The companies and employees at ground zero of the COVID-19 outbreak provide insight into what works in a time of crisis — and what doesn’t.

Leaders around the world are facing twin anxieties: how severe the coronavirus (COVID-19) outbreak will be for the economy and what companies should be doing to prepare.

Scientists have long warned that emerging infectious diseases represent a new reality with the potential to cause untold human suffering and economic disaster. While the financial damage of the COVID-19 epidemic — first reported from Wuhan, China, on Dec. 31, 2019 ― has so far largely been confined to China, organizations around the world are directly and indirectly affected by what is fast becoming a global crisis.

Managers lack clear guidance on how to ready their organizations for a global pandemic event. The World Health Organization (WHO) tracked 1,438 epidemics between 2011 and 2018 and notes, “In addition to loss of life, epidemics and pandemics devastate economies.” Many of the outbreaks in this period, including Ebola and MERS, were able to be contained geographically. But the conflux of hyperurbanization and global warming makes pandemics and other ecological dangers more likely to spread over a larger area — and a very real threat to the world’s economies.

We’ve been taking a close look at the effects on Chinese companies and workers of the government quarantines that began being imposed in January. The responses of these two sets of stakeholders at the front lines of managing this crisis offer important lessons for organizational leaders in other locales. Current projections suggest that it’s only a matter of time before most organizations are facing similar challenges.

The Impact on China’s Economy and Global Trade

Our first task was to find out how much the virus, and the resultant quarantines, have been affecting Chinese business. Our research initiative at the Global Center for Entrepreneurship and Innovation at the University of St. Gallen, in Switzerland, collects and examines remote sensing data, such as satellite data and digital trace data. We are using this tool to shed light on how COVID-19 has been affecting the Chinese and global economies.

Our team has been analyzing daily satellite data from the European Space Agency’s (ESA) Tropospheric Monitoring Instrument about air pollution emissions to quantify the regional and local impact of the COVID-19 outbreak and government-imposed quarantines on the Chinese economy. Changes in the quantity of pollutants, such as nitrogen dioxide, are useful for identifying daily changes in emissions-heavy industries, such as manufacturing, because of their short lifespan in the troposphere. Emissions data has long been used as a proxy for quantifying shifts in certain types of economic activity. Simply put, a drop in air pollution indicates a drop in manufacturing.

The emissions data shows the severe hit that China’s manufacturing sector took in January and February. (See “Air Pollution Reduction Shows Where Chinese Manufacturing Slowed.”) Our data shows that nitrogen dioxide emissions in China fell by 38% between Jan. 24, the start of the government-imposed quarantines in Hubei Province, and Feb. 21, the targeted “back-to-work” date in many Chinese provinces.

Air Pollution Reduction Shows Where Chinese Manufacturing Slowed

During a 28-day span, when areas of China were under government-imposed quarantine to slow the spread of COVID-19, manufacturing slowed — evidenced by the decrease in nitrogen dioxide emissions. Municipalities in red had the highest decrease in emissions, while areas in blue had no decrease.

Global Center for Entrepreneurship and Innovation at the University of St. Gallen, using data from ESA from Jan. 24 to Feb. 21, 2020

The numbers were more extreme closer to the outbreak’s epicenter in eastern China: Within Hubei Province, emissions fell by 53%, and in the worst-affected industrial municipalities around Wuhan City, emissions plunged by as much as 85%.

What is the economic impact of this sudden nosedive in production? Converting emissions data to dollar amounts is fraught, but we estimate that a 38% decline in emissions may indicate a conservative loss of up to U.S. $215.6 billion to Chinese manufacturing during this period alone. (To make our estimate, we compared nitrogen dioxide emission reductions with province-level 2018 gross regional product attributable to the secondary sector values from the Chinese National Bureau of Statistics.)

The real economic impact of COVID-19 on the Chinese economy, though, is likely to be far higher. While nitrogen dioxide emissions began recovering in many less-affected Chinese provinces in mid-February, countrywide emissions levels are not likely to return to pre-outbreak levels until the end of the quarantines in Hubei Province, scheduled for late March 2020 (as of this writing). Moreover, the manufacturing being done in China is a hinge point for many of the world’s largest companies and economies. The effects of the slowed Chinese production include customers who must find alternate sources of supplies and slowdowns of entire global production schedules as a result of the trade upheaval and uncertainty.

Best Practices to Guide Companies Through the COVID-19 Crisis

In addition to analyzing emissions data, our team has also been systematically aggregating news and social media data from the most severely hit regions in China to better understand how COVID-19 has affected the Chinese economy, including those portions that are less observable through traditional economic proxies. This data collection has given us a unique lens on how Chinese companies and other Chinese organizations have been responding to the ongoing crisis.

Our data shows that there are several steps that Chinese managers are successfully taking, often with the encouragement of Chinese authorities, to mitigate the impact of the virus and its disruptions. There are also several areas where a lack of preparedness has led to less-than-desirable outcomes.

We believe that managers can learn a lot from how companies in China have been coping with COVID-19. These coping practices include having smart policies around remote work; anticipating and mitigating operational roadblocks; and addressing the social impacts of this health emergency.