The Covid-19 pandemic exacerbates new and prescient risks that organisations have struggled to contain even before the outbreak. Boards that balance between seeking recovery and planning for what is to come next and beyond through a stakeholder-centric approach will find an advantage that endures into the future.
The current crisis is a significant risk for businesses and highlights the need for unparalleled leadership. The EY Global Board Risk Survey conducted just before the outbreak offers some interesting perspectives. Prior to Covid-19, only 21 per cent of 500 global board respondents said their companies were well-prepared to deal with a crisis. With the onset of the crisis, it appears that the numbers are even lower.
Boards play a crucial oversight role in helping companies navigate challenges. As they think about the questions to ask management, adopting a stakeholder-centric view across the business, customers, people and broader society, can help to distil insights and drive much needed actions.
Taking a stakeholder-centric approach
From a business continuity perspective, it is fundamental that boards seek timely updates related to the company's emerging risks and material threats, vulnerabilities and potential impacts. They need to be confident that the financial scenario planning and stress-testing undertaken are adequately assessing the levels of liquidity, credit and capital needed over a continuum of possibilities.
Management should demonstrate that they are continually monitoring the effectiveness of internal controls over financial reporting and disclosures. As business models are adjusted to address the crisis in the short term, boards should challenge how those changes uncover new opportunities along with operational effectiveness and efficiencies over the long term.
How will customers evolve as a result of the pandemic? It is crucial to ensure that IT resiliency, cyber security and data privacy issues and regulations are monitored to avoid any breaches that can compromise customers' trust.
From a people perspective, boards need to ensure that management has adequately communicated personnel health and safety as the number one priority and allocated sufficient resources, as well as engaged its employees on the workforce management response in a timely manner. Transforming and upskilling the workforce must now be imperative.
Boards should also seek to understand the steps taken to reduce the risk factors associated with adapting to changing workspace and IT needs, and evaluate the company's plans for managing levels of redundancy, supply chain resiliency and effectiveness of third-party service providers. Importantly, any crisis-related decisions should reflect the business purpose, culture and values.
From the perspective of the business impact on the broader society, boards should consider how their companies can support social and economic welfare initiatives. This may involve short-term costs but deliver long-term value - through improved social outcomes and enhanced corporate trust and reputation.
For example, in Singapore, family businesses, Apricot Capital and Sing Lun Group, joined others to launch the Helping Our Promising Enterprises fund, which will extend short-term loans to businesses that have been badly affected by the outbreak. Fullerton Health in Singapore, delivered over 3,000 ambulance services to help ferry suspect Covid cases as part of Singapore's pandemic response, and is reshaping clinic consultation by rolling out telemedicine services.
Challenging conventional thinking
The crisis presents a unique opportunity to reexamine entrenched ways of thinking. What worked well before may not be applicable now. For example, IT resiliency issues have taken on greater prominence. Remote working arrangements are set to be a defining feature for the workforce in a post-Covid world, and workforce planning and talent management will require renewed strategies.
In managing the crisis, leaders may have to look hard at their current business and ask what incremental improvements can be made to the business model, products, customer segments or market strategy.
Will the business still be relevant in the future? What is their place in the business ecosystem? This will require leaders to refocus their purpose and envisage scenarios of their business, say 15 years from now, and reverse-map the path they need to take in order get to the desired state.
For some, this could mean making bold investments even during this time of uncertainty. In a recovering market, the mergers and acquisitions landscape often presents high-quality acquisitions at lower valuation. During the 2008 global financial crisis, for instance, oil companies made purchases that allowed them to explore and diversify into higher-value refined products and more sustainable sources of fuel to support the sustainability agenda.
Identifying distressed assets that are aligned with business strategy can help build capacities and capabilities that answer future growth demand. For example, an infusion of digital talent by acquiring smaller, digitally agile firms could be one way to help accelerate the company's digital transformation plans.
The future will be written on the back of today's choices, and boards must lead with clarity and confidence to steer businesses forward. Do we retreat to what is familiar, or is this an opportunity to reboot and reshape? The latter requires a transformative mindset.
The writer is a council member of the Singapore Institute of Directors.