This is the second in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.
These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.
To date, over 99 percent of the officially confirmed total of 45,000 (61,000 if the Chinese authorities’ newly expanded definition is used) Covid-19, or Coronavirus, cases are inside China. The impact of the virus is pronounced in a core group of ten Chinese provinces: Hubei, where the virus originated, the six neighboring provinces of Shaanxi, Heinan, Anhui, Jiangxi, Hunan, and Chongqing, plus the adjacent coastal provinces of Guangdong, Fujian, and Zheijiang. As of February 9, these areas account for 90 percent of the total reported confirmed cases and 92 percent of China’s new cases.
While supply chain organizations in these provinces are facing severe impacts due to closures, we believe the level of exposure to risk of disruption for service delivery organizations is limited because the service delivery centers are largely servicing internal customers, which are themselves operating at reduced capacity or are closed completely until further notice.
Data from Everest Group Market Intelligence (EGMI) shows that there are 51 Global Inhouse Centers (GICs) – or shared services centers – and 20 service provider delivery centers located in these 10 provinces. Of the seven GICs in Hubei at the epicenter of the outbreak, two, owned by FedEx and UPS respectively, are thought to deliver internal shared services to domestic and near-Asian employees. The rest are technology research or innovation centers.
In view of restrictions imposed by the Chinese government, provincial governments, or companies implementing business continuity protocols, it is highly likely that most, if not all, of these delivery centers are closed and will remain so until further notice.
Examples of the restrictions imposed by the authorities or by companies themselves that have been in place for at least two weeks and look set to remain include:
- The Chinese government extended the New Year holiday, which began on January 24, to February 2. Authorities in in 24 provinces and cities further extended closures by a week to February 9, and many businesses look set to remain closed the week of February 10; authorities in Beijing have urged businesses to adopt flexible working policies, including working from home
- Places of business in Hubei will remain closed until February 15 at the earliest
- With extensive internal travel restrictions in place, many workers who had returned to their home provinces for the New Year holiday are now unable to return to work
- All multinationals with offices in China and Hong Kong have imposed either complete travel bans (Amazon, Ford, Google, HSBC, and LG) or non-essential travel (GM, Johnson & Johnson, P&G, PwC, and Siemens) to and from mainland China
- Many multinationals have imposed a work from home policy for all staff in China and Hong Kong until further notice; in some cases, this policy has been backed by widescale closure of offices and facilities
- Some businesses have cancelled meetings or conferences involving large numbers of international participants, including, for example, Citibank’s annual investor conference in Singapore, ZTE’s press briefing at MWC in Barcelona, and Ericsson’s attendance at MWC in Barcelona.
As an example of specific defensive measures businesses are taking, all businesses and public facilities in Singapore, in accordance with government guidelines issued on February 10, are now:
- Scanning people entering and leaving buildings for raised temperature
- Increasing the frequency and intensity of cleaning
- Making hand sanitizer widely available
- Requiring all visitors to make a health and travel declaration
- Issuing face masks to staff who interact with members of the public
It is possible that some enterprises will use the disruption caused by the outbreak as justification for cost cutting and capacity reduction, but we don’t yet see clear evidence of that.