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Free Article: Hong Kong & Coronavirus

Friday 13 March 2020

This article has been pulished in the March Edition of the GRC Professional Magazine. 

Hong Kong Baptist University Professor Angus Young shared with the GRC Professional Magazine some of the panic around the coronavirus in Hong Kong and its impact on risk and compliance in business following the pro-democracy protests that held the country at a standstill last year.

What has the coronavirus impact been in Hong Kong and have there been any specific impacts on businesses? Are there industries that have been particularly affected?

The impact has been widespread, with retail, food & beverage, hotel, tourism, entertainment (like cinemas) and transport (buses, MTR, taxis) hit the hardest in Hong Kong. Tourism numbers have fallen, residents are afraid to leave their homes, many companies have implemented work-from-home schemes, and schools have remained closed. Kindergarten, primary and secondary all have extended holidays and universities have halted face-to-face classes in favour of online classes. 

There are, however, long queues at the supermarkets as people are rushing to buy food and toiletries. Almost everyone in Hong Kong is fearing the local human-to-human spread of the virus, so the only haven is at home.

Are there concerns that this might further curtail foreign investment?

Investments from the Mainland (China) shall fall dramatically. Other countries, I suspect, will follow suit as most of the foreign investments into Hong Kong are aimed at business expansion into the Mainland or at Mainlanders coming to Hong Kong.
I know you have been critical of compliance training and compliance levels in Hong Kong in the past. Has there been the sense that businesses have processes in place to manage the risks posed by the virus?

Many companies are simply treating this as a crisis and have implemented worst-case-scenario plans by asking most of the staff working in their offices to work from home. Many retail, food & beverage, and hotels have reduced the number of staff on roster—in part, because customers numbers have dropped as many residents have stayed home.

Have the Hong Kong protests weakened businesses operating there and has it weakened it too far to handle the coronavirus outbreak?

Many businesses have yet to recover from Hong Kong's protest. The coronavirus outbreak caught many businesses off-guard as, traditionally, the Chinese Lunar New Year is the time businesses are the busiest. But now, it’s like a 'double whammy' as losses mount even higher. For example, I am beginning to see large restaurants along the frequent protest zones either closed or gone into liquidations. 

Are there any differences in the way coronavirus and SARS were handled by businesses in terms of their own GRC approach?

Even though SARS originated in Hong Kong and the coronavirus has come from the Mainland, for most businesses, the way they have handled it is similar. This time, however, people from the Mainland are, for the moment, not welcome to Hong Kong for obvious reasons. After the coronavirus subsides, will Mainlanders return to Hong Kong in droves? I suspect not.
In an interview with Kent Kedle from Control Risks, he suggested that the coronavirus is a kind of wake-up call for those doing business in China to update their risk management programs. Do you agree with this, and do you see or expect to see companies in Hong Kong and China doing just this?

I think risk management is even more important today and not just because of the coronavirus. Uncertainties from geo-politics, climate change and cyber risks are on the up. I am concerned that companies in Hong Kong and the Mainland might treat this as a health (diseases) crisis and see risk from this narrow lens. Many still fail to see and appreciate wider risk because Hong Kong and the Mainland enjoyed unprecedented growth from the 1980s. Even considering the Asian Financial Crisis in 1997; its impact to Hong Kong was short-lived, and on the Mainland it was not serious. The same could be said of the GFC in 2008-9. The Mainland and Hong Kong bounced back relatively quickly. This time, I fear not. Pumping money into the economy and lowering interest rates are only short-term measures. 

Another reason is that businesses in Hong Kong and the Mainland have tended to treat risk as business opportunities. In fact, there is a Chinese saying: Where there is risk, there is opportunity. But I think in the 21st century, this mindset must change. 

Recently, I have introduced and drafted a new module for the MBA and Master of Science in Business Management called Enterprise Risk Management as an elective at Hong Kong Baptist University. A colleague made a remark to another, asking if students will study this. This illustrates the general mindset of many here in Hong Kong. On the Mainland, I have yet to hear of any MBA programmes introducing 'Risk and Compliance Management' as a core or elective module.

When I first reached out to you, you addressed the panic and sense of loss in Hong Kong. Kedle also described scenes in Shanghai where there was hardly anyone in the streets. Are you seeing the same thing in Hong Kong and how might this be impacting businesses? Has misinformation been adding to the detrimental impact?

To some extent, it does apply to Hong Kong, but it is not as dramatic as the Mainland. There are still many people out and about in the day, but less so in the evening. Now, everyone wears face masks (which have since sold out). Whenever a store receives new face masks, people start queuing outside as early as midnight until the shop opens in the morning at 11am. Where there have been rumours of certain items in short supply, people rush to the shops to buy whatever they can. For example, toilet rolls are in short supply in Hong Kong. Some supermarkets put a cap on the amount of toilet rolls one person can buy.
Are there any critical issues in risk and compliance that the coronavirus might cause a business to be distracted from?

Yes. Directors and senior executives should put risk and compliance as an agenda item for board meetings, and treat it as an important matter, not just an item on the tick list. This is a crucial first step.