How directors can prepare their organisation for crisis

Friday, 01 November 2024

Dennis Gentilin GAICD  photo
Dennis Gentilin GAICD
Author, The Origins of Ethical Failure
    Current

    What directors do during a crisis can be less important than the role they play in helping their organisations to be strategically prepared to navigate such an eventuality.


    If you’re a board member, the phone call informing you that your organisation is facing a crisis is one you don’t look forward to receiving. However, with the high reliance on technology and the frequency of outages — be they caused by malicious actors, technical issues or fat finger errors — it is a phone call you must be prepared for.

    While working at UniSuper as head of enterprise risk, one of my responsibilities was to coordinate the organisation’s response to a crisis. In May this year, I received a call that people in this role also don’t necessarily welcome. I was informed that a major outage had disabled a large proportion of our systems, some of them mission-critical.

    Here, I share some of the lessons that emerged from this experience for me personally. What will become apparent is that although important, it is not what directors do during a crisis that has the biggest impact. Rather, it is the role they play in helping their organisations prepare for such an eventuality that matters more.

    Establish principles

    Developing principles that guide decision-making during a crisis is crucial. When the pressure is on, uncertainty is high and the normal guardrails provided by an organisation’s systems and processes are compromised, principles will help reduce the likelihood that the decisions taken are at odds with the standards that the organisation aspires to live by.

    Workarounds rarely work as well as intended
    Most organisations would have established workarounds that provide a “Plan B” during a crisis. However, workarounds will invariably fail to operate as intended. This could be because of the uncanny ability a crisis has to throw up unknowns, or the risks associated with operating the workaround at the required cadence. Whatever the case, the best way to shore up workarounds is by conducting exercises.

    Exercises are crucial

    Running exercises is the best way to identify gaps and improve workarounds before you find yourself in the fire of a full-blown crisis. To be sure, exercises should also test the ability to recover systems, but always prepare yourself for the contingency that recovery of systems is not as rapid as expected and workarounds need to be relied upon for longer than expected.

    If appropriate, boards should be involved in exercises. At a minimum, as part of their oversight responsibilities, they should be provided with reports that detail findings and suggested improvements. One of the lessons that emerged from an exercise we conducted at UniSuper was the need to develop a crisis communication plan. It was worth its weight in gold.

    Communication

    Everyone is aware of the vital role communication plays during a crisis. Arguably the primary reason for this is that a crisis compromises trust — you might let down some of your most important stakeholders. How you communicate during the crisis and in its aftermath should acknowledge this and begin putting in place the foundations for restoring the trust that has been lost.

    A plan is crucial. It helps provide clarity and direction in a period when there is much uncertainty. Among other things, the plan should provide a schema of what the first 24 to 48 hours looks like — which stakeholders need to be communicated with, in what sequence and through which channels. Where possible, delegate responsibilities, as there will be long delays if everything has to be approved by the CEO. 

    Leadership is crucial

    Although this goes without saying, it is a bit more nuanced than you might think. From the top, the board must resist the temptation to be overbearing. In a crisis, time is of the essence as the environment is fluid and dynamic. You cannot afford to be deferring to the board on every issue — management must be empowered.

    From the bottom, a crisis requires leadership at all levels, not just the executive. This is because very few corners of an organisation remain untouched by a crisis. Everyone needs to step up. People who are seemingly dispensable during periods of normal operation can suddenly find themselves in the limelight playing a pivotal role.

    The importance of culture

    Ultimately, a crisis will test an organisation’s culture. It is difficult to pinpoint exactly which aspects of culture are tested, but suffice to say, if the culture is one where people resort to finger-pointing and recriminations rather than coming together and collectively responding, it will make what is already a painful process far more challenging.

    Principles, workarounds, exercises, communication plans, leadership and culture — these do not emerge in the heat of a crisis. Rather, they are developed in the months and years leading up to one. If directors would like their organisations to thrive in a crisis, it is quite clear what they should be focusing on. 

    Strategy, risk and governance consultant Dennis Gentilin GAICD brings 20 years’ experience to his work in the financial services industry. He is the author of The Origins of Ethical Failure. 

    This article first appeared under the headline 'Under Pressure’ in the November 2024 issue of Company Director magazine.  

    Latest news

    This is of of your complimentary pieces of content

    This is exclusive content.

    You have reached your limit for guest contents. The content you are trying to access is exclusive for AICD members. Please become a member for unlimited access.