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Research and Briefings

Business Resilience amid a Prolonged Regional Haze Crisis

 


Forest fires raging throughout the islands of Kalimantan and Sumatra in Indonesia have left many parts of the country enveloped in haze. A State of Emergency has been declared in Indonesia’s Riau province, where the pollution levels have reached hazardous levels. Thousands of residents have left Pekanbaru, the provincial capital, to seek respite.

Indonesia’s neighbors, Brunei, Malaysia and Singapore have been affected, and are struggling to cope with the effects of this transnational crisis. Brunei’s Ministry of Health has advised the public to reduce outdoor physical activities and to seek medical treatment if they experience physical discomfort. In Malaysia, schools have been closed in several areas, including in the capital, Kuala Lumpur. Singaporeans have been advised to avoid strenuous outdoor activity, and there are also concerns that large-scale outdoor events such as the FORMULA 1 SINGAPORE AIRLINES SINGAPORE GRAND PRIX would not take place as planned.

If conditions persist or worsen, business supply and value-creating chains can be significantly affected, particularly where suppliers reduce their workforce or business activities. Businesses in the tourism industry may also see declines in revenues as foreign visitors stay away from the region. Retail and F&B businesses may also be affected, especially for those offering outdoor experiences.

Prolonged haze conditions can take a toll on employees’ health which may result in a rise in absenteeism and lower productivity. With poorer visibility, there is a heightened risk of accidents taking place, potentially resulting in injuries or even property damage.

Marsh Risk Consulting recommends that a company’s management reviews its risk management controls, human resource policies, crisis management plans, and crisis communications capabilities. Additionally, there are preventive and preparatory actions that can and should be taken now.

The main thrust for an effective business continuity and crisis management response should be to preempt major incidents, reduce risk exposure, minimize impact, proactively communicate with key stakeholders, and adjust business strategies and activities to minimize the impact of high absenteeism, productivity loss, processing/production downtime, and supply chain disruptions.

Marsh also advises checking insurance policies to ensure proper coverage for haze-related damages, for example, property damage and worker injuries. As some existing policies may not cover damages resulting from haze, businesses should consult with their brokers or insurers to include haze impact as a policy endorsement and add haze extensions to property damage policies.