SINGAPORE: With the worsening haze situation, the drop in air quality is expected to affect businesses. While industry watchers have said the disruption is likely to be manageable, they also urge that appropriate risk management and business contingency plans be put in place.

Business activity in the construction industry, as well as F&B and retail sectors, is expected to slow down over the next few weeks as the haze situation deteriorates. Some firms are already taking measures to keep employees indoors.

Still, industry watchers said the haze is not likely to hurt businesses significantly.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises (ASME), said: “This would be something that is disruptive for businesses. The Government is also addressing with the Indonesian government how Singapore can help, so everyone is quite mindful about how we can prevent it from escalating.

“But in the event that it escalates and spikes, I believe it would not last for a prolonged period of time. It might hit us for a few days or even a week, where people have to be indoors or receive instructions to stay at home. Some would still be able to work from home. There will be those who will not be able to carry on their work, kids will not go to school and people will not go out much.

"So you might have a few days of quite serious disruption, but relative to what we have been through - SARS, bird flu and some of the much bigger situations we have dealt with - this is something we are quite capable of handling."

While the direct impact is currently still manageable, observers said firms should have preemptive risk management measures in place to avoid a knee-jerk approach. In particular, they caution firms of potential disruption to their value chain, which depends on goods and services delivered by other business partners.

Industry watchers said firms need to be prepared to address supply chain interruptions.

Said Mr Lim Sek Seong, vice president & BCM Service Leader (Asia) at Marsh Risk Consulting: "It is very important to start the dialogue. What if the haze really disrupts the operation? How will it affect you? Then the next thing is, if I can't use my people to deliver, can I work with another business partner or a competitor to deliver the service.

"Of course my people will still be overseeing it. It is important that they start the conversation now rather than later, and once the arrangement is put in place, they should have all these documented.

“The next thing is, before the next incident like the haze happens again, they need to rehearse. Because if we don't rehearse, how do we know whether the measures in place are effective? The idea is to avoid a knee-jerk reaction. When the thing happens you react. Typically yes you can avoid the service failure. But if you have rehearsed it, you could have done it better."

Contingency plans aside, observers said businesses should also consider enhancing their insurance coverage to mitigate against the risk of any business disruption.