Governing well, in the face of a crisis

Information (and mis-information) about the spread of COVID-19 around the world is clogging our airwaves, inboxes and social media feeds as quickly as the virus itself is spreading. But amongst it all, there are some things we can hold as self-evident. Many people are suffering, some are dying. New phrases are entering the lexicon, such as, social distancing (should be physical distancing, I think) and self isolation. Governments are responding with a variety of controls to limit movement. Borders have been closed, and lockdowns are being imposed in some areas. Airlines have reduced capacity, grounding fleets. Many businesses, especially SMEs, are in turmoil. People are on edge—lives have been put on hold.

While COVID-19 has spooked many people, not to mention the stock markets and wider economy, life must go on—and it will, albeit with some adjustments, of course.

The challenge for those who direct the affairs of companies—boards—is one of governing well in the face of what is, patently, a very different environment from that which existed even two weeks ago.

Businesses face continuity and safety risks every day. Routinely, staff and managers spot, assess, prioritise and respond to operational risks every day; that is their job. But when risks have strategic implications (i.e., an occurrence is likely to have a major effect on strategy execution, future business success or even company viability), the board must become involved. COVID-19 is one such risk. The board needs to understand the potential short- and longer-term impact (using information from credible sources and tools such as scenario planning, for example), consider various options and make informed decisions.

Some practical questions that the board may wish to consider include:

• Has management made changes to the work environment (including remote working options, physical barriers, closing sites, etc.) to ensure the safety of all staff, customers, suppliers and any visitors?
• What additional financial resources need to be released to support continued business operations, and how will they be provided?
• What is the likely impact on short- and longer-term income, and do any adjustments need to be made to reduce operating expenses (including, potentially, suspending or releasing staff) to maintain viability?
• What capital projects can be deferred to release funds to support working capital demands?
• ​Should the board itself use on-line meeting or video conferencing tools instead of meeting in person?
• Should the board meet more frequently, rolling its sleeves up in support of management and for more timely decision-making?

One final point. COVID-19 is no longer a strategic risk. It is upon us. Boards everywhere need to deal with it as well as they can, given the most reliable information available, with the best interests of the company to the fore. That means providing close support to management; more so if big decisions are needed, such as releasing staff or partial closures. However, and most importantly, boards should not panic. Neither should the board react to suggestions being advanced by some that an event such as the COVID-19 outbreak should be seen as a catalyst to redefine corporate governance. Corporate governance remains corporate governance—the means by which the company is directed and controlled. What might be appropriate though is a review, to consider how the board practices corporate governance. But that should wait until the current crisis in in hand. Fix the problem first, then learn from it.