3 industries most at risk in the event of an epidemic outbreak

In 2018, there were close to 100 documented cases of disease outbreaks around the world, according to the World Health Organization. An epidemic outbreak puts countless lives at risk, but it’s also a direct threat to many companies.

Such outbreaks often shake the stability of a country’s economy. In Latin American and the Caribbean, for example, the Zika virus alone may end up costing up to $18 billion. The South Korean MERS outbreak in 2015 caused a 40% drop in tourism, costing the country an estimated loss of $900 million in revenue.

According to a recent survey by management consulting firm Protiviti, board members and C-suite executives want to devote additional time or resources to risk management efforts in 2019. Fortunately for them, Metabiota unveiled its predictions for the industries that are most likely to be impacted by a health crisis in the year ahead. The epidemic risk-modeling company runs large-scale epidemic simulations that factor how such an epidemic might start and spread around the world, where it might go, how many people might be infected, and more.

“As we get better at understanding how outbreak events have, and could, play out, we also are getting better at translating that information into business impacts,” Dr. Patrick Ayscue, director of epidemiology at Metabiota, said in a press release.

Nita Madhav, vice president of data science at Metabiota, says that Metabiota’s Pathogen Sentiment Index offers a “new way to quantify the potential for business interruption losses” because it measures the human impact of an epidemic outbreak and the economic impact caused by “fear-induced behavioral changes.”

Related: Which countries are the most, least resilient for 2018?

Three industries to watch

Metabiota’s research shows that outbreaks like acute flaccid myelitis (a “polio-like” illness), Zika, Avian influenza and even seasonal influenza are not one-off scenarios but, in fact, illustrate distinct patterns. To that end, infectious diseases can and should be insured so that, like natural disasters, resources, financing and other support can be established to offset the impact.

Working in collaboration with MunichRe and Marsh & McLennan, Metabiota is delivering a comprehensive methodology for quantifying the potential impacts of epidemics so that the risk can be understood and policies can be delivered to protect countries and corporations from financial setbacks or business interruption losses related to a health crisis.

Because of Metabiota’s purview into the intersection of health events and risk management, the company revealed its predictions for the industries that are most in danger of business interruption and financial loss as a result of an epidemic.

• The travel & tourism industry: The travel and tourism industry is likely the hardest hit when it comes to an outbreak. The hospitality industry relies on a traveler’s sense of security. Unfortunately for hotels, individuals respond negatively to outbreak headlines and travel warnings by canceling bookings and travel plans. Even in contained outbreaks with minimal risk to travelers, historical evidence has shown repeatedly that travelers significantly reduce their travel to affected locations often months after an event has occurred.
• The professional sports industry: At the onset of an infectious disease event, people tend to stay away from large venues and the economic impacts can stretch far beyond ticket sales. When fans don’t attend games, they don’t purchase food, beverages, or merchandise — often substantial revenue lines for the sports industries. If an outbreak were to occur during the playoff or all-star games, an even larger impact could be felt league-wide. Fans are the fuel for the professional sports industry and become absent in the event of an outbreak. During the 2003 SARS outbreak, the Toronto Blue Jays’ parent company spent roughly $700,000 by offering $1 tickets to worried-well fans. Players also react to outbreaks as seen in 2016 when MLB games were moved out of Puerto Rico due to player’s concerns about the Zika epidemic.
• The entertainment industry: Local tourism fuels local economies and drops when an epidemic strikes, putting casinos, theme parks, convention centers and to some extent, shopping malls, in a financially precarious position. During the 2015 MERS outbreak, sales from local department stores in South Korea dropped by 12.4% and online retail sales increased as the outbreak prevented customers from going to public establishments. Any industry that depends on consumers’ sentiment is at risk for economic loss due to infectious diseases.

Related: 3 steps to managing your potential infectious disease exposures