As the impact of the COVID-19 pandemic first emerged, many boards focused their attention on responding to the immediate crisis. Boards must now turn their minds towards governance for recovery and not lose sight of their overarching role and responsibility for good organisational governance, purpose and strategic direction and planning.
At this critical time, NFP boards should focus on the future. Pre-COVID-19 mission statements, strategies, operating plans, assumptions and forecasts must be assessed to ensure they remain relevant in a post-COVID-19 environment. Similarly, existing risk management frameworks, crisis management plans and business continuity plans should be reviewed and updated to capture lessons learned and reflect post-COVID-19 requirements.
Understanding how governments, regulators and key stakeholders are each responding to the crisis, and how those responses may evolve over time, will help shape the future direction of organisations. Effective boards should invest time and resources to carefully consider and understand the impacts of these responses, to position their organisations to operate effectively and in support of their purpose as society emerges from COVID-19 restrictions.
As government intervention and slowing infection rates point to a period of tentative stability, what are the key considerations and questions that boards should be asking? How can a board best position their organisation, not only to survive the immediate impact of the crisis but also to adapt to a changed environment and stakeholder expectations beyond the coming days and weeks? In this director tool, we examine some of the key areas that NFP boards should be focussing their attention on over the short to medium term.
Critically assess and update strategy, business plans and mission statement
Existing NFP strategy and business plans should be reviewed and updated to reflect the short-term impact of COVID-19 and changes to the organisation's operating environment, especially around changes in the focus and expectations of the community, members and volunteers. In many cases, the NFP operating model has been challenged, with the disruption to usual operations both exposing weaknesses in existing models and highlighting opportunities in modifying purpose and strategy. In reviewing organisational strategy, boards should consider the following areas:
In a post-COVID-19 environment:
- Will our existing mission statement maintain its relevance for our key stakeholders such as clients, members, employees, volunteers, donors and community partners, or will it have to be updated? Note that any changes will be constrained by the 'objects' of the organisation's constituent documents and any regulatory or tax requirements to maintain charitable status and tax exemptions that may be currently engaged.
- Will clients and members still have the same demand for our services or will their focus shift to more immediate concerns?
- How strongly will our mission statement and core values attract key stakeholders to continue supporting and contributing to our organisation?
Operating model issues
- How reliant is the operating model on the physical movement of goods and on physical contact? Can supply arrangements be restructured to diversify providers and otherwise reduce delivery times?
- What initiatives can be implemented to support and retain clients when faced with constraints? For example, offering contactless service delivery or replacing physical appointments with telephone appointments.
Workforce issues – employees and volunteers
- What can we learn from COVID-19 to support a healthier and more resilient workforce?
- How has COVID-19 shifted perceptions around what is reasonably expected in a safe workplace?
- Should flexible or work from home arrangements be utilised more regularly across the organisation to support the NFP's strategy?
- Does the organisation have the right mix of full-time, part-time and casual employees, volunteers and contractors, especially in light of changes to our operating model?
- Can reliance and spend on external consultants or contractors be reduced and the required expertise be sourced or developed inhouse from existing employees, volunteers or community partners?
Strategic mergers, partnerships or other opportunities
- Are there strategic mergers or partnerships – possibly with other NFPs or community partners – that will support and strengthen our organisation in the future? This may deliver benefits ranging from consolidating and strengthening supply chains, cost reductions and the sharing of knowledge, expertise or resources.
- Are there any opportunities to restructure the organisation? Reducing the number of ancillary services which are already better served by other NFPs or pro-bono organisations may resharpen the focus on core strategy and mission statement. Adverse client impact can be minimised by establishing referral arrangements with external service providers and holding them to the same standards that your organisation would normally provide.
- Has COVID-19 presented any opportunities or challenges unique to our sector or organisation? How can we leverage or overcome these?
Review crisis management and business continuity plans
Crisis management plans and business continuity plans should be reviewed and updated to reflect learnings from the COVID-19 pandemic. These plans should be updated on a more frequent basis, to capture new information and COVID-19 measures around sector standards, best practice and any vulnerabilities or structural changes caused by COVID-19.
- In responding to the impact of the COVID- 19 crisis, what was done well and what has been managed poorly by our organisation?
- How did the crisis management and business continuity plans respond and adapt to external factors such as coordinated responses from the NFP sector?
- Does the business continuity plan allow us to viably operate, and for our employees and volunteers to continue to contribute, remotely or offsite?
Assess risk management frameworks
COVID-19 has shown there can be significant risks to financial stability, operational capability, capacity to meet contractual obligations and commercial relationships arising from pandemics. Existing risk management frameworks should be reviewed and assessed through this lens.
- Does the risk management framework adequately cater for once in a generation events including epidemics or pandemics?
- Are there other risks that were highlighted by the impact of the COVID-19 crisis, such as supply chain, operating model, financial or personnel risks that need to be adequately addressed by the organisation?
- Can personnel health and safety policies be updated as a positive long-term shift rather than a temporary reaction to the COVID-19 crisis?
