In the spring of 2003, RMS pioneered quantitative event cancellation risk analysis with a study for FIFA in respect of the 2006 World Cup in Germany. As it happened, SARS was first reported outside China in February 2003, and was rampant throughout the duration of the risk analysis. At that time in London, as in Asia, sensible precautions such as avoiding busy Chinese restaurants was a rational defensive measure. Since the World Cup was scheduled for three years later – the summer of 2006, SARS was not considered as a cancellation risk. Terrorism was the primary risk to which investors in Golden Goal Finance Ltd were exposed.
Thanks to intensive global contact-tracing, and the need for an infected person to be symptomatic before being contagious, the World Health Organization was able to declare the SARS outbreak contained in July 2003. Nearly seventeen years after SARS, a novel coronavirus related to SARS appeared in China over a month ago in December 2019. Whereas SARS had a case fatality rate of about ten percent, the novel coronavirus (2019-nCoV) is more benign. The case fatality rate is currently estimated at just a couple percent. But even this level is highly disruptive, and all risk stakeholders will be anxious over the number of months before 2019-nCoV is contained.
Already, a number of concerts and other public events in China, and elsewhere in Asia, have been cancelled because of the novel coronavirus. Others are in the balance: the Boston Symphony Orchestra have planned an eight-concert tour from February 6-16, playing in Hong Kong, Shanghai, Taipei and Seoul. Among international sporting events, the 2020 World Athletics Indoor Championships in Nanjing have already been postponed a year from March 13-15, 2020.
Postponement, rather than cancellation, was a notable risk mitigation feature of Golden Goal Finance Ltd. Even if the World Cup in Germany could not be played in 2006, it might have been replayed the following year. Change of venue was another important risk mitigation feature of Golden Goal Finance Ltd. This measure has been adopted for the Tokyo Olympics 2020 women’s soccer qualifiers, which have been moved from Wuhan, to Nanjing, and now Sydney.
The Chinese Grand Prix, scheduled for the weekend of April 17-19 in Shanghai might potentially also be relocated. The governing organization (FIA) is closely monitoring the 2019-nCoV outbreak before making any decision. Although the novel coronavirus may have peaked before then due to draconian Chinese countermeasures and public self-isolation, the residual risk will make this a very tough decision.
Looking ahead in the international sporting calendar, the UEFA EURO 2020 soccer tournament is due to be played at multiple venues in Europe from mid-June to mid-July 2020. Unlike terrorism and natural hazards, which have a finite geographical footprint, 2019-nCoV could potentially blight this tournament.
Extending the innovation of Golden Goal Finance Ltd., RMS is applying the most extensive commercial experience of modeling infectious disease, to the challenge of quantifying the risk of non-containment of 2019-nCoV, the associated business disruption, and event cancellation over the coming months. RMS infectious disease modeling will consider a broad spectrum of scenarios for coronavirus evolution and possible mutation; quarantining; transport restrictions; business closures; and other non-pharmaceutical countermeasures.
In a single month, 2019-nCoV has already had a massive global economic impact across many business sectors, and has now been declared a global emergency by the World Health Organization. This RMS modeling initiative will assist the risk assessment of event cancellation insurers, international corporations, and many other risk stakeholders.
RMS is gauging interest from the risk community in a report to better understand the impact of the coronavirus on the global economy. Please contact your RMS Account Executive or Life.Risks@rms.com.
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Gordon is a catastrophe-risk expert, with 30 years’ experience in catastrophe science, covering both natural and man-made hazards. Gordon is the chief architect of the RMS terrorism risk model, which he started work on a year after joining RMS in December 2000. For his thought leadership in terrorism risk modeling, he was named by Treasury & Risk magazine as one of the 100 most influential people in finance in 2004. He has since lectured on terrorism at the NATO Center of Excellence for the Defense against Terrorism, and testified before the U.S. Congress on terrorism-risk modeling.
As an acknowledged, international expert on catastrophes, Gordon is the author of two acclaimed books: “The Mathematics of Natural Catastrophes” (1999) and “Calculating Catastrophe” (2011). Dr. Woo graduated as the best mathematician of his year at Cambridge University and he completed his doctorate at MIT as a Kennedy Scholar and was a member of the Harvard Society of Fellows. He also has an Master of Science in computer science from Cambridge University.