After our webcast on the major challenges of the current pandemic to organizations, we continued the series on 22 April with a look at the COVID-19 implications for the Food & Beverage (F&B) and Hospitality & Gaming industries in Asia.
Joining me on the panel were:
Seth Peller, Hospitality & Gaming Industry Leader, Asia
Sarah Koo, Food & Beverage Industry Leader, Asia
Joan Collar, Mercer Marsh Benefits Leader, Asia
Peter Johnson, Client Advisory Services Leader, Asia
Adam Russell, Placement Leader, Asia
COVID-19 has sharply impacted the Hospitality and Gaming industry, making it clear that Hospitality & Gaming businesses and those in the travel and tourism must adapt to operate in a “VUCA” environment (Volatility, Uncertainty, Complexity, and Ambiguity).
There are some signs of recovery, such as in China, but at different stages across Asia. For now, the immediate considerations are:
The F&B industry faces three critical concerns:
Supply Chain Disruption and Knock-on Effects: The food supply chain is inter-dependent and highly integrated, hence, any disruption will have knock-on effects for many in the region. These include delay in global transportation, trade restrictions, export ban, and logistical disruptions to production, warehousing, shortages of raw materials, and food safety.
Employees’ Safety and Welfare: Employees must comply with local safety measures and employees may face increased work scope to ensure well-stocked supplies and well-managed deliveries.
Potential Shifts in Business Activities: Some F&B sectors may experience an unexpected upward trend in sales, such as for grocery. Online demand has also surged, presenting a shift in risk profiles with increased cyber and cyber-crime exposures.
The panel then applied the framework discussed at the launch of the webcast series to explain what F&B and Hospitality and Gaming businesses can do to navigate the key challenges of the pandemic.
From a risk management and insurance perspective, businesses have several tools available to manage costs and improve cash flow. These approaches below were shared by Seth, Sarah, and Adam.
Claiming Business Interruption Losses
With unexpected changes in demand, your business needs to provide relevant updates in your business activities, inventory values, and locations of additional third-party warehouses. Similarly, review and update your business interruption declared values.
Reduce Future Insurance Premiums and Workers Compensation
We can identify your most economically efficient means to finance your risk through Risk Finance Optimization (RFO), which ultimately gives you information on which risk management programs provide the best financial returns.
Depending on business volume, your business may qualify for return premiums due to reduced revenue. F&B businesses should inform insurers of any material changes in the information provided, manufacturing processes, or business activities (especially for Product Liability and Recall Policies). We recommend discussing this with your broker to determine viability.
This risk financing option can be a long-term alternative strategy, and the use of a captive may provide access to reinsurance markets and potentially more efficient capital.
Joan talked about the key focuses for the F&B and Hospitality & Gaming industries:
Given the current trend of reduced hours and working from home, it is best to review your Workers Compensation insurance and solutions as they generally focus on workplace injuries and workplace areas.
When the sectors recover, we expect higher adoption of non-traditional benefits policies, per the pre-pandemic trend. Consider providing your employees with flexible or voluntary benefits. This can solidify your company’s employer brand positioning during and after this pandemic cycle.
We have seen more Personal Accident extensions offered to employees and contractors in the food delivery eco-system, and we expect to see more tests and screenings offered as part of the employee benefits.
To manage the changes to your risk profile, Peter walked through a few considerations.
Business Continuity Plan Reviews and Updates
In the short and medium term, the focus should be on:
Pandemic Risk Vulnerability Assessment and Forecasting Models
In the longer term, these assessments and models enable organizations to evaluate different risk mitigation strategies, manage tail uncertainty under different scenarios, and balance revenue interruption versus cost control decisions.
Many companies may now have moved their business online or implemented more technology-based operations, drastically altering their risk profiles, necessitating revised risk assessments to financially quantify the exposure changes. This will inform their risk management strategy and insurance limits.
Financial and Professional Liability Risk Identification
COVID-19’s heavy impact could attract litigation, which may trigger coverage under D&O insurance. We also expect D&O insurers to increase underwriting scrutiny. It will be critical to consult us and engage with insurers as early and openly as possible to manage these changes.
Peter outlined how Marsh can provide immediate support through three primary activities:
Seth updated that the Infectious Disease Exclusion is becoming a group-wide exclusion imposed across all lines of business, including F&B and Hospitality & Gaming companies.
It is important to note, Marsh has developed a stand-alone, dedicated risk transfer solution with insurers that gives the option to consider non-damage Business Interruption cover for Infectious Disease for certain industries, of which Hospitality and Gaming is one. Find out more by contacting your Marsh representative.
Our consumer solutions team also develops insurance solutions that can be offered on a B2B2C basis across many industries, such as:
Click here for the full replay of this webcast.