• Vik Muktavaram

COVID-19 pandemic - How a risk became a crisis in the US

Updated: Mar 29

As the federal government finally took the first decisive step in stemming the outbreak of COVID-19 in the US, the images of serpentine lines of arriving international passengers at airports waiting for immigration and screening for COVID-19 coronavirus ubiquitous online and in print. Presumably, the rationale for the screening was that these arriving passengers represented a high-risk cohort. Yet, the long, crowded lines with no social distancing not only defeats the the very purpose of screening but in fact, one could argue that the risk of spreading is increased substantially amongst the ground staff as well as passengers from different airlines.

As we deal with the COVID-19 pandemic, we should also be wondering how did we miss this when all the signs were there. How did some countries such as Singapore and South Korea manage to contain, if not necessarily prevent, the spread of virus in their countries despite their proximity to China. Risk Management is a structured way of looking at early indicators and prioritizing risks and then managing these risks. As our crisis response continues to be a case study in “how not to”, let’s take a step back to see how the risk (low likelihood, high impact) of a virus-pandemic became a crisis. Mind you, this was not a black swan event. Even as early as 2015, Ebola outbreak provided a harbinger of things to come. Before there is a war, there is a failure of diplomacy, before there is a bankruptcy, there are telltale signs of declining sales, before COVID-19 became a pandemic there was Wuhan and there were several emerging risk indicators.

Looking through the lens of Risk Management, offers us a framework for not only identifying risks and prioritizing them, but also provides approaches to dealing with these prioritized risks. Unless a risk can be measured (qualitatively or quantitatively or as often is the case a combination thereof), it’s hard to evaluate what the right approach would be to deal with it would be. In case of COVD-19, this was mistake #1 by most countries. Even though there was enough information if not data, to indicate that the virus was highly contagious and spread rather quickly and the mortality rate, especially in certain groups of vulnerable people was quite high, there was no formal assessment as to the magnitude or likelihood in the early days.

Once it was determined that virus had the potential to wreak havoc (Italy became a poster child for this), most countries vacillated between either nonchalance and panic. This is where a risk based approach to response would have been very helpful. Risk management framework has four approaches to deal with a risk. Let’s evaluate each one of these in the context of the response the COVID-19:

1. Risk Transfer: An example of risk transfer would be an insurance company that would buy reinsurance for the tail risk or catastrophic risk. The insurance effectively transfers a risk to an outside entity. Clearly, in the case of a pandemic, this is not an option available.

2. Risk Acceptance: This is essentially a “do nothing” strategy but it is worth emphasizing that the Risk Acceptance is deliberate as opposed to nonaction. This seemed to be the approach of Mexico (or Mexico’s President, Andrés Manuel López Obrador,to be specific) for the longest time. This is a perfectly valid approach, granted one can measure what the impact would be of an unchecked coronavirus spread. For a while, the US seemed to embrace this approach as well. In case of the US: assuming 80% of 300 million population has mild symptoms but 20% have severe symptoms (defined as having symptoms that would send someone to the hospital), we’d have about 60 million that might require some level of care compared to a bed capacity of 1 million [1] in the entire country. Assuming 15%[2] of the people with severe people die, the number would be roughly 9 million. This is assuming 20% that has severe symptoms can be found a hospital bed. Of course, the rest of the world would close it’s borders if a particular country were so cavalier. So the economic impact would be equally devastating.

3. Risk Avoidance: This is actually an interesting approach. How does this work? Very early on, the country simply would shut itself off completely from the external world. India seems to have been a prime example of this having closed off borders and canceled visas fairly early on. Based on the published numbers of positive cases (less than 200[2]) in India (assuming these are reliable), it seems to have been fairly successful. Almost all cases seem to have had a foreign origin and so far the government claims that there is no community spreading of the virus. If India simply got lucky or if the weather (it’s the beginning of summer in India) helped is a matter of speculation at this point.

4. Risk Mitigation: Singapore and South Korea seem to be exemplars of a successful implementation of a risk mitigation strategy. Both of these countries made extraordinary efforts to test on a large scale, early on and isolate the positive cases. This has proved to extremely successful with the number of cases (in case of Singapore) very small and fatality rates (in case of South Korea) relatively small.

Of course, any successful risk management approach would need to be coupled with an equally robust communication plan. Here Prime Minister Lee of Singapore provides a template for a well-articulated plan [3].

In the absence of a coherent risk management approach, countries such as the US and Italy have had to respond to a crisis. Crisis response often is far more dramatic, far more expensive, and far more devastating economically, psychologically, and culturally. One can only hope that all of these impacts are short term and do not leave a long lasting impact on these countries and the world at large.

If there is an upside, it will be that there might a population boom come the months of December and January!






Vik Muktavaram is a freelance management consultant and a Board of Education member for the Town of Westport, CT and Board member, The Bridge Academy, a Charter School in Bridgeport, CT.


Recent Posts

See All

Risk Management

In a time of crisis, it is normal to respond to the most urgent things to keep operations running and cash flowing.   However, it is important to start thinking about risks, both short-term (1-3 month

© 2017 by Rithym Advisors.