business implications of SARS in China and
Asia as a whole. For all the hype however, very little is known about
the long-term effects of this virus. Some business people say the
extent of the economic damage done by SARS has been overestimated
believing that the international news media gives the impression that
it is worse than it actually is. True, the mysterious illness has
disrupted global business plans and jeopardized the health of thousands
of small businesses in Asia. Initial findings however suggest that
SARS is less contagious than influenza, and hundreds of thousands
of people around the world are killed by flu every year. These facts
need to be taken into consideration before boarding the next plane
out of China.
The chances of contracting the illness in the general
population are extremely low. Even in a city like Beijing, with a
relatively large number of reported SARS cases, considerably less
than one per cent of the population has fallen ill. Not that SARS
shouldn't be given some cause for concern. SARS is not going to wipe
out mankind altogether, but at the same time it does represent a new
emerging epidemic disease with no cure that may not be brought under
control any time soon. Although the number of deaths attributed to
SARS is tiny - the death rate among those infected is about 5%, according
to the WHO - no one knows how many will eventually become sick and
die. It is quite possible that SARS will never be completely eradicated
but will become a preventable, containable and treatable disease.
Managing
your business under SARS
Whether you have made the decision
to stay and weather the storm, both financially and medically, or
you have decided that it might be safer to let your Chinese partner
or employees handle things for the time being whilst you sit out the
crisis back home, there are a number of considerations for effectively
managing your China business under SARS. According to Russell Brown,
Managing Partner of LehmanBrown:
"Companies need to
act quickly to dispel fears amongst stakeholders through effective
communication, contingency planning and provision of precautionary
and corrective care, whilst maintaining business control and being
realistic in revising budgets and cash projections".
Communication
To begin with, it's important to make sure that all
your company's staff are well informed about the risks of SARS. Managers
should arrange a briefing outlining all the facts about SARS, most
importantly including the symptoms. In a crisis situation, knowledge
dispels fear. In turn, all personnel should be well informed about
the natural ways of combating illness. Encourage all staff to maintain
good hygiene levels and wash their hands regularly. Conserving a good
immunity system by maintaining a healthy, balanced diet, is critical.
It is also very important that you communicate swiftly
and properly with other stakeholders such as clients and suppliers,
especially if they are outside of the 'SARS areas.' They should be
informed and updated on the position of your company and how it may
affect them. Make sure they know what steps you have taken to prevent
SARS and deal with its effects. Most of all, keep your lines of communication
open.
Head offices need to be apprised of the 'post-SARS'
reality. Some media reports, including many overseas stories have
stoked panic and created false perceptions. Your colleagues outside
of China certainly need reassuring that everything is under control
and adequate steps have been taken to secure the future of the company's
China venture.
A central purpose of your communications will be
to manage the associated anxiety attendant with SARS. Currently, fear
of the disease is being driven more by uncertainty than by an understanding
of the actual magnitude of the risk. You are in a position to help
your clients and staff assuage their anxiety. Your response now could
have a strong impact on your customer relationships in the future.
Above all, you must resist the urge to crawl into
a shell and try to ride out the storm. Skillful communication with
your customers, your staff and your key stakeholders will reinforce
your commitment to mutual success. As Christopher Millward, CEO of
Millward Consultants, points out, "In a culture of fear and uncertainty,
voices of clear-headed reason command respect and trust."
In preparing and implementing your communications
during these sensitive times, experts stress transparency, credibility
and empathy. It is important that you are as honest and open about
what measures you are taking and why you are taking them. Remember,
communication is a two-way process: ask your customers and staff what
you can do for them.
Millward adds, "No one expects you to cure SARS.
However, your customers, both internaland external, do need the assurance
that you are doing whatever you can to ensure their safety and success."
Contingency
Once your stakeholders are aware of the basic facts,
it is important to put in place a contingency plan, should a member
of staff fall ill or one of your stakeholders who have contact with
your staff fall ill. This might include calling for all other staff
to re-locate to another building, moving to rotational shifts, organizing
the diversion of telephone calls and arranging for the disinfection
of the office. If the need to evacuate and disinfect the office should
arise, then it's essential that all important files and documents
are backed up and stored safely. Quarantining of staff during the
SARS incubation period should be part of the policy, in which case
provision should be made for them to work from home.
Staff should also be given clear instructions on
what to do if they develop SARS-like symptoms. Ensuring that all staff
are immediately aware of what they must do in such a situation might
help to curb the spread of the virus to other staff members and stakeholders.
Establishing a clear line of communication is also important for reporting
necessary information such as employee contact details and local hospital
addresses and telephone numbers.
Information technology and infrastructure are two
further key areas that require contingency planning. Imagine your
building being quarantined and no one being able to access email,
files, faxes etc. Danny Levinson, Chief Operating Officer of Xianzai
Ltd., advises:
"Make sure the general manager or office
manager and at least one other vital technician has access to
everything, including passwords, in case of emergencies. Also
remember to store data off-site in at least one other place. Depending
on the amount of data your organisation creates, you may want
to replicate your data hourly, daily, or weekly - and make sure
individuals with laptops replicate their data to file servers
at least once a week."
