The FSA has released the executive summary on its market wide exercise on the impact of a possible influenza pandemic, discussed here in September. A total of 3,500 people were involved in the simulation and 63 of the 70 particpating firms submitted a report.
The summary is a valuable read for any operational risk people and for senior bank management more generally. It confirms the widely held belief that, in banking at least, the real problems would be in the retail end of the market as the customer facing staff failed to attend work for various reasons, ranging from their own sickness to failure of their childcare arrangements and fear. In non-retail, as also expected, the proprietary businesses would be heavily cut back as firms redirected available staff to keep core functions going, rather than worrying about taking on further risk. This would lead to increased pricing volatility.
For insurance the problems seemed to be less – except possibly in coping with the sheer volume of health insurance claims. The in UK this would be easier than in Australia (I believe) due to the heavy reliance there on the State sector (the NHS) for primary care. In Australia the problem may be larger.
An exercise like this would be useful in Australia, if nothing else than to improve the focus on operational risk in general. The changes to procedures and just the practice would also be very useful in the event that a serious problem occured.