Dive Brief:

• North American companies are bracing for negative business impact due to the coronavirus outbreak, a Willis Towers Watson survey found.

• Despite rising concern of the effect coronavirus will have on their businesses, most U.S. companies are taking a "wait-and-see" approach when it comes to adjusting their executive pay and sales compensation programs, the Arlington, Virginia-based advisory and solutions company found.

• Additionally, a survey from Gartner's risk management practice found that 56% of business leaders rated themselves as "somewhat prepared," for the outbreak, with 11% relatively or very unprepared.

Dive Insight:

"Companies are increasingly expecting that the coronavirus will adversely affect their businesses. Yet, because the exact impact of the virus is uncertain, compensation committees and executives are not making immediate changes to their organizations’ pay programs — at least for now," the research quotes Adrienne Altman, managing director of rewards at Willis Towers Watson, as saying.

34% of companies expected the virus to have a "moderate or large negative impact" on their business over the next six months. 44% companies say their annual executive incentive plan has been or will be affected by coronavirus, but nearly one in five intends to adjust funding or targets for the plan.

Three quarters of companies surveyed do not plan to adjust their sales compensation plans. Among those considering adjustments, most intend to apply discretion, if needed.

"CFOs are in a particularly unique position to provide facts on contingency planning and risk management activities, as well as financial arrangements that are in place to protect both the company and its workers," John Bremen, managing director of human capital & benefits at Willis Towers Watson, told CFO Dive in an email. 

Bremen stressed the significance of CFO and CHRO partnership as the virus’ scope unfolds. 

"There is significant overlap between Finance and HR in areas relating to contingency planning, benefits funding, and pay continuance, as well as travel policy and operational policies, such as those relating to alternative work arrangement," he said. "CFOs can add tremendous value by considering issues around long-term company growth and financial impact versus short-term financial considerations."

Bremen says that leading companies focus on their purpose and values during times of great volatility, similar to what we’re seeing today. "CFOs are in a strong position to convey this mindset, both internally and externally," he said.

A recent survey by Gartner’s risk management practice aligns with Willis Towers Watson’s findings; just 12% of Gartner’s 1,500-plus respondents believe their businesses are highly prepared for the impact of coronavirus, with 26% believing it will have a negligible impact at all.

"This lack of confidence shows that many organizations approach risk management in an outdated and ineffective manner," vice president at Gartner’s risk and audit practice Matt Shinkman said. 

56% of respondents rated themselves somewhat prepared, and 11% said they were either relatively or very unprepared. But these numbers don’t tell the whole story.

"It’s nearly impossible to predict exactly if or how a particular scenario will unfold or even when," Shinkman said. "That’s what creates the ambiguity and often inaction around emerging risks. It’s much more effective to focus on potential impacts and how to mitigate them."