Globalisation in the past 20 years has enabled systemic risks to spread further and faster than ever before.

The latest Lloyd’s 360 Risk Insight report – “Globalisation and Risks for Business” – identifies pandemics as one of the top risks businesses face due to increased international travel and trade.

Among other recent pandemics, the outbreak of the H1N1 swine flu virus last year outlined a range of the challenges facing governments, businesses and institutions in preparing for these events.

The Lloyd’s report identifies three main threats in the event of a pandemic: human resource depletions, interruptions of services and supply chains, and the loss of customers and markets.

It says businesses need to develop their risk management systems and strategies through risk audits, contingency and disaster management plans and test scenarios.

Munich Re Value and Capital Actuary Murray Glase says the threat of the SARS virus, and more recently swine flu and avian flu, have greatly increased global awareness of the risk of pandemics.

“We have been fortunate that none of these diseases have developed into a serious pandemic,” he told “But we certainly can’t ignore and we are not ignoring that one of these diseases has the potential to turn into something very serious.”

Mr Glase says many businesses now have risk management plans in place to deal with the possibility of pandemics, with the Australian Prudential Regulation Authority also taking a leading role by making pandemic risks an explicit component of proposed new prudential capital requirements.

“We have to be prepared for something when it does eventually occur,” he said. “We have seen governments setting up their own pandemic risk plans and we have many types of business [with] business continuity plans.

“There is also a lot of research going into learning how to control and possibly to contain and treat potential pandemics.”

Mr Glase says insurers, reinsurers and businesses generally need to understand the nature of pandemic risks and design plans to deal with each potential event.

This is complicated by the wide range of diseases, which include but are not limited to strains of the influenza virus that could develop into a pandemic.

He says globalisation means disease can now spread further faster than ever before, as was seen with the swine flu virus.

Australia’s higher education sector is particularly vulnerable to pandemic risks due to exchange programs throughout the world, and particularly in Asia, as well as the number of overseas students studying in Australia.

Higher education mutual Unimutual was involved in helping Australia universities respond to the swine flu virus last year.

 GM Risk Management Services Harry Rosenthal says while not all swine flu risk management preparations were required in dealing with that threat, they have left universities far better prepared to respond to future large scale threats.

“Pandemic is a real risk – it will happen,” he told “We have seen the cycles in the past, and it is just a matter of when.

“Risk management is helping organisations learn lessons from the past and ensure they are well prepared for future low-frequency/large-loss events like pandemics.”

Whether from a reinsurance or institutional perspective, it is clear that the lessons learned and the preparations made to respond effectively to potential pandemic risks have become vital to ensure businesses and society can continue to function when the next pandemic strikes.