CEERS - Corporate Epidemic and Economic Risk Scorecard

Promote economic resilience through the creation of a real-time corporate scorecard for epidemic risk, early warning alerts, and mitigation solutions.

Nita Madhav, MSPH, CEO, Metabiota. Nita has over 15 years of experience in probabilistic modeling and risk assessment, with focus on monitoring and modeling infectious disease spread and economic impacts.

Companies need better solutions to understand, mitigate, and manage their epidemic and pandemic risk. There are an estimated 190 million companies worldwide, contributing to over US$87.7 trillion in global gross domestic product (GDP). Due to the COVID pandemic, the world has seen a contraction in global GDP growth, estimated at -3.5% in 2020. While governments are critical in risk mitigation efforts, corporates, and the private sector more broadly, will also need to play a role in mitigating the impacts of infectious diseases in the future. 

One main reason why companies don’t have solutions to understand and manage their epidemic risk is because they lack the required data and analytic tools -- not just for COVID but for a myriad of infectious disease threats. This in turn makes them vulnerable to future economic impacts from infectious disease threats. Along the same lines, corporate boards lack ways of ensuring accountability for appropriate pandemic risk management measures, and anyone vetting or deciding to do business with another company similarly lacks the tools to understand the exposure of the organization to epidemic and pandemic threats.

Our solution primarily serves companies and anyone who does business with them, including those who are seeking to better quantify their risk,  understand their exposure, and take proactive steps to be prepared for and resilient to epidemic threats. 

Our scorecard would serve several use cases:

1. Help corporations (especially Boards and company directors fulfilling their fiduciary responsibility) understand their risk, the key contributors to the risk, and how to mitigate these risk factors.
2. Help incentivize risk mitigation actions by setting target thresholds and creating a transparent and publicly viewable assessment of risk.
3. Help provide potential investors (including ESG and beneficial investors), insurers, lenders, and ratings agencies with an unbiased and transparent view of a company’s epidemic risk

Our solution will also ultimately serve society as a whole by building economic resilience to epidemic threats.

We have been continuously engaged with and assessing the needs of businesses with respect to epidemic risk over the past five years. This has mainly been through our work in the insurance industry (for example, on PathogenRX with Marsh and MunichRe, Lloyd’s Lab, and Willis), with corporations seeking solutions for risk management and early warning, and with governments and broader stakeholder groups on pandemic economic backstops.

The global “public good” that our solution will provide is a reduction in the economic impacts caused by epidemics and pandemics. The economy will be more resilient, and with businesses being better prepared, fewer people would lose their jobs as a result of economic hardships faced by businesses. The system would also shift some of the burden of the global economic costs from pandemics away from governments alone and allow for more cost sharing by the private sector in implementing preparedness methods and increased resiliency. 

Empirical evidence during COVID has demonstrated that lower employee wages, lack of healthcare benefits, and lack of paid-time-off contribute to workplace transmission of infection. Through the proposed corporate risk score, a link between investment in a company’s workforce and their economic resilience can be drawn and can incentivize corporates to mitigate these risk factors. Through this mechanism, the corporate scorecard could decrease economic disparities that exist and could lead to a reduction in workplace transmission during an epidemic.

To provide broad access for this public good, there would be a public-facing version of the scorecard, which would allow the public to benefit from these scores and would provide incentives for corporates to improve their scores.

Implementation of a public risk score will provide visibility to risk levels within different businesses and incentivize them to improve their scores through preparedness and mitigation activities. This will lead a push-pull dynamic for corporates to improve their epidemic risk preparedness and mitigation approaches:

• Push: ratings agencies will integrate this data into their estimates of credit risk, which will raise borrowing costs for companies that are not prepared or otherwise fail to address and improve their risk. Bond funds and beneficial investors will also take this info into account, and demand risk reduction
• Pull: Boards of Directors and C-suite executives will demand epidemic and pandemic risk reduction as per their fiduciary responsibility, as well as due to increased demands from customers, business partners, and investors for corporate social responsibility. 

