Only 13 FTSE 100 companies factored the risk of a worldwide disease into their business plans last year, analysis shows.
The UK’s 100 largest companies – backed by millions of UK investors – ignored the warnings of previous pandemics to enter the current crisis woefully underprepared, according to research.
Analysis of the annual reports of FTSE 100 companies from 2019 found most failed to factor pandemic risks into their strategic risk planning, according to risk analysts Mactavish.
Only 13 of these companies referenced pandemic or epidemic risks as being material to their business, despite the frequency of these in recent years, including bird flu and swine flu.
FTSE 100 firms were also found to be slow to realise the seriousness of the threat as it emerged.
Of those that had published reports in 2020 at the time of the analysis, 82 of 88 mention pandemic risks.
- 10 FTSE 100 winners following Pfizer Covid rally
- Pfizer Covid-19 vaccine triggers stock market surge
But some believed Covid-19 was just a regional or national issue as late as March – yet an average 187 epidemics happen every year, according to the World Health Organisation.
Mactavish, which advises businesses on insurance risks, found one FTSE 100 company did not mention Covid-19 at all in their report published at the end of March 2020, despite the virus raging across Europe at that point.
Bruce Hepburn, chief executive of Mactavish, says:
“Given the frequency of epidemics and pandemics and some recent high profile ones such as SARs and MERs, I am shocked that so many FTSE 100 companies gave little or no reference to these when discussing the potential risks they face.”
Risk planning has been an under-resourced function within companies, he added, and is too often removed from critical decision making.
Hepburn blamed institutional investors, like pension funds, for failing to hold companies to account for their failure to prepare worst-case scenarios, such as global pandemics.
“While there has been much discussion from institutional investors about the concepts of stewardship and sustainability, too little of that focuses on real operational risks and too much of it could be described as ‘greenwashing’,” he said.
- ii view: AstraZeneca expects Covid vaccine data by year-end
- Are you saving enough for retirement? Our calculator can help you find out
Analysis by MacTavish of the annual World Economic Forum Risk Survey found pandemic risks were top of the agenda in the mid 2000’s but had slipped to the tenth-most severe risk by 2020, with the focus on environmental concerns instead that were believed to be more likely and more damaging.
Hepburn said: “Despite our belief in the strength and professionalism of corporate leadership, understanding and management of risk is still immature at c-suite and boardroom levels.
“The reality is that risk assessment is far from an empirical process, all too often attitudes to risk are formed by last year’s crisis and this year’s headlines.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.