Crisis Management is one of today’s most urgent Governance matters, taking into consideration the continuously expanding Risk Universe attributed to dynamically changing Business Landscape, unpredictable geopolitical situations, increasing number of Cyber threats and increase in usage of advanced technologies like Automation, Artificial Intelligence, and Robotics.
The most important theme to discuss at this time is the Board’s role in Crisis Management and Culture oversight. While there’s a robust amount of preparation for the crisis that Board’s can do by observing the mistakes other Companies make and by thinking their way through them, as a Director, one needs to think about how a Senior Leader can possibly fail and the Risks associated with each scenario. To avoid and mitigate the negative impact of a Crisis that’s going to hit you in the future, Boards need to look around the corner and rely not just on their own eyes, ears and experience, but actively look at revisiting Company’s overall Crisis and Risk Management Strategy. Sometimes the Crisis might be Company or Industry specific, but looking into the fundamental human characteristic of dynamic Leadership is also important.
Recent geopolitical events and cases on Cyber threats have highlighted the challenges for Boards in responding to potential red flags and consequently, some of the key practical steps for Directors to undertake in overseeing management, which include: identifying the specific Risks the Corporation faces, and then understand the mapping of Risks with the overall Business model. The Board establishes the tone at the top, the corporation’s overall tolerance for Risk and the Compliance culture.
Here are the top 3 characteristics which every Board must demonstrate for an effective Crisis Management
Having strong Muscle Memory: Identifying Crisis in real time and getting prepared for the “unknown”
The primary step to measure any Company’s crisis response is how early the risk/threat/crisis has been identified. If your Company isn’t able to anticipate the possible Risks involved in Crisis situations, then it will most likely fail in its response strategy. In these scenarios, it becomes almost mandatory to have a robust real-time Reporting structure that gives visibility into Key Risk metrics such as Risk Value, Impact, and Probability. Companies with a robust Enterprise Risk Management function will likely be more prepared for a crisis, whatever the nature of the Crisis might be. Boards need to focus on having proper Reporting systems in place to deal with unexpected Crisis situations.
Finding the Cadence. Finding your balance and standing with it.
Creative Board Leadership is all about designing the best possible response strategy
Each crisis— be it in your own Company or happening at a competitor’s Company—is an opportunity to learn and expand the definition of Board Leadership. The Board must be in the escalation cycle in Crisis management. As explained by Chairman of Confident Governance, award-winning Cyber Governance platform and global Governance thought Leader Bhavesh Bhagat “Crisis is any event that deviates you from normal Business. But the important question you ask here is what do you do when the normal is being redefined every six months? And what systems do you have in place to effectively address the Crisis”
Confidence in Leadership means Confidence in Governance.
The best defense in a Crisis is to ensure that the Company directly addresses the personal needs of those impacted—whether they’re Employees, Stakeholders, Product/Service Users or fellow members/companies in the Industry. In the past, Leaders have not always taken ownership for disasters, but successful Crisis management requires that Leaders accept responsibility for their actions. In wake of recent news on a) grounding all Boeing 737 Max 8 and Max 9 models following Ethiopian Airlines crash and b) an auto industry titan, who was also the architect of an alliance between three global Auto Industry Leaders, getting arrested for Financial misconduct which led to a severe reputation Crisis for not only the Company, but also for the allied Companies, It all boils down to one word, that’s LEADERSHIP. As a Company, the best approach is to identify what can be the best possible response for each event, and execute the steps strategically.
Stay tuned for more insightful and exciting posts on Governance, Risk, Cyber Security, and Compliance.