The strength of these links is evident through our conversations with customers, collaborators, and business partners, who have all expressed the necessity for this type of risk score and how they would use such a score in their business practices.

We will start in year one by building the publicly-available scorecard and an annual subscription-based scorecard that incorporates real-time risks. The solution we are developing would take a global view of risk and vulnerability, including distributed operations and supply chain considerations. We will start in the first year with S&P 500 listed companies, which primarily have operations in the US. The S&P 500 companies represent an approximate market cap of US$33.4 trillion and 30 million employees, which comprise a significant portion of the US and global economy and workforce.

In years 2-3, we will plan to expand to publicly-traded companies having primary operations in the UK, Canada, Europe, and Singapore. These would be ideal areas for expansion, as companies in these areas would have the resources and data availability to be included in this solution. Additionally, many of these countries have also expressed the most interest in developing centers of excellence for pandemic risk. Depending on the feasibility of conducting this in LMIC contexts, we will evaluate expanding in year 3 to areas where we currently have operations (and have operated for several years) in Cameroon, Democratic Republic of Congo, and Sierra Leone.

We would know the system is working if we see average risk scores improving over time, even the course of 1-3 years, especially in the intrinsic components of the scores. We would also see more linkages between the score and incentives to mitigate infectious disease risk, such as insurance policies. Broad scale market adoption would also show more acceptance that financial risks for infectious diseases should be taken seriously. 

As the static scores would be updated at a minimum on an annual basis, the scores developed in year two would be compared to the scores that were developed in year one. The changes in components one and two would be especially important for seeing improvement both in intrinsic factors as well as extrinsic factors over time. Furthermore, since the scores would be derived from a weighted-index approach, the underlying variables could be drilled down into, to really understand what factors are driving the observed changes in the risk scores and where companies are choosing to make improvements.

Prior to COVID many corporations and financial institutions did not appreciate the magnitude of losses that could result from a pandemic or recognize the importance of mitigating risk factors. COVID has shed light on this risk, and many companies are now looking for solutions.

For our solution, data availability and differences between countries as we expand may be a challenge. We would mitigate this through the design of the scoring approach, which could allow flexibility for inclusion/exclusion of different data elements. Additionally, in light of the current COVID crisis, many more data sources are becoming publicly available, and there are continuous advancements in machine learning and extrapolation methods that can be utilized to fill in data gaps. We would continuously incorporate these new data and methods, so that our solution is rigorous to meet the needs of the market. 

For this solution to have a long-lasting impact, the adoption of this solution will also need to be linked with financial incentives to mitigate infectious diseases, and the market will need to adopt this solution. We plan to address this by engaging with partners (such as ratings agencies) who can catalyze this aspect of adoption.

Willis Research Network, Munich Re, World Bank, Lloyd’s Lab, US Centers for Disease Control and Prevention, US Department of Defense, Asian Development Bank, Marsh, In-Q-Tel, USAID

Our mission at Metabiota is to make the world more resilient to infectious disease threats and we believe in order to do so, people, governments, and organizations need access to the best information and data possible. The foundation of our proposed solution has been in place for the last five years and we believe that we must scale now as we begin to overcome the COVID-19 pandemic and prepare for the next impending threat. For this project we aim to use our core expertise in epidemic risk to create new tools which support a broader and deeper understanding of this risk, how to mitigate it, and how to promote economic resilience. Funding for epidemic risk efforts poses a persistent need. We also think that working with larger companies and drawing from the expertise of Trinity Challenge Members will help to increase the reach of the corporate risk score card solution.

We would like to partner with risk rating groups and corporates, and any groups focused on business and financial resilience. This includes many of the Trinity Challenge Member organizations. We hope through these partnerships that we would potentially have access to more data sources, draw on expertise these organizations have in business resilience, and to have a wider reach for the tools once they’re developed.