It is now twelve months on from the emergence of COVID-19 in Wuhan, China. As a result, boards and executives have had time to reflect on the learning from a challenging 2020.
The extensive operational and financial disruption caused by COVID-19 and the accompanying economic contraction resulted in a range of business responses to deal with the crisis. There have fortunately been many business initiatives, organizational transformation, and new thinking about managing risk emerge from this period.
Businesses can leverage off the following key learnings and takeaways for managing risk in 2021 and beyond.
Business Continuity plans are worth their weight in gold. Businesses that had invested in business continuity plans were better placed to assess the early impact of -and respond to – COVID-19. They were readily activate plans that had been developed and rehearsed many times.
Cash and liquidity reserves are priceless (and company-saving). Directors, CEOs, CFOs, and Treasurers at many companies maintained significant cash and undrawn bank lines to deal with any unforeseen severe financial and economic shocks, going into the pandemic. These companies had developed funding and liquidity strategies in the aftermath of the Global Financial Crisis to build financial resilience.
Successful digital transformation improves risk profile. The need to quickly automate processes and move businesses online saw many manual processes – that were prone to error – removed. This has resulted in an improvement in the risk profile.
Supply chains need to be better understood. Long, complex supply chains that were not understood left many businesses exposed. Some firms found that offshoring and/or outsourcing arrangements needed to be unwound at short notice. The result has been simpler and better-understood supply chains for many.
New technologies can be quickly and safely implemented. New technologies and processes are often developed and implemented over long (and costly) project timelines. This is driven by the desire to undertake extensive testing and piloting. The response needed to implement COVID-19 technology initiatives demonstrated that new technologies can be implemented quickly, cost-effectively, and safely.
Perceived operational risks are not always a reality. Organizations are often held back by excessive caution and conservatism. The transition from office to work-from-home showed that perceived operational risks were either not there or could be adequately addressed and mitigated.
Diverse management teams perform better. In times of crisis, different leadership skills are required. The ability to draw on expertise throughout an organization – particularly the detailed operational knowledge required in the early stages of the pandemic – highlighted the benefits of diversity in management teams and inclusive decision making.
Time spent on scenario planning is time well spent. Like business continuity planning, scenario planning was often seen as ‘nice to have’ and a luxury that many businesses couldn’t afford. COVID-19 has highlighted the value of regularly discussing ‘what if’ scenarios around the board and executive table.
All the other risks have not gone away. Businesses were frequently reminded during the year that other risks such as country risk, fraud risk, cybersecurity, and climate change risk had not gone away. All 52 Risks are ever-present – even in a pandemic.
You can download the infographic in pdf form here
The first 52 Risks’ article on the pandemic was in March 2020 and was titled Pandemics: The Convergence of Business Disruption & Economic Slowdown. To read it click here