A former Barbados Labour Party (BLP) Cabinet Minister is suggesting that health authorities and policy makers use stress testing or scenario analysis, to manage the risks or fallout from the COVID-19 crisis plaguing the country.
Anthony Wood, an award-winning economist and University of the West Indies (UWI) lecturer said this approach is now standard in the tool-kit of financial regulators.
“The management of the response to the coronavirus is essentially an exercise in understanding and managing the risk-return trade off. The balance has to be struck between safeguarding the health of the nation and maintaining economic activity which requires participation from the tourism sector,” Wood, a former Minister of Agriculture and Rural Development said.
“Finance 101 tells us that aiming for higher returns attracts greater risk. Thus, the focus of effective risk management is to maximize the returns from upside outcomes while at the same time minimizing the potential losses from downside outcomes,” he added.
Wood, who recently broke ranks with the BLP is also urging the Mia Mottley administration to tread carefully in allowing entry to visitors.
“Risk management in the current coronavirus environment is an extremely meticulous exercise. While the temptation is great to encourage visitors to a tourism-dependent Barbados, it is vitally important to have a well-resourced health plan to deal with the fall out from the spread of the coronavirus,” the ex-Minister of Energy and Public Utilities told Barbados TODAY.
“Thus, stress testing or scenario analysis, which is now standard in the tool-kit of financial regulators, should be utilized by local health planners and the policymakers. Simply put, a number of ‘what if’ scenarios are developed to check the resilience or robustness of the system. Some of the scenarios should be extreme shocks to the system,” Wood suggested.
He explained that in this way, the planners get a good idea of the level of resources required to handle worst cases like a rapid spike in coronavirus cases.
“Given the problems being experienced at the moment with regard to the lengthy time for test results, inefficient design and administration of protocols resulting in sub-optimal financial decisions and other knee-jerk reactions by governments, it is obvious that no attention was paid to stress testing by the planners and advisers at the outset,” declared the winner of the Economics Theory Prize from the UWI.
He said the absence of thorough planning was causing great embarrassment for the administration and country both locally and internationally.
“I sincerely hope that these failures will not be repeated in the future,” Wood told Barbados TODAY.
“A lot of anxiety has already been created. The situation is spiralling out of control and it needs to be wrestled to the ground. There have been too many breaches of the protocols and we are paying dearly for it. Each breach places too many lives at risk. A lot of these breaches took place in our quest for money and foreign exchange through the attraction of large numbers of tourists, some very wealthy,” Wood stated.
“The blame game must stop since coronavirus is an imported virus. Imagine the scale of the current problem if the 65 government-approved and other Old Year’s Night events took place. Our health services would be more overwhelmed today and a state of emergency might have been declared already.”
“The current predicament reminds us that there is more to life than money, having a good time and receiving tourists who bring foreign exchange,” Wood contended.
He said the current administration needs to listen more and be more open-minded. He insisted that placing the blame on nationals would only attract resentment from many Barbadians at a time when a collective national effort is required.
“I wish the health workers great success with their efforts and all Barbadians need to give them their full support and prayers. Also, we need to play our part in preventing the spread of the virus,” he added. (emmanueljoseph@barbadostoday.bb)
