As COVID-19 (also known as novel coronavirus) continues to spread around the globe and with a pandemic now declared, businesses are scrambling to prepare for a potentially escalating series of events.
Business continuity and crisis management plans commonly prepare organisations for a one-off event, but many won’t prepare them for a threat like COVID-19 that could potentially play out over months or longer.
The role of the board in this type of situation is to work with management to decide when to enact business continuity, crisis management and pandemic response plans and to pressure-test these plans to ensure they are appropriate for the evolving and unpredictable nature of the situation.
Arash Rashidian GAICD, principal of risk management consultancy Lighthouse Advisory, says “This is a strategy derailing event and board members will have an active role to play in supporting management in its planning and resource allocation and this will require constant engagement.”
Boards must set appropriate reporting expectations
However, once appropriate plans are in place, directors are advised to resist the inclination to request ever increasing levels of information from management. It may be appropriate that only the chair continues to work closely with the CEO, to manage the flow of information and provide focused support.
Management will be under significant pressure and directors must demonstrate empathy and manage themselves to ensure that, in their quest to provide support, they are not making the situation more difficult. Boards can help by setting reporting expectations that don’t get in the way of management leading the business through the crisis.
All Australian businesses are likely to be impacted
The duration and extent of the impact of COVID-19 is unknown. Enterprises that do business in and with China will be feeling an immediate impact but as the situation unfolds, the ripple effects are likely to impact all Australian businesses.
Michael Humphreys GAICD, co-founder of risk consultancy RGOv Global and a former managing director with Control Risks in China and Australia, says companies should expect factories in China to remain closed for three months or more.
“The outbreak of COVID-19 will have major trade implications,” Humphreys says. “Companies will need to look for new trade routes.”
Humphreys says that while the largest impact of the virus is the health risk, the economic and trade impact will have long term consequences.
“This is the largest restriction on the movement of people around the globe since World War II,” he said.
Boards should be reviewing long-term impacts and threats
Boards have a role to play in taking a longer-term lens and actively monitoring the changing nature of the threat, anticipating and scenario testing how the spread of the virus is likely to affect their business and its stakeholders, and in monitoring emerging threats.
Richard Goyder AO FAICD, chair of Qantas, said at the Australian Governance Summit last week that COVID-19 represents all the things business does not like – uncertainty, unpredictability and adverse economic consequences. He says it’s important that organisations work with the facts and put in place the best plans they can.
A unique opportunity to build trust
Once the pandemic is over, boards and management should take the opportunity to review the situation and discuss lessons learnt including how the business was disrupted, how to reduce exposure for future events, and how the business can be better prepared next time.
How a business handles any disruption of service will determine how they are judged and the confidence of stakeholders. If boards get this right, it presents a unique opportunity to establish and build trust within their community.
Below is a list of questions boards should be discussing:
- Which plans need to be activated and when?
- Do our plans account for this type of ongoing threat? Do they contain an appropriate focus on employee wellbeing, supply chain disruption, short- and long-term financial impact?
- What support does management need? What is the best way to support them?
- Is the business communicating timely messages to both internal and external stakeholders?
- How are we monitoring the ongoing risks?
- Are we routinely revisiting and clarifying our priorities as the crisis evolves and the landscape changes?
- Is the business planning for post-pandemic communications and stakeholder impacts?
- Are we scenario planning and testing for any negative fallout?
- Are we adjusting revenue projections if necessary and taking action to boost financial resilience?
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