The ongoing COVID-19 pandemic has forced businesses to reevaluate their operations and execute contingency plans in an attempt to weather the economic crisis. But what about the next crisis? Boards and management should have crisis plans at the ready.
As noted at the 2018 Harvard Law School Forum on Corporate Governance, crisis prevention, while an obvious priority, is “nearly impossible” — as has been shown by the current COVID-19 pandemic. According to the Harvard forum, terrorist attacks or natural disasters might also fall into that category.
Unable to prevent these crises, a board of directors needs to map out a crisis response, oversee it when it is put into practice, and evaluate it in the aftermath. The importance of doing so cannot be overstated, given the impact a crisis can have on an enterprise’s culture, operations, and reputation. Again, quoting the Harvard forum:
(A) crisis management program should bring together a variety of stakeholders who can understand the potential implications and help plan for and recover from a crisis. The program should be managed by someone with in-depth legal and compliance experience who is able to manage day-to-day operational and tactical responses. It should also closely align the internal and external communications leaders to make sure the decisions and messaging are clearly and directly articulated to the key audiences.
Effective leadership can apply the broad guidelines of a crisis management plan and adapt it for a particularly challenging environment, like COVID-19. Here are some things the pandemic has taught us.
During the pandemic, communications are critical. In-person meetings are difficult, with many reluctant to travel and social distancing guidelines, even if they may prove more effective for interactive dialogue and swift responses to new developments. In some cases, the benefits of in-person communication may necessitate such a meeting. I think that, given current circumstances, directors should undoubtedly be allowed to participate virtually if they wish.
Telecommunication tools, including video conferencing software such as Zoom and Microsoft Teams, can help boards meet quickly and virtually. These meetings may be held more frequently given the volatility of the ongoing situation. They may include a variety of relevant topics, including safety protocols, liquidity, financial and business impact, employee issues, and communications.
But remote communications on sensitive issues come with challenges. Board communications should always be respectful and to the point, but the need to rely more on email and perhaps text messages require carefully written notes regarding content, context, and tone — and awareness of litigation risk. The adage “If you would be embarrassed to see your note on the front page of the newspaper, do not send it” seems out-of-date but is a good reminder. Remember, too, that a poorly worded communication can sour relationships and lead to misunderstandings.
Boards should as always, find a balance between challenging and supporting company executives. Even with a crisis management plan, the nature and scale of COVID-19, for example, has tested companies in an unprecedented manner. Do not forget that committed senior executives are working as hard as they probably ever have and are under tremendous pressure; remind your management teams to be aware of their own health, too.
Responses to crisis-related challenges should be scalable and account for all parts of a business, including operations, IT, and supply chain. An experienced board should pass on prior crisis management experiences and stay well informed about issues, from employee safety to liquidity to financial performance to compliance. Boards should be advisers to executives, overseeing prompt, thoughtful leadership decisions in a stressful environment with a constant focus on long-term shareholder value.
It is the responsibility of every board member to keep themselves informed of industry updates and trends. During COVID-19, that includes new laws about the treatment of employees and business operations. Developments at the local, state, and national levels can happen very fast. Directors should be well aware of current events, and companies should provide their boards with the most thorough, timely information to help them make good decisions.
The COVID-19 pandemic has forced immediate, dramatic challenges on most companies. Stabilizing and rebuilding a business includes a strategy and protocol for bringing employees back into the office, returning to normal operations, and focusing on growth. Additionally, boards should consider the long-term consequences of the COVID-19 pandemic. Strategies such as digital transformation, finding new ways to compete in a post-virus environment, and developing new plans for future crises are also essential.
In any crisis, effective boards should stay regularly informed and carefully oversee crisis management plans while providing support to company executives and always thinking about maximizing long-term shareholder value.
Jonathan F. Foster is the founder and a managing director of Current Capital Partners LLC. He has more than 30 years of experience with high-quality financial services firms as both an adviser (mergers & acquisitions and capital raising) and as an investor (private equity) focused mostly on industrial and services companies.