ERM: It isn’t Where, When or Why, it’s How we’ll get through this
Talking about Enterprise Risk Management at this point may seem rather like closing…
If anyone had doubts about what a pandemic would look like, those doubts have been completely demolished in the past few months. Covid-19, the novel Coronavirus, has swept through the world like the proverbial Angel of Death, striking down high and low indiscriminately, decimating populations literally by the hundreds of thousands, and leaving devastation and despair in its wake. Hospital systems have been overwhelmed; research laboratories on every continent are scrambling to find a cure before deaths mount into the millions; and the supply chain has been disrupted in unimaginable ways.
Talking about Enterprise Risk Management at this point may seem rather like closing the stable door after the horse has bolted. After all, the disruption has already happened and the damage has been done. Countries are struggling to pick up the pieces of their economies; people are fearful, sick and beset by uncertainty. Many have been stretched to their limits and beyond by the virus and its repercussions, including the loss of income and livelihoods as countries instituted lockdowns to stop the wildfire spread of infection. Their anxiety about the future can barely be hidden behind the masks that have now become part of the global dress code.
But gobsmacked as they have been by the happenings of the past five months, businesses which want to carry on should be looking at ERM frameworks, systems, procedures and processes, and cull what can be most helpful to the firm, going forward. It is worth noting that not all businesses have been impacted at the same level within a particular industry. Although some sectors have been badly hit – Tourism & Travel, Aerospace, Oil & Gas, Automotive and Insurance among others – individual firms within industries have experienced varying levels of disruption to their business; some more, some less.
While all businesses are reeling to a certain extent, size does matter in this case. Big businesses would have had the resources to put mitigative measures in place long before the pandemic hit, and can now activate their plans but smaller concerns should not feel at a disadvantage. Their size can actually be a mitigating factor in itself. It is easier for a small or medium-sized business to institute measures throughout the organisation, than for a large organisation to wait for a trickle-down effect. SMEs can consolidate and implement action more quickly, and if they find these measures aren’t working, can reverse decisions and switch tracks just as easily.
But where does the organisation start, with an event with such far-reaching consequences as the Covid-19 Pandemic? At its core, the Pandemic is a humanitarian crisis and tragedy, so people – the firm’s work force – should be front and centre. An organisation’s employees are also the foundation of its operations Maintain staff and the business will be able to carry on. Smaller firms rarely have deep pockets so negotiation of remuneration and adjusted operational methods may be necessary. Working from home (WFH) is a viable option. Staff who can work from home, should. Only staff essential to the operation of equipment and maintenance, for instance, should be on the premises.
As an indication that the first – and worst shock – of the Pandemic may be wearing off, countries have started to come out of lockdown, and are reopening their borders. Italy, one of the worst-hit in Europe, is even forgoing quarantine for tourists, in its efforts to get its economy back on track in time for the summer crowds, when most of the year’s business is done. Whether this is a premature or overly optimistic move remains to be seen, but for most other countries, recovery has been gradual. Korea, which took a beating, initially reopened its schools when infections came under control but promptly closed them again at the first sign of recurrence.
What this indicates is that everyone understands the need to keep running; agility is critical. One of the best ways to stay agile, and indicate that you are still operating despite the tribulations of the situation, is to set and communicate priorities clearly. This is reassuring to both clients and staff who may be dealing with uncertainty in the midst of anxiety. There are also other factors that businesses have to be aware of, that will happen when disruption such as a Pandemic hits. Governments may institute new fiscal measures to help ease the burden of organisations as they recover and struggle to get back to business-as-usual.
Although it may seem irrelevant to apply ERM principles when the damage has already been done, efforts can still be made to improve the situation – and this takes planning. One of the main thrusts of ERM is to protect and create value. Companies still need to strategise how they will keep running for the next two years, taking into account the devastation of the Pandemic and its possible knock-on effects. Another thing they can do is utilise this “down time” to reset their systems and the way they have been operating. Perhaps they need to reassess and understand their customers’ needs in light of having to work in different ways. They should also assess their resources; can they weather another lockdown, or an extended supply chain disruption?
Businesses have to get ready to adapt to a totally unprecedented environment. As such, mistakes will be made, hence the need for agility – decisions may have to be quickly reversed, and corrections made without hesitation or overreaction, as the organisation moves forward in what is being described as the “New Normal.” Agility may be key but it does not make decision-making any easier in this time of uncertainty. It will not be easy but firms need to hone their ability to assess, anticipate, then act; they will have to constantly consider different perspectives. Organisations may have been mauled by Covid-19, but what they will have learned from the Pandemic is invaluable: always prepare for the unknown.