The spread of COVID-19 is an epidemic affecting hundreds of thousands of people worldwide, with significant economic implications to linger for months to come.
The Organisation for Economic Co-operation and Development (OECD) warned that the coronavirus could cut global economic growth in half, with industries across the board facing fallout. The global economy and international markets plunged as the coronavirus spread from China, the world’s second-largest economy, to other countries in Asia, Australia, Europe, the Americas and the Middle East. Policies intended to prevent further spread of the virus, which include travel restrictions and quarantines, have unintended consequences of disrupting international supply chains, suspending business operations and shrinking revenues.
According to recent data from Dun & Bradstreet, services, wholesale, manufacturing and retail account for more than 75 percent of businesses in the impacted region of China. On a global level, 51,000 companies have “one or more direct or Tier 1 supplier,” from the impacted region and an additional five million companies have Tier 2 suppliers there, with 938 of those being Fortune 1000 companies.
The impact on supply chain is twofold. For one, companies must closely monitor short-term and long-term demand and inventory to accommodate production loss in the wake of factory closures and economic slowdown. For another, retailers are faced with inventory depletion as consumers stock up in preparation for potential quarantine or extended stays at home. Delivery options have also become a more appealing alternative for consumers who want to avoid making trips to the store – leaving retailers to mitigate fulfillment, while also keeping employees safe.
“Retailers around the world are grappling with the appropriate response to the coronavirus for their employees, customers and their business,” Hilding Anderson, head of strategy, retail, North America, said. “For many, it's shaping into a once-in-a-generation test of business continuity, planning and supply chain flexibility.”
Events that have a very high impact on the market but have a very low probability of materialization – otherwise known as “black swan events” – make short-term and long-term consequences like “panic buying,” work shortages or limited supply hard to measure definitively. However, there are measures organizations can take that can help navigate risk when black swan events occur, and as they unfold.