More than a health crisis: leadership amid coronavirus

June 2020  |  FEATURE  |  BOARDROOM INTELLIGENCE

Financier Worldwide Magazine

June 2020 Issue

As 2020 began, the novel coronavirus, or COVID-19, was thought of mostly as a China-specific issue. If an organisation did not have any China-based operations or relationships, then from a business perspective, leaders had little to worry about. Yet as we have seen, the threat carried by COVID-19 around the globe is unparalleled in living memory.

As a result, business leaders face a raft of risks and challenges affecting their employees, operations and finances. The full magnitude of the damage will not be apparent for some time, however senior executives must provide strong leadership and take affirmative action to safeguard companies and lives. Many have acted promptly. Remote working, whole company shutdowns and social distancing measures have dramatically changed the working lives of millions and reshaped national economies on an extraordinary scale.

“The business sector is suffering already,” notes Arjen Boin, professor of public institutions and governance at Leiden University. “Lay-offs are on the rise. In the long term, governments will have to rebalance their budgets as the current stimulus operations are unprecedented. Moreover, we really have no idea how a sudden halt of the global economy can be reversed.”

The crisis will exert profound pressure on companies in the short term, with fundamental legacy effects. “We are in uncharted waters and encountering many interconnected issues,” suggests Carolyn Williams, director of corporate relations at the Institute of Risk Management. “Some of our modern practices of working and living, such as ‘mega cities’, global supply chains, ‘just in time’ techniques and even social, family and legal structures, while bringing benefits, also make us less resilient in the context of pandemic risk. Changing working practices will be one outcome, but all sorts of other things will be questioned as well.”

Remote working

Prior to the outbreak, remote working had been growing in popularity, with links to increased employee happiness and productivity. Furthermore, 76 percent of respondents to a FlexJobs survey said they would be more loyal to their employer if they had flexible work options. While the coronavirus outbreak may only have caused a temporary change of working habits, it may be hard for companies that do not typically support remote working to put that genie back in the bottle once the crisis has waned.

“The necessity of home working will likely lead to a rapid development in remote communications and remote working systems, making the entire process easier and more efficient,” says Ayesha Vardag, founder and president of Vardags. “A change in temporary circumstances will naturally lead to a change in habits. Things which were previously automatically accepted, such as the morning commute, will be reassessed. After all, why would you feel the need to squeeze yourself into a packed commuter train if you know you can achieve the same amount from the comfort of your own home?”

Individuals are likely to appreciate a break from day-to-day commuting, and the ‘time back’ that working from home gives them, but certain processes and expectations will need to be addressed. “I do anticipate that there will be a push to incorporate this more into every day working life,” says Alison Loveday, a partner at Kennedys. “If that does happen, specific training must be given around conducting meetings remotely, and how best to promote team working in this new environment. The technology solutions are already there, but we are playing catch up with individual working practices.”

Few companies were fully prepared to react to the immediate severity of the COVID-19 crisis, with most scrambling to put measures in place to maintain business continuity. Unfortunately, companies often fall short on crisis preparedness and it will cost them in the coming weeks and months. “There is an element of ‘it can’t happen to me’ thinking still slowing response for too many, and the issues that come as a result will not soon be forgotten,” warns Erik Bernstein, president of Bernstein Crisis Management.

According to author and leadership expert Peter Economy, the greatest leadership failure due to the coronavirus in the coming months will be a failure of imagination – grasping the full extent of this ‘black swan’ event which is unprecedented in our lifetime. “Business leaders must imagine the worst outcomes possible, and then prepare to take them on,” he says.

On the other hand, some business leaders may be unfairly judged in the short term. Given the suddenness of the outbreak, they are being asked to make critical decisions amid rapidly changing circumstances while under immense personal pressure. “Every organisation will be affected by what is going on in a different way,” says Ms Williams. “Nevertheless, questions will be asked about leaders who misjudge the balance between business interests and human interests, between the short term and the long term, and between ‘doing nothing’ and ‘doing something’.”

Business continuity planning

Though the economic and social impact of the COVID-19 pandemic has quickly taken hold, there are some similarities with other global crises, and companies must be able to focus on what comes next. “Strategically, there needs to be a real focus on ensuring that a business cannot only survive the virus, but also thrive in the future,” says Ms Loveday. “There does need to be some ‘crystal ball gazing’ and all leaders can do is make their best considered guestimates as to where their market is going and how their business needs to adapt to be in a strong position to take advantage, once the market returns. If leaders only focus on the present, they are likely to miss this opportunity, and this may have a negative impact on the business which lasts much longer than the virus itself.”