The above preventive measures are designed to manage
the risk to the business and the stakeholders in the unfortunate circumstance
of someone catching SARS.
Care
Precautionary care measures can be taken to help
staff maintain good health and cleanliness. Companies should consider
distributing vitamin tablets, such as multivitamins and vitamin C,
or even fruit. After all, a healthy workforce is less likely to contract
SARS or any other illnesses, this in turn increasing productivity.
Disinfectant should also be provided for the cleansing of hands and
the face. Since according to WHO, SARS can live outside of the human
body for up to three hours, it is essential to wash one's hands after
touching a taxi door, money or a lift button. It might also be time
for companies to review their employee insurance policies to ensure
they are providing adequate cover.
It's important to make sure staff members follow
company policies and procedures. According to Jeremy Perks, a senior
consultant with IWNC:
"Beyond making sure tat companies have the
right rules in place, a key role of the HR designate is to make
sure that they are being enforced and procedures followed. In
my experience, where problems have arisen, it is not because of
a lack of rules, it has been because individuals have not obeyed
them."
Corrective care should be provided to anyone unfortunate
enough to contract SARS. The company should ensure that they have
been provided with proper medical care, communicate with their family
and provide assistance wherever possible. Employees will very closely
examine a company's effective response and actions in dealing with
such a crisis, assessing their claims to be caring employer. Such
perceptions can make a big difference to a company's image for a long
time to come.
Control
Maintaining an atmosphere of business as usual might
prevent a bigger crisis. A move last week by the Japanese car manufacturer,
Toyota, to pull its foreign staff from their Beijing office is a move
mirrored by many other companies with foreign staff in the panic-stricken
city. If you or one of your company's executives have made, or are
thinking of making, a similar move then there are a number of considerations
that need to be taken into account. Weathering this storm might prove
to be the making or breaking of foreign companies operating in the
already tricky Chinese market.
There are serious ethical issues to be considered
when sending foreign employees home while still expecting your local
employees to turn up to work for business as normal. This could lead
to resentment from local staff, resulting in the resignation of valuable
members of staff and seriously damaging the reputation and future
development of the company in China.
Who is watching your company's accounts whilst your
CFO is lounging in self-imposed quarantine back home or on a beach
in Hawaii? The protection afforded by sending key foreign personnel
home needs to be viewed in the light of how effectively your business
can operate in their absence. There are confidentiality issues to
review, who will manage or take charge of cash, sign cheques, pay
payroll, update budgets, forecasts, prepare monthly, quarterly statutory
and HQ reporting.
The decision to send staff home should not be taken
lightly. It is necessary to consider all the options, from both a
medical and business point-of-view. If your company does decide to
send key members of foreign staff home then you might consider bringing
in outside management. Bringing in outside management, whether to
replace senior management temporarily in their absence or bringing
in a professional firm to provide oversight or help conduct essential
re-calculation of forecasts and budgets, makes sound business sense.
Cash
As the old saying goes, 'cash is king.' The SARS
outbreak has led many Asian governments to considerably cut growth
forecasts for 2003. Your company should do the same, and assessing
the financial impacts of SARS on your company's business is vital.
The re-calculation of your company's forecasts and budgets in light
of the effects of the recent crisis is necessary, especially considering
that the long-term impacts of SARS are likely to be felt at least
until the end of 2003, and more likely well into 2004 as well. The
re-calculation of budgets will undoubtedly lead to a more cautious
approach to business actions, an essential part of managing the risk
imposed by the economic fallout of SARS.
Such projects are the foundations for cash flow projections.
Both SARS and the war in Iraq have combined to cause a colossal slow
down in the global economy. 'Debtor days' have increased in many companies
causing them to react by increasing their 'Creditor days.' For a large
multi-national in China, the worst-case scenario might be making a
call to HQ requesting extra cash. For SMEs however, the current crisis
combined with a more cautious approach and reduced business operations
could spell disaster. Companies should consider bringing in professional
assistance for the collection of debts or for outsourcing of receivables
management.
Make sure you plan ahead well, as short term as necessary
for the business you are in. Any modifications to estimated budgets
and future planning should be communicated to head office well ahead
of time so that adequate adjustments can be made to their own projections
and strategy.
Conclusion
When describing the plague of 1348 a famous Italian
scholar wrote, "Those in the town fled to the villages. There
was such a fear that no-one knew what to do." In some ways this
situation mirrors what we've seen so far, especially in Beijing. Since
one's susceptibility to illness increases in proportion to one's anxiety
levels, managing anxiety is vital. Panic should be obverted and stakeholders
given enough information for them to make informed decisions.
There are some companies cashing in on SARS, which
just goes to show the versatility of entrepreneurs in Asia. Hong Kong
has seen a proliferation of designer, Hello Kitty and colour-coordinated
facemasks! A vinegar bar in Shanghai has started producing spray-able
white vinegar cans that supposedly prevents the spread of the virus.
In Beijing sales of turnips are rising since it's believed they prevent
infection.
For the rest though, if you have not implemented
the above-mentioned measures then you should do so immediately so
as to ensure the future growth of your Onions!
Michael Pennington,
LehmanBrown, Shanghai
