7 minute read 28 Apr 2020
How to safeguard your business with COVID-19 risk management tactics

How to safeguard your business with COVID-19 risk management tactics

By EY Belgium

Multidisciplinary professional services organization

7 minute read 28 Apr 2020

Six risk management steps to move quickly, stay focussed and keep your business running during and beyond the COVID-19 pandemic.

The economic impact of the COVID-19 pandemic is nothing like anything the world has seen before. Time is of the essence to get a grip on this new kind of crisis. Business leaders need to show strong management and sound decision-making.

Previous experiences with crisis management can point where to start. By constantly identifying, prioritising, managing and responding to multiple risks companies can ensure their future. A solid risk management approach also helps companies safeguard the wellbeing of their people, clients and other stakeholders. It’s therefore key to have the right organisation, people and processes in place.

Usually a risk management life cycle consists of four stages: prevention, detection, response and mitigation. But this crisis forced companies to respond quickly, without hardly any time for prevention and detection. Yet, this crisis is still at an early stage. And it’s time to prepare for a long unpredictable journey. This includes thinking about the next phase: the gradual lifting of the confinement measures and the resumption of activities.

Here are six important steps to keep your business running at as high a capacity as possible:

1. Set up a crisis management task force

Managing a crisis requires governance and process management. For businesses to survive a crisis, they should always establish a crisis management task force first that directly reports to senior management.

The cross-functional team will have to focus on four core tasks:

  • Risk and response assessment
  • Monitoring, analysis and reporting
  • Crisis operation management
  • Communication

The task force can then function as a project management office (PMO) that will have to address workforce management and employee wellbeing, customer and brand protection, finance management, supply chain, and any legal and contract issues. There’s no one-size-fits-all approach. The crisis affects businesses differently and the focus per topic will vary for each company. Think about food retailers who had to deal with replenishment issues because of hoarding in comparison to fashion retailers that had to close their shops.

2. Identify current and emerging risks

In uncertain times a company faces multiple risks at the same time. It’s therefore important that, while you’re setting up a crisis management task force, you also initiate a first risk assessment. Make an inventory of all the current and potential risks. This will help to get a more realistic sense of what is happening and provide the task force with the fundamentals to manage the crisis.

Risk identification focuses on four categories that cover a wide range of business risks:

  • People: What risks exist to the safety of people, clients and other stakeholders? What could negatively impact employee engagement and motivation?
  • Financial business aspects: Will customers continue to buy and pay? What are the liquidity risks?
  • Supply and operations: Have you defined your supply chain and production risks? How are operational processes impacted?
  • Demand and commercial activities: How will demand disruption and shocks impact you? How have customer interactions changed?

3. Prioritise risks based on impact and likelihood

The next step is to evaluate and prioritise risks based on impact and likelihood. Risks that are very likely to happen and have a big impact need to be tackled first. Next come high-impact risks that are less likely to occur, followed by low-impact risks that will certainly happen. Low-impact risks that probably will never happen, get the least priority.

During a crisis people have a tendency to get overwhelmed and leap into action without consideration. Prioritising your risks will help to clear up the fog and stay focussed.

4. Deciding on risk mitigation and the right course of action

Each type of risk requires a specific approach. Which responses are possible?

  1. Reduce the likelihood of the risk ever happening (risk prevention). This is the best course of action. For example, communicate extensively about an ample and continuous supply of basic products.
  2. Reduce the impact of the risk that will happen (preventive action), like building up stocks.
  3. Prepare to cope with the impact, like optimising distribution of available products over different locations.
  4. Develop a recovery plan to repair the damage and ensure you are up and running as soon as possible. For example, organise a promotion for products that were previously out of stock.
  5. Adjust for long term consequences, if either the crisis persists or prepare for the next one. Learn and make changes for the future. For example, review your planning and forecasting process.

When faced with the mammoth proportions of this crisis, companies tend to fold back on their own organisation. Also look outside your organisation for support. Federal, regional and local governments, as well as industry organisations are setting up programmes. But also banks and even your clients and suppliers can help. Everyone is in the same boat. And if there’s one thing this crisis has shown us, is that anything is possible if people move away from the well-trodden path. Just think about supermarkets joining forces to deliver groceries to healthcare workers.

5. Plan, monitor, act, evaluate – Repeat

These are extremely volatile times. What is true today, may be radically different tomorrow. This means the risks and your responses keep changing too. Your first risk and response assessment is just the beginning. You’ll need structure and processes for the long-term management of the crisis. For each prioritised risk you will need to plan, monitor, act accordingly and evaluate as the situation keeps evolving. You basically need to set up an overall risk management programme with separate workstreams and dedicated teams per type of risk. That’s where your risk management task force comes in.

Priorities also evolve. The first priority was the safety of people, closely followed by cash management and cash flow optimisation. With the gradual lifting of restrictions, the focus will shift to supply chain and restarting operations.

6. Keep track of your organisation

In times of crisis people tend to switch to survival mode. Don’t lose track of the rest of the organisation and guarantee business continuity, including when you’re resuming business and new tasks emerge. The crisis management task force and programme are there to get a grip on things, so that rest of the organisation can continue with daily operations. Managing the crisis and its risks properly, also creates more time to see beyond the crisis and build resilience for a better future.

Having the right organisation, people and processes in place empowers your organisation to constantly plan, monitor, act on, evaluate and mitigate risks. Handling current and emerging risks with determination not only ensures the future of your organisation. A solid risk management approach also helps protect what matters most: the wellbeing of the people that are part of your organisation.

Reshaping results with crisis risk management

Thanks to solid risk management methodologies, an integrated team of EY experts supports companies in complex, critical or urgent situations to identify, prioritise and manage risk. Building trust and truly understanding our clients’ needs is part of our DNA. We therefore combine technical and functional expertise, underpinned by a strong commitment to excel for each client.

Discover the complete series of articles by following us on social media #CrisisManagement #COVID-19 #ReshapingResults.

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With the COVID-19 pandemic businesses face increased economic disruption and uncertainty. Creating a crisis management task force and solid programme to manage current and emerging risks is the key to a prosperous future for both the organisation and its people.

About this article

By EY Belgium

Multidisciplinary professional services organization