Analyse finances, fundraising and sources of funds
Consolidating the organisation's financial position is critical during times of crisis and this requires consideration around existing and future sources of funding as the economic and political climate shifts in response to COVID-19.
- What is our financial position? Are there any immediate concerns that need to be addressed?
- What is our funding mix and how has COVID-19 impacted this? What is the relative reliance on membership fees, government grants, corporate support, donations and philanthropy and event fundraising? Will support-in-kind become just as valuable as financial donations?
- Is there sufficient cash to pay costs over the short and long term? Is it prudent to cut non-essential and discretionary expenditure?
- Is it possible to move to accepting donations online or hosting philanthropy or fundraising events via video conference? Target audiences may be easier to engage through these mediums in light of the social distancing measures that are currently in place.
- Is there any government or sector support available to access now or in future? Examples include the JobKeeper program for paid employees or targeted increases in government funding to address increased demand for social support services brought on by COVID-19.
Stakeholder relations and external communications
The COVID-19 crisis has shone a light on the importance of being able to rely on continued support from key stakeholders, whether this is in the form of financial support from donors, volunteers and pro-bono partners maintaining their existing commitments or engaging in productive dialogue with government and regulators. Now more than ever boards need to be mindful of at times competing stakeholder expectations and ensure an effective communication strategy is in place.
- What are our stakeholders focused on? Does their focus align with our purpose, strategy and business plan? The answer may be different for each stakeholder ranging from the interests of clients, employees, volunteers, donors to community partners.
- Will our stakeholders be supportive of our organisation changing its focus, whether temporarily or permanently, to address the immediate needs of the wider community?
- Are all key stakeholders adequately updated on any significant changes to our organisation?
- Does the communication strategy focus both on the immediate response to the crisis, as well as longer term and post-COVID-19 purpose and strategy?
- Where relevant, are we maintaining regular engagement with key contacts within regulatory agencies – such as the Australian Charities and Not-for-Profits Commission (ACNC) or the Australian Tax Office – to ensure that any potential changes in regulatory focus do not come as a surprise?
- Are we adequately complying with new and changing regulatory responses to COVID-19 whilst continuing to comply with existing legal and regulatory requirements? For example, the ACNC has introduced a raft of measures and guidance to assist NFPs with complying with their obligations during the COVID-19 pandemic, ranging from fundraising obligations to holding virtual annual general meetings.
Digital presence, technology capabilities and cybersecurity
Government mandated shutdowns of physical services around the world and increasing social distancing measures have reinforced the importance for NFPs to have a strong digital presence and technology capability. This allows organisations to continue to engage with their clients and members, deliver services and support their clients through an online medium to overcome increasing physical barriers.
- What advantages exist online for us to adapt our service model not just to weather the COVID-19 storm, but to support strategy in the recovery period? Are we able to reach a greater audience and client base now that physical distance is no longer a limiting factor?
- Do we have a technology platform which supports remote, flexible or work from home arrangements for personnel (employees and volunteers)?
- Do we have adequate cybersecurity measures in place to protect the organisation, members, personnel and clients?
- How have client behaviours changed – or digitization trends been accelerated – as a result of COVID-19?
Focus on the ‘road to recovery’
While leadership teams and other key stakeholders have appropriately focussed their immediate attention on the short-term impacts of COVID-19, the period of stability afforded by a slowing infection rate in Australia presents an opportunity for boards to refocus their attention on their primary governance role. It is essential that boards look forward and plan the 'road to recovery', ensure their mission statement, purpose and strategic direction remains fit for purpose and maintain adequate oversight and management of key risks and opportunities for the organisation beyond COVID-19.
About the author
Kate Towey and Charles Ashton are partners in the Allens Corporate and M&A group. They have extensive experience advising boards on corporate governance and reputationally significant transactions.
The Australian Institute of Company Directors is committed to strengthening society through world-class governance. We aim to be the independent and trusted voice of governance, building the capability of a community of leaders for the benefit of society. Our membership includes directors and senior leaders from business, government and the not-for-profit sectors.
For more information: 1300 739 119w: aicd.com.au
This document is part of a Director Tool series published by the Australian Institute of Company Directors. This series has been designed to provide general background information and as a starting point for undertaking a board-related activity. It is not designed to replace a detailed review of the subject matter. The material in this document does not constitute legal, accounting or other professional advice. While reasonable care has been taken in its preparation, the Australian Institute of Company Directors does not make any express or implied representations or warranties as to the completeness, currency, reliability or accuracy of the material in this document. This document should not be used or relied upon as a substitute for professional advice or as a basis for formulating business decisions. To the extent permitted by law, the Australian Institute of Company Directors excludes all liability for any loss or damage arising out of the use of the material in this document. Any links to third-party websites are provided for convenience only and do not represent endorsement, sponsorship or approval of those third parties, or any products and/or services offered by third parties, or any comment on the accuracy or currency of the information included in third party websites. The opinions of those quoted do not necessarily represent the view of the Australian Institute of Company Directors.
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