The COVID-19 pandemic has fundamentally changed our understanding of the type of business risks faced by boards. The impact of a health crisis that could lead to a global economic depression, and the assumptions around risks are challenging boards in unforeseen ways.
Boards are charged with gaining the best return for the risk being taken with the capital of the company. COVID-19 brings a renewed focus on risk, new opportunities for return and the need for strategic focus and agility. Our work with boards of directors during the pandemic has highlighted nine themes. Some of them may be relevant to your board, others less so, but all are worthy of thought and consideration.
1. Supply Chains
The disruption to supply chains highlights their connected nature locally and globally. From the availability of shipping containers constrained by the Chinese lockdown in early 2020, to the impact of the aviation crisis on the timeliness of the movement of perishable goods. All businesses will review costs, risk, reliability and contingency in their supply and distribution chains.
2. Adaptability and agility
Necessity is the mother of invention. The need to move fast and break things in order to adapt and respond to a health and economic shock have heightened the pace of innovation. Recent months have demonstrated business agility to cut through regulation and inertia.
It has speeded up the manufacture and approval of hand sanitising materials, ventilators and test kits. It has turned the trickle of people working from home into a torrent and forced the broadband economy into overdrive. The associated risks have required guidance and support around cyber security, privacy and confidentiality when working from home. It’s also becoming increasingly important as the months roll by that the physical and mental health of employees must be prioritised and supported.
3. A weakened consumer
Consumer sentiment and spending have been hit hard by COVID-19. Uncertainty and fear have affected many working on the frontlines who are lucky enough to remain fully employed. Many have taken leave or are managing on reduced hours. Those who have lost their livelihoods and employment will draw upon savings, credit and the government for support. As a result, consumer priorities and spending are shifting creating winners and losers.
4. Weakened businesses
Cash flow and cash reserves are everything. The initial response and tactics employed to stay afloat must move to long term thinking, planning and strategy to ensure businesses that survive can rebuild and thrive in a post pandemic world, particularly with vaccines coming on stream. A focus on existing customers through clear communications and provision of excellent service will enable businesses to explore new ways of operating.
5. Pressure on industry
There will be winners and losers with consolidation leading to the survival of the fittest. There will be the prospect of strategic intervention in businesses, for example, some national and regional airlines being supported by public funding, while others are not. The criticality of every business value proposition will come to the fore. Membership based organisations, in particular, will have to assess their value add to members or risk extinction.
6. It’s all about the people stupid!
Businesses are generating and destroying trust with the way they work with their people. Mistakes made at this time will sear the culture of organisations and trust in boards and CEOs. Trust, honesty and openness through clear and regular communication at all levels is key.
Consider how you protect your staff, customers and suppliers in an environment that will continue to be risky. Take heed of government and public health expert advice to craft and constantly evolve a plan together with your people. Ask them to maintain a working environment in which they feel safe. Innovative solutions may well emerge.
7. From survive to thrive
How do we move our mindset from survive to thrive in a new and different world? How do we evolve our business model to ensure it will see us through the next ten years? How will we grow the top line revenue? What does this mean for board directors in the way they fulfil their roles in strategy and risk?
8. How sustainable is your business in a post pandemic world?
What does sustainability look like for your business in a world that has been woken from its sleepwalk into climate disaster? How much further do your environmental, social and governance (ESG) commitments need to go? Is profit your sole motivation, or do you have a broader agenda? What business opportunities does this create for your business, and how will your board seize the opportunities to thrive?
9. Think circles of influence
Consider the political cycle. Some national leaders have demonstrated leadership during the pandemic and now enjoy high levels of approval, while others haven’t and don’t respectively. Where the pandemic has been perceived as not being handled well by the government or where there are elections it’s important boards look ahead at possible new leaders and adapting their circles of influence strategy accordingly.