It's a simple, yet chilling, question: What would you do if a quarter of your workforce called in sick tomorrow … and the next day, and the next?

Given the financial crisis, this question becomes even more imperative—most businesses now have fewer resources to rely on in any given day. But with the recent swine flu scare, the chances of a work stoppage become very real.

Still, 53 percent of organizations surveyed by the UK's Chartered Management Institute in 2009 admitted that their pandemic preparedness was either weak or non-existent, with 28 percent anticipating employee absences exceeding four weeks.

That lack of preparation may mean more than just employee downtime. “Timing is everything for businesses,” says Christopher Bohn, director and actuary of Aon Global Risk Consulting. “Given the financial crisis impacting businesses' operations, having a robust continuity plan in place could be the ‘make or break' for companies responding to both issues simultaneously and surviving intact.”

Unlike seasonal flu, which severely affects the very young and old, severe cases of pandemic flu occur primarily in adults ages 18 to 45. Because this population is also likely to be called upon to care for other ill family members, the U.S. Department of Homeland Security suggests that employers anticipate absenteeism rates as high as 40 percent. And, given the potential slowdown to manufacturing and the service sector, the U.S. Congressional Budget Office estimates the cost of a severe pandemic to the U.S. economy to be USD600 billion, or 5 percent of gross domestic product.

Clearing Up Misconceptions

Historically, pandemics have been characterized by “waves” of disease, with the second often more devastating than the first. And, there are typically two to four waves of disease occurring over a period of 18 months to three years. Companies that are unprepared for such a sustained impact will suffer, while those that have carefully anticipated events should experience minimal business interruption. Suffice it to say, directors should take action now to ensure their businesses are in the latter category.

Exploding the Myths, Aon's second white paper on pandemics, can help. It examines the continuing misconceptions surrounding the pandemic question, providing valuable—and actionable—information. For example, many people believe that the production and supply of vaccines have improved sufficiently to mitigate pandemic risk. While a vaccine is the most effective defense, manufacturing sufficient quantities takes several months. So a vaccine may not be available for the pandemic's first wave—and may still be difficult to obtain when a second wave strikes.

Indeed, it was not until the current strain of (A) H1N1 (a.k.a. swine flu) was identified that its vaccine development began, with several months passing before large quantities of vaccine were manufactured and distributed.

Antiviral medications such as Tamiflu may not have an impact either. While antivirals are effective in treating the (A) H1N1 virus if administered early enough, stockpiles vary by country. The UK, for example, has a sufficient supply to treat more than half its population. However, should an outbreak occur, some densely populated countries, such as Indonesia, are reported to have only 3 million capsules to cover a population of 237 million. And, it is widely expected the virus will eventually become resistant to antiviral treatment.

Prepare for the Worst

Because pandemics are inevitable, preparation is not an academic exercise. The unique features of a pandemic demand that businesses sharpen their business continuity plans and review key business impacts. In the words of the U.S. Department of Homeland Security, the pandemic threat “demands a shift in business continuity planning from one that anticipates a short-term, near-normal condition to one that prepares for extreme, long-term catastrophic contingencies.”

For example, the threat of massive absenteeism—and sadly, higher-than-average mortality—adds new emphasis to succession planning, from the CEO's office down to the shop floor. “Companies should determine the mission-critical activities within the organization, consider cross-training in key functions and review the extent to which existing employees can do other workers' jobs,” Bohn says.