Business continuity plans are vital. “Companies that are prepared for this sort of event – and a business continuity plan would prepare you for it – will see a smoother transition to continuing workflow under lockdown conditions. The lesson is simple: every company should spend time with the idea of business continuity planning,” says Professor Boin.

Having a business continuity and communication plan for predictable categories of events, such as pandemics, are key to ensuring that companies can eventually return to ‘business as usual’. “Nobody thinks clearly in the midst of chaos, and chaos is what you are going to have if you decide that winging it is your crisis management plan,” says Mr Bernstein. “Though you are well behind the curve if you do not have a plan now, it is never too late to get it together.”

As Mr Economy points out, while most enterprises have disaster and business continuity plans in place, smaller businesses often do not, so it may be too late for them. “Leaders should communicate to their employees, suppliers, customers and other stakeholders regularly,” he says.

For George Foster, strategic accounts director at Wilson James, being open and proactive is key to optimising a business continuity plan. “This pandemic has really illustrated the benefits of having a robust and comprehensive business continuity plan for some, and not waiting until the horse bolts,” he says. “Learning outcomes are inevitable, especially with a set of circumstances such as this where even the most experienced of security specialist perhaps just did not see something of this scale coming.”

Businesses will draw vital lessons from their reaction to this crisis. “Constantly re-evaluating risks and a business’ response to them makes it much more resilient and less likely to be taken by surprise,” says Ms Loveday. “It is businesses that already have this type of approach in place that will come out best from this pandemic.” Once COVID-19 has been managed to a point that allows normal economic activity to resume, it is imperative that companies reflect on how they handled the crisis.

Lessons to be learned

The impact on global trade will be devastating. Indeed, a rise in contractual disputes stemming from the disruption is practically inevitable. “The outbreak has already seen a surge in interest in force majeure clauses, with the Chinese government distributing a record amount of force majeure certificates which aim to protect Chinese exporters if they fail to meet their contractual obligations,” says Ms Vardag. “Under English law, where force majeure is not defined either in statute or under case law, the situation can be far more complex and companies ought to study their own contract terms, particularly the non-exhaustive list of events which are included in such a clause.”

Global supply chains as we know them may be irrevocably changed by the outbreak. First and foremost, businesses should be continuously evaluating and improving their supply chain risk management programmes as part of good business continuity management practice. But, as Professor Boin points out, it is probably impossible to build a culture of risk management throughout the supply chain. “It might be better to enhance detection of emerging risks and vulnerabilities, which provides time to make adjustments,” he suggests.

It falls to senior executives to build a culture of risk management throughout their organisation. “Every employee is a crisis management representative, whether you want them to be or not,” says Mr Bernstein. “With that in mind, it only makes sense to ensure there is a culture of risk management that includes employees as well.”

In the near term, companies should put in place sound communication measures. “The importance of communication plans stretches beyond facilitating remote working, and when drawing up such plans it is essential to remember the human side of the situation,” says Ms Vardag. “Keeping channels open for remote working is key, but so too is creating a space for social interaction between employees. Measures such as a WhatsApp chat where colleagues can stay in touch can be vital.”

Countless challenges ahead

The intensity of the COVID-19 outbreak is unrivalled in recent times and its impact has caught many organisations cold. “I do not believe anyone anticipated that a viral outbreak would have such a pervasive and debilitating effect on so many people around the globe all at once,” says Mr Economy. “Almost everyone has underestimated the speed of this virus’s spread, and they have also underestimated the damage to businesses and the global economy.”

Drafting an optimised plan for business resilience is a lengthy, expensive undertaking. Being properly prepared for a ‘black swan’ requires companies to design, implement and continuously review their plan to a very high standard. “It can take a fair amount of financial investment and time to put preventative plans together, however if something is a consideration, then it should be considered – even more so when it can impact people’s health, wellbeing and of course livelihoods,” says Mr Foster.

As 2020 continues to unfold, companies will face countless COVID-19 challenges. The speed and agility of a leader’s reaction could be the difference between losing millions and losing tens of millions. To date, governments and businesses have been struggling to cope with a highly uncertain and rapidly evolving landscape. While global incidents like the COVID-19 crisis are difficult to predict and even harder to respond to, companies that have business continuity plans and clear communication channels in place will be better positioned to survive.

“Tested and flexible continuity plans are still the best defence, along with general resilience,” says Ms Williams. “We would expect to see this becoming an even more critical core competency for organisations in future.”

© Financier Worldwide

BY

Richard Summerfield