4 minute read 21 May 2020
Business woman leading project meeting office

The role of the board in the next phase of the crisis and beyond

Authors
Dermot Daly

EY Ireland Assurance Partner and EY Ireland Centre for Board Matters Co-Chair

Believes in transforming audits through the smart deployment of technology.

Pat O'Neill

EY Ireland Assurance Partner and EY Ireland Centre for Board Matters Co-Chair

Focused on the audit meeting the changing needs of business and investors. Supports board directors to navigate their increasingly complex roles by challenging them to ask the right questions.

4 minute read 21 May 2020

The collective expertise of the board is critical in their organisation’s response to the COVID-19 pandemic.

As the virus continues to threaten the health of people both around the world and in our communities and a recession looms, businesses in Ireland are continuing to face unparalleled disruption to their operations.

Lockdown and essential social distancing protocols are skewing demand and interrupting supply chains. This is forcing employers across the island to urgently revisit their workforce management plans in the immediate term as broad restrictions remain in place, and for the foreseeable future as a phased return to work unfolds. This applies to every sector, albeit with varying considerations.

The survival of many organisations is contingent upon the ability of their leadership teams to remain calm, focused and purpose-driven. That means that now, more than ever, boards need to lead by example. 

Boards have a collective role in supporting senior executives through the organisation’s continued tactical crisis response, building enterprise resilience, while also remaining responsible for the long-term strategy of the organisation beyond the crisis. Core to this is addressing the challenges that will ensue as a result of the pandemic, but also tackling those that existed before the world was turned upside down.

Business leaders are grappling with crucial decisions that need to be made. But how do we gain clarity and focus amid the crisis that will serve the organisation? Here we’ve whittled it down to the top 10 considerations that will equip the board to effectively navigate the next stage of the crisis, while keeping an eye firmly on the horizon after the current crisis abates.

1. Safeguard your crisis response

While the initial phase of the crisis may have passed, we need to remember that it is just that – the initial phase. An effective crisis response plan acknowledges the phases of the scenario, planning and executing accordingly. The response of the organisation will live on in the minds of customers, employees, communities and other stakeholders. The board’s role is to ensure crisis management decisions reflect the purpose, values and culture of the business while addressing immediate short-term demands. All response actions should consider social responsibility, employee wellbeing and the potential impact on the organisation’s reputation.

2. Crisis management resourcing

It’s vital that crisis response teams remain in place and are not disbanded prematurely. Prior to the emergence of the pandemic, just one fifth of boards believed their organisation was very well-prepared to respond to an adverse risk event with regard to planning, communication, recovery, and resilience. As the crisis continues to evolve, boards should continually review the effectiveness of the organisation’s crisis response and enhance the team with additional expertise where necessary. At this stage of the crisis, there may be a greater need for certain skills that weren’t as critical previously. 

3. Ongoing crisis management simulation

Before COVID-19, only 19% of businesses very frequently performed simulation exercises, stress testing and scenario analyses. As the crisis continues, organisations must review, adjust and regularly test crisis management plan simulations to adapt to the new environment. For example, their response to a major cyber-attack today will likely have shifted from just months prior. Likewise, they should in parallel conduct financial stress tests and scenario analyses to reflect the current financial and economic climate. 

4. Communicate, communicate, then communicate again.

This is a time of high anxiety among employees, which simply can’t be overlooked. It’s essential that leadership provides clear, decisive and authentic communication on a regular basis, particularly around workforce matters. Events like this shine a spotlight on the purpose and values of the organisation. While the board may not be the ones communicating, they should ensure that all communications (and the strategy and actions behind those communications) reflect the leadership values of the organisation. 

The board should consider whether it is communicating with all stakeholders, including employees, customers, regulators and public officials, in a trusted and transparent manner. The importance of open and timely communication with all stakeholder groups cannot be overstated.

5. Ensure supply chain liquidity

COVID-19 is putting tremendous strain on supply chains. It is vital boards ensure that senior executives proactively manage relationships with key suppliers while approving and tracking necessary but unusually high costs to support the supply chain.

6. Mitigate and communicate the financial impact

Boards should explore all options to immediately mitigate the impact of sharp revenue declines. This may include adjusting pricing, seeking additional financing, and restructuring debt. They should also work with management to ensure Government stimulus programmes are thoroughly researched and accessed, where possible.

As the situation continues to evolve, with further packages being announced by Government, this needs to be closely monitored on an ongoing basis. To cement investor trust, boards and audit committees must make sure that COVID-19 revenue impacts and other financial projections are based on robust assumptions and communicated clearly to investors.

7. Social responsibility

In times of crisis, stakeholders look to organisations to put people ahead of profits. With thousands of individuals and businesses severely impacted by COVID-19, boards should consider how their organisation can support local communities and economies, and individuals impacted by COVID-19. Doing so builds trust, enhances reputation, creates long-term societal value and demonstrates a commitment to doing the right thing.

8. Assess risk interdependencies and mitigation measures

Boards should ensure teams assess the interdependencies between COVID-19 and other risks, including third-party risks. For example, the increased use of technology to facilitate remote collaborative working may increase cyber vulnerability.

9. Risk mitigation

Just 12% of boards were confident, prior to the pandemic, in management’s reporting of how evolving risks were impacting organisational performance. Organisations should adopt intelligent risk sensing to determine if their risk mitigation plans continue to be adequate and effective. Boards should consider whether critical processes and controls are being periodically tested, ensure they get periodic updates on new and emerging risks, and assess how their organisation’s risk management function is adapting in the current crisis.

10. Continue to meet, virtually

Communication between board members and between the board and senior executives should increase, not decrease during this time. Whole of board or sub-committee calls should happen regularly. As remote working for non-essential workers looks set to continue in some form for many more months, more board and shareholder meetings will happen virtually. It’s important to remember, however, that the traditional model of a board meeting is unlikely to work in a virtual environment, so seek guidance on how to effectively run a collaborative session online.

Summary

Lockdown and essential social distancing protocols are skewing demand and interrupting supply chains. This is forcing employers across the island to urgently revisit their workforce management plans in the immediate term as broad restrictions remain in place, and for the foreseeable future as a phased return to work unfolds. 

About this article

Authors
Dermot Daly

EY Ireland Assurance Partner and EY Ireland Centre for Board Matters Co-Chair

Believes in transforming audits through the smart deployment of technology.

Pat O'Neill

EY Ireland Assurance Partner and EY Ireland Centre for Board Matters Co-Chair

Focused on the audit meeting the changing needs of business and investors. Supports board directors to navigate their increasingly complex roles by challenging them to ask the right questions.