Risk Management During the Coronavirus

Since the coronavirus outbreak in China late December 2019, many Chinese companies or multinational companies that have offices in China are facing stress from government regulations and their own employees. As a compliance professional currently in China, I have some insight into how risk and compliance professionals can build a stronger system in light of the coronavirus. 

An Emergency Management System is Essential

Though it is impossible to anticipate all potential risks (certainly with an epidemic like this), setting up an emergency management system will help companies be prepared organizationally to respond to an emergency, which is key to avoiding panic among employees in the first place.

An emergency management system will let employees know who they can contact in an emergency, who the first responsible person is in an emergency and the level of authority he/she has in responding to the situation. Given how quickly and dramatically the Coronavirus situation evolved, companies in China had no time to lose in responding. If the decision to purchase masks for their employees was not made quickly, the company might have ultimately found no masks available for sale.

Many local government regulations to prevent the virus spreading include governance requirements. For example, the Shenzhen municipal government requires that: (1) every company needs to have a system to prevent and control the virus at their facility with designated personnel in charge of implementation and (2) the company needs to have policies in place to encourage migrant employees to work from home. Other provincial governments have similar regulations asking for stronger governance during the emergency.

Therefore, it’s necessary to thoroughly discuss how to set up such a system that fits into both the company’s governance and the local context. Best to prevent everyone going to the CEO for help in an emergency.

Following Up on Government Regulations Can Be Challenging

The outbreak of coronavirus has left no one enough time to prepare, and corporations’ actions have mostly been reactive according to government regulations. Therefore, knowing the latest national and local regulations is key to schedule and plan changes for the business and to ensure compliance.

To slow the virus spreading, the central government announced the extension of the Chinese New Year holiday on January 26, which was only four days before the actual holiday ending on January 30. In this case, if a company was not actively following regulations, they may have found that they did not have enough time to rearrange work schedules and inform their employees.

Following up on regulations from different provincial and municipal governments makes the situation even more complicated. Because the virus impacts various provinces and cities differently, each level of government has its own ways of dealing with it. For example, Hubei province basically stopped public transportation, as well as travel into Hubei from other provinces; Jiangsu, Shanghai and Guangdong provinces announced that companies cannot resume work before February 10 unless otherwise approved. To resume work after February 10 – take Shenzhen city in Guangdong province, for instance – companies must prove they have adequate resources (such as masks and medical alcohol) and an emergency system to tackle the outbreak.

Simply following through with all these requirements can be a little overwhelming, especially for companies with their main compliance or HR functions in countries other than China, not to mention doing all the work to be in compliance. For multinationals with offices across China, it is recommended to have at least one person locally in charge of learning all the local regulations, filling out all the government papers and coordinating with HR. Again, this is why it is important to have a system in place to “level up” your preparedness.

HR Compliance Needs to Be Strong

HR must have been very busy during this outbreak, because there were a lot of questions about resuming work and salaries and leaves because of the extension of the Chinese New Year holiday. As mentioned, there are several provincial governments prohibiting resumption of work before February 10. Since the Chinese New Year Holiday ended on February 2, people were concerned about how this would affect their salaries from February 3 to February 7 if these were not considered working days.

Personally, when I learned about the news, I contacted HR to get clarification about the salary and work arrangement during these days so I could plan my schedule in advance. Given the unique situation (postponing the resumption of work has rarely been used by local governments), they did not have a clear answer for my salary questions that same day. Just imagine all the other employees who, like me, must have rushed to HR for answers to questions about their paychecks.

Due to the extension of the holiday, HR was under pressure from both compliance and the business. To reduce the turbulence caused by the extended holiday, some companies arranged key functions to work from home from February 3 to February 7 and promised to compensate them according to the regulations when clear answers were available from the government.

For foreign-invested companies in China, this could be a little confusing and complicated. In supporting these companies, organizations like the American Chamber of Commerce (AmCham) in China have published guidance for their audiences. For example, this article from AmCham focused on legal do’s and don’ts during the coronavirus outbreak, and the British Chamber of Commerce in China collected official notices and policies in their article. Again, we can see that it asks for dedication and energy to respond to the outbreak from HR – particularly when it comes to being responsive, dealing with constant changes in a short time, and working closely with compliance.

No one could have anticipated what a virus outbreak would mean for compliance, nor could we have known how to be fully prepared. Hopefully we can do better next time it happens and minimize the damage it may have to ourselves and our businesses. Though different companies have different strategies, I believe an emergency system coupled with a strong legal and HR compliance function can lessen the damage.