Risk Management and Courage in the Age of COVID-19
“If we thought we were building up a heaven on earth, if we looked for something that would turn the present world from a place of pilgrimage into a permanent city satisfying the soul of man, we are disillusioned, and not a moment too soon.” — C. S. Lewis, Learning in War-Time (1939), a speech given shortly after the outbreak of World War II
The United States needs to be prepared to manage health risks, economic risks, and a host of others in aggregate in a world that may never return to the status quo. Merely acknowledging the need for restored economic activity at some future linear point post-COVID-19 will not suffice, because the world may have to live and operate in spite of a persistent viral enemy. The government must foster economic activity as a necessary component for the sustenance and health of its citizens. Both citizens and their institutions may also have to acknowledge that some components of life once taken for granted may not return. This is not about restoring the Dow to record highs or “maximizing stakeholder value.” This is about food on the table and health care access not just for U. S. citizens, but others around the world whose economies depend on our production and consumption. I propose a framework for risk management that weighs both current and future risks, one which recognizes that zero risk is unattainable. The framework asserts that the risks of waiting for dangers to pass outweigh those of innovation and pressing forward, measured in the same terms as the pandemic: early mortality and overburdened systems. Action on these synthesis points requires courage.
The effects of a longer timeline
An informal sampling of scholarly articles on vaccines (e.g., flu, mumps, measles, SARS) reveals an important fact: societies never reach zero risk of infection, especially in the age of globalization. Some past viral plagues, like SARS (early 2000s) and MERS (2012), have potential for resurgence, as no one has yet developed a vaccine. Despite hopeful tones from medical sources, it appears unlikely that we will accelerate the vaccine timeline past its usual 12-to-18 month development period. In the meantime, the virus seems to be resurging in Singapore, and has re-emerged among former patients in South Korea.
From the beginning, models for “flattening the curve” generally show the same approximate area under the curve — the same number of overall cases over a longer period of time. This should provide us content for reflection when we think about how long tourniquets can be applied to the economy.
Research shows that economics and health are not mutually exclusive sets: poverty correlates with unhealthy lifestyles in families, and poverty begets poverty in succeeding generations. While we may be able to sustain the current severity with Keynesian government intervention (federal loans, grants, etc.) for a short time, a sustained constriction will yield wider impoverishment and more deaths from it. One study showed a 24 percent difference between the cancer mortality rates of high income vs. low income families. That translates to thousands of additional deaths in large countries if the economic freeze persists so long that it takes years or decades to recover.
Does this sound alarmist? Reuters Business News is keeping a running tabulation on meat processing facilities closing in North America due to coronavirus outbreaks among their employees. Dairy, vegetable, and chicken farmers are dumping staggering percentages of their inventories as demand dries up (updates to industry impacts here). While the food industry keeps sufficent stockpiles, the labor force for both production and delivery is vulnerable. Major ports around the world are shut down or at reduced capacity to protect their workers, causing prices to rise on most goods we consume, including food. With these combined factors in play, recently furloughed meat packers may soon not be able to afford their own products.
A framework for risk management
The status quo has already changed. While we wait for the status quo to return while a danger passes — will it pass? — we are incurring very real risk to life and health.
John Cogliandro proposed a mathematical formula in 2014 that measured the balance between the sum of an organization’s projects weighted by benefits and risk against the sum of current products and services weighted by their expected gain and longevity. I will spare this audience the sigmas and variables, and instead offer sets of competing factors on a balanced scale in Figure 1. All related current activities (left), diminished by their growing obsolescence, are balanced against future innovations and other changes (right), inhibited by their stage of maturity.
Figure 1. Current and future risks in a COVID-19 world.
(© 2014 IIE). http://www.iienet2.org/uploadedFiles/IIE/Author_permissions/IEJul14Cogliandro.pdf
Implications and takeaways from this conceptual balance:
· Aggregation. Risks of all related categories must be assessed together concurrently, and not in sequence. Factors influencing threats to the elderly now (COVID vs. social distancing) must be considered at once with the equally real threats to the elderly and children in the near future (malnutrition, poor health care access in a dilapidated economy). Civil liberties must be given due weight. We might chuckle or squirm at memes that suggest automated systems removing those that have fevers. However, we should be concerned about the inconsistent, selective enforcement of current protective measures that no legislature has approved, which appears somewhat like tyranny.
· System-level innovation (right side). Viewing things in aggregate — as a system, rather than independent components — drives us to expand what we should consider essential, and the balance of intellectual and financial capital we apply to innovation for those things. To date, we have been focused at national, state, and local levels on a vaccine and bridging the gap for ventilators and personal protective equipment for health care workers, with all public and private intellectual equity invited to the game. In the meantime, we assume some individual corporations deemed “essential” did what they could to protect their employees and surrounding communities. However, we as a society basically told all the meat packers, truckers, and grocery workers, “Suck it up. Get back to work. You’re essential.” And now we’re surprised that the food chain is threatened by the closure of food processing plants, when we applied no effort to innovate changes to working conditions. The American Trucking Association recently posted a plea to governors to let their trucks be exempted from interstate border checks, to allow truckers to use public rest stops, and to keep sufficient motor vehicle departments open for more truckers to get licensed. As a society, could we not have thought of such things earlier? Or do we need Dr. Fauci to say it’s OK for truckers to use the restroom?
· The effects of rapid obsolescence (left side). The vaccine is at least a year away, and the health system doesn’t have enough capacity to allow “herd immunity” to grow quickly. Some doubt whether even an antibody test will be widely available in the near term. It would appear that many of our means of production depend on physically present workers in virus-vulnerable environments. Therefore, why should we assume that our low-margin, highly leveraged, global transport-dependent, service-based economy will come roaring back this summer . . . or next year? Inaction based on a false premise could impoverish us all.
· A reminder of intangibles. While we could apply some mathematical models to the things we’ve discussed so far, some equally important elements cannot be captured. Most households have at least one extrovert languishing inside for whom Zoom meetings do not suffice. For some, loneliness and isolation could eventually lead to depression or mental illness. Patients cannot be visited at hospitals by family; women are delivering children alone. We need innovation for all these challenges, too.
Action
If we are to balance the seesaw with some innovation on the right side to counter the throttled activities on the left, we appear to have three basic courses of action. These are not mutually exclusive:
· Upgrade working conditions. We should rapidly innovate new working conditions in many industries to provide more space between workers, more ventilation, more sunlight, more PPE, etc. State and federal governments could provide generous tax incentives for those who do so, the way they do now for solar panels and other earth-friendly initiatives.
· Explore new (or dormant) economic sectors. We should immediately consider which services, functions or production lines cannot be protected pre-vaccine (e.g., table service at restaurants?) and encourage entrepreneurship to employ affected workers elsewhere. The Small Business Administration appears eager to provide loans. Rather than merely keeping businesses afloat, perhaps some of these could be used for venture capital for those owners who envision a change in course. If we have continuing concerns about pestilence from international commerce, we might consider exploring some new means of domestic production — additive manufacturing, a revitalization of trades with new technology, etc.
· Loosen some tourniquets now. We have more data now on which mitigation measures are effective, and which are overkill or ineffective. Clustering large numbers of people, especially indoors, seems the most common denominator for rapid spread. Yet some states have foolishly shuttered nearly everything. We have been myopic regarding protection for some of those deemed essential (transportation and food workers); we should not forget they also need to be paid. That means that those who can work in low-risk environments should be allowed to do so. In Virginia, there is a comparatively broader definition of “essential” businesses, and non-essential storefronts can stay open if they limit the number of patrons inside. However, we can safely relax some things further. Churches, for example, should be allowed to put up canopies on softball fields, keeping family units in clumps of chairs a few meters apart with strictly scheduled ingress and egress. Schools could consider a similar approach with rolling start times for smaller groups of classes outside.
Fourteen short years ago, John Cogliandro was invited to present a contrarian position at a conference for the American Study of Peak Oil and Gas, at which most participants held the view that the world oil supply was running out. Cogliando, who with several other engineers had recently invented a revolutionary oil-from-shale technology, challenged their assumptions that no innovations or breakthroughs would be forthcoming. Just a few short years later, North America became the largest oil producer in the world and went from importing to exporting, based solely on new technology and investment in the spirit of exploration.
We Americans have made major course changes through innovation before; we can do it again.
Courage
In all of these tracks, we will have to allow for multiple failures. Says Cogliandro: “Some new technologies and approaches (civil, medical, educational, business) will fail due to implementation prior to full maturity.” We must allow and even reward failures; they will lead to solutions. Give Mr. Edison another grant.
Most of us will need to return to work in the near future to put food on the table. The vaccine may be late. Our employer’s risk mitigation measures may not suffice. Some of us will get sick; some of us may die. While we need not be reckless or hasty, at some point we’re going to need to prudently take more risks for the sake of those we love. The Christian can face these risks with confidence in an eternal security; others may not find comfort in these words. Regardless, we would all do well to remember this life is a short and finite journey, and we should not let a virus keep us from making the most of it.
Quinn Skinner is a retired naval officer with more than two decades of operational risk management, including in high-risk environments. The opinions expressed here are his own and do not represent those of any organization with which he has ever been associated.
