How should boards respond to COVID-19?

Wednesday, 01 April 2020


    The AICD has collated a number of COVID-19 director resources to help guide board and executive teams on crisis and risk management, communications and governance issues.

    As the COVID-19 virus spreads around the globe, 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 be prepared for a threat that could potentially play out over months or longer.

    Arash Rashidian GAICD, principal of risk management consultancy Lighthouse Advisory, says organisations will need to plan in terms of immediate, medium and longer-term responses. “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,” he says. “This will require constant engagement.”

    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.

    The duration and extent of the impact of COVID-19 is unknown, although Rashidian’s scenario analysis suggests a minimum disruption for six to 12 months or, in a pessimistic scenario, up to 18 months. Enterprises that do business with China have felt the immediate impact, but the ripple effects are likely to impact all Australian businesses, many already strained after recent fire and flood disasters.

    Mick Humphreys GAICD, executive director of risk consultancy RGOv Global and former managing director with Control Risks, says that while the largest impact of the virus is the health risk, the economic and trade impact will have long-term consequences. “Crises present opportunities and the pause in ‘business as usual’ can facilitate change, innovation and substitution,” he says. “This is the largest restriction on the movement of people around the globe since WWII.”

    Boards have a role to play in taking this longer-term lens and actively monitoring the changing nature of the threat, anticipating and scenario testing how the spread of the virus could affect their business and its stakeholders, and in monitoring emerging threats. Organisations should give priority to communicating proactively with the facts to reduce the risk of overreaction. This is increasingly vital given the additional complication of what The Lancet medical journal describes as “an epidemic of misinformation spread rapidly through social media platforms and other outlets [which] poses a serious problem for public health”.

    Richard Goyder AO FAICD, chair of Qantas, said at the recent Australian Governance Summit that it is important organisations work with the facts to put in place the best plans they can. “The one lesson I learned out of the GFC was don’t run out of cash,” he said. “As we face these issues, one question we should all be asking is what’s our cash position?”

    Management will be under significant pressure and directors, in their quest to provide support, should ensure they’re 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, said University of Sydney chancellor and Qantas director Belinda Hutchinson AM FAICD at the summit. (See our 2020 Australian Governance Summit wrap up for advice to boards dealing with the COVID-19 pandemic.)

    In a complimentary AICD webinar, Dr Amanda Rischbieth FAICD outlines how boards can lead their organisations through COVID-19. Questions include: Do you have a plan? How are you monitoring ongoing risks? Are you taking action to boost financial resilience?

    Since time of print, federal and state governments have announced unprecedented response measures to the COVID-19 pandemic. AICD has also made available a series of resources for directors. Access these resources here.

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