Nick Allan is CEO of Control Risks, a specialist risk consultancy that works with national and multinational businesses in all sectors from many parts of the globe, including NGOs, to advise them on making their organisations secure, compliant and resilient.
Below Nick reflects on the key risk management lessons of the impact of Covid and of the critical need for companies to be agile and innovative to face the months of uncertainty ahead.
Now is not the time to be conservative, business must adapt and innovate.
The leading article for RiskMap 2020 that I wrote in December confidently forecast that “agility will be essential in a challenging year.” By mid- March it was clear that this was an understatement. With half the year still to go business is beginning to move from crisis management into future planning but, as our Top 5 Risks article points out, with a high degree of uncertainty not only in the long term but also in the immediate months ahead.
Recent weeks will have been an intense experience for most business leadership teams. For some organisations there will have been an immediate opportunity to accelerate their success – witness the surge in the fortunes of big technology companies and supermarkets. But for many more the focus was cash preservation and survival. All will have learnt many useful, if sometimes painful, lessons from the impact of COVID-19. As lockdowns ease, in many parts of the world it can be tempting to conclude that the pandemic crisis is firmly in the rear-view mirror. However, cases are increasing globally and with a northern hemisphere autumn and winter still to come it is worth reflecting on some of the key lessons so far.
The cliché that “the worst time to learn about crisis management is during the crisis itself” proved to also be true about business continuity planning. Many firms had to move very quickly to enact plans that for some were little more than a too lengthy academic study. In India, at the extreme end of the spectrum, the four-hour warning that the government gave ahead of its national lockdown led not only to a considerable degree of human suffering for the poorest but meant businesses had almost no time to prepare. The heroes of the hour across the world became IT and HR teams who either rolled out a well-rehearsed business continuity plan or scrambled resources to keep the firm going. More often than that not, businesses found themselves somewhere between these two extremes.
From our perspective, how Control Risks has worked through the past months has demonstrated the value of having a global business with leadership spread across continents. This has helped us stay close to clients and to our own people. The impact on the firm has been global but also intensely local. It has been illuminating to see how diverse leadership styles and strengths need to meld for the best outcome. Action-orientated decision-making has been hugely valuable to drive forward immediate plans while more reflective and consultative styles have allowed us genuinely to listen to our people at a time of enormous change. For us as for many of our clients, the challenge is to innovate and adapt at a time when instinct pushes most companies to be intensely conservative.
For the most impacted sectors COVID-19 continues to be about crisis management. While a pandemic will have featured on most corporate risk registers, that assumption was in the main part based on either influenza or the localised viral outbreaks seen with SARS or MERS. In none of these scenarios did companies expect to drop to almost no revenue in a matter of days. For many, survival and recovery depend on the response of governments both in the short term via financial support and in the longer term with how countries implement virus management policies. With hindsight it is possible to see that the greatest impact to business has come not from the health perspective but from the necessary measures put in place by government to control transmission. This impact then flowed through into supply chains, and led to huge demand shocks in sectors such as energy. And in turn, the massive government spending programmes and the rash of emergency bids have heightened fraud and corruption risks as companies respond to the pressure to perform and survive. The pandemic has taught us that more than ever we need to dive into the second and third order impacts of an identified risk to surface the potential impact.
As we move forward, the risk management lessons need to be embedded into organisations. The next few months look to be no easier than the first half of the year. Indeed, our Top 5 Risks article points out that the risk landscape has not changed. Rather the pandemic has served to pour fuel on the fires that were already burning. Despite the exuberance of stock markets, the world has yet to feel the economic impact of the pandemic and while unprecedented injections of liquidity will ease the pain for some countries, the well understood connection between economic decline and political risk is still to play out. Even before the pandemic 2020 was set to usher in a period of political turbulence.
The danger for many businesses is that the focus on managing the impact of the pandemic will leave teams unable to respond to new challenges. Some of this will be due to fatigue but some will be because the structures and ways of working are too new to be incorporated into planning. While the immediate term is difficult to anticipate, the clear tensions between the US and China, increased cyber extortion and information security theft, and the lack of a globally coherent response to the pandemic all point to risks that business must plan around.
At the same time, companies are managing a workforce that is more politically engaged on specific issues than it has ever been. The future is not merely about commercial management but also about where a company is perceived to stand on a range of issues and sometimes being urged to take a clear position where they might rather not. The trend of activism and protests that characterised 2019 is accelerating