During Times of Crisis… What Should Boards Do?

Crises come thick and fast and with even greater consequences. A PWC survey revealed that only 23% of respondents believe their business has effectively integrated its various crisis management functions. And this indicates that most enterprises need all the assistance and efforts they can acquire, especially from board members. Board directors are in a prime position to assist management in striking this delicate balance between attending to urgent matters and maintaining an eye on the future.

Since they are distanced from day-to-day operations, board directors may aid management teams fighting through the fog of war by helping them identify the most crucial determinants for survival and the possibilities that will enable the company to emerge stronger in a drastically changed environment.

As such, the board's ability to fulfil its governance responsibilities, provide valuable oversight, strengthen the organization and chart a positive course for the company's future can be greatly enhanced by involving board members in developing, implementing and assessing crisis management and communication plans.

So, what priorities should board members have during any crisis? And what should they do before, during and in the aftermath of a crisis? Let’s find out together.

Uncovering the Priorities for Board Members During Crisis Management

According to a Deloitte survey of over 500 crisis management experts, nearly 60% of respondents believe that organizations confront a greater number of crises today than a decade ago. In light of the current environment, what strategies and actions should the board adopt to effectively manage and address the challenges at hand?

During any crisis, the board must be available and up to date. To contribute meaningfully to management's discussion of issues and possible solutions, board members must also be up to speed on these matters on their own time. There are more calls and meetings, and you must constantly monitor the safety of your employees and your company's viability to meet your clients' ever-changing demands.

Outlined below are the key priorities that boards should focus on to drive organizational resilience and success in times of crises:

• Safety: Prioritize employee safety, including physical, psychological and financial well-being, while adhering to legal and policy requirements.
• Decision-Making Authority: Establish clear decision-making mechanisms and empower leaders to make agile decisions, adjusting governance and risk considerations as needed.
• Stakeholder Communications: Oversee a comprehensive communications strategy, considering the scale and impact of the crisis and finding innovative ways to reach employees and external stakeholders.
• Business Continuity: Ensure continuity by adapting business operations, such as realigning supply chains and establishing online channels, while conducting extensive scenario planning for different trajectories of the crisis.
• Recovery Phase Preparation: Set the tone from the top, recalibrate the organization's strategy and risk appetite, and identify opportunities to future-proof the organization in the face of ongoing challenges.

Before the Crisis Happens…

Effective crisis management requires advanced preparation on behalf of boards. Board Intelligence maintains that “sufficient preparation for crisis is the best strategy to managing one.”

Having thorough crisis management measures in place before a calamity occurs is essential. The board of directors and top executives must proactively collaborate to evaluate qualitative and quantitative threats. Thus, the organization may benefit from putting its plans to the test by subjecting them to both ideal and worst-case situations. Creating a crisis handbook promoting board and executive engagement is a good idea, but proceeding with care is important. Sometimes, a false feeling of security may result from relying too much on handbooks, which may not account for complex, fluid events. That's why finding a happy medium between being well-organized and flexible is crucial.

Establishing the board's duties and responsibilities in advance is crucial for crisis preparation. By doing so, the board can more efficiently guide and assist the company during the real crisis, saving precious time. In the event of a crisis, it is essential to have a well-defined escalation mechanism in place. This approach should predetermine the board's involvement. Privilege issues need early involvement of both internal and external counsel in the escalation chain. For a unified reaction, it's also important that everyone in the organization knows what they should be doing regarding communication and where the situation is. It is important that the board does the following before a crisis occurs:

• Challenge crisis planning activity and have independent plans in place.
• Take a broad view of risk, including identifying potential 'novel' or 'black swan' risks.
• Scrutinize the executive team's Crisis Management Plan for simplicity and robustness.
• Inquire about regular testing patterns and documented outcomes in post-exercise reports.
• Review the findings of the report and focus on implementing lessons learned.

Deploying Simulation Exercises

Deploying simulation exercises before a crisis serves as a proactive measure, allowing organizations to prepare effectively by simulating potential scenarios and testing their response strategies in a controlled environment. It involves several key steps to ensure effective preparation for a crisis. Here are the steps typically followed:

• Developing a Scenario: Carefully craft a crisis simulation scenario that reflects the realities of the threats the company faces. Natural catastrophes, technological glitches, and PR controversies are just a few examples.
• Crisis Simulation: In a crisis simulation, board members perform their duties in real-life crisis management, encompassing the decision-making process, internal and external communication, resource allocation and other vital activities.
• Debriefing the Evaluation: After the simulation is over, it is recommended to have a thorough debriefing session to talk about what went well, what might be better, and what we learned.
• Revising the Initial Plan: Incorporate the insights gained from the simulation exercise into the organization's emergency plans, standard operating procedures and training programs. Make necessary adjustments to enhance crisis preparedness and response capabilities. Eventually, board members can further strengthen their ability to withstand real-world crises by revising the initial crisis management strategy in light of what they learned from the simulation.

During the Crisis…

The board's position during a crisis should be one of assistance to the executive team. It is crucial for the CEO and the board to work together and have open lines of communication. The CEO is responsible for keeping the board updated on developments and having them weigh in on potential courses of action.

Nora Aufreiter, board member of Scotiabank, observed for McKinsey that “Both management and boards have been surprised by how quickly they can make decisions when necessary. Once you have experienced that, it gives you the confidence to act more quickly.”

Naturally, board members have a wealth of experience and knowledge that may be used to shed light on and explore opportunities management may have missed. By leveraging the collective expertise and collaborative efforts of the team, the company will significantly improve its ability to address and resolve the issue at hand. In addition, The board has the capacity to undertake the following actions:

• Supportively play an internal role while retaining independence.
• Intervene if the management team is compromised or not acting in shareholders' interests.
• Adapt leadership approach, simplify processes, and delegate authority.
• Provide critical oversight, long-term planning, and strategic support.
• Foster strong relationships and information exchange with the executive team.
• Plan and agree on board roles and responsibilities in advance for low-probability events.

Post Crisis….

The board should perform a thorough incident post-crisis review to investigate what went wrong when the crisis has passed. Eventually, this aims to learn from the crisis and improve operational systems, not assign blame. It's vital to figure out what's causing it, how bad it is and whether or not anything is being done to fix it.

During the period of repairing and rebuilding the company's reputation, the board must keep the momentum going while keeping an eye out for any potential threats. A company's long-term performance must be able to foresee the accumulation of reputational hazards and actively manage its reputation with a stakeholder-facing perspective.

There is room for development and progress in the aftermath of every crisis Create a "handbook" for crisis management that can aid your organization in the future by documenting your lessons learned and discussing them with the board as they occur.

• Investigate the cause of the crisis and act on evidence of cultural problems.
• Review crisis plans, processes and competency, focusing on team performance.
• Ask challenging questions to reassess resilience and vulnerabilities.
• Learn from other companies' crisis responses through case studies.
• Work with the executive team to define a favourable outcome and facilitate change.
• Identify opportunities for transformation and gain competitive advantage.

Bottom Line

The previous three years have been particularly crucial for crisis management due to the worldwide pandemic, climatic events, and the present geopolitical, environmental and humanitarian calamity that is the Russian-Ukrainian war. These worldwide occurrences have triggered a seemingly unending stream of crises, leaving many institutions frantic for answers.

In this stressful context, board directors may aid their organizations in weathering crises and emerging stronger if they anticipate and prepare for future crises, communicate effectively with stakeholders, be open and flexible and do a comprehensive post-crisis assessment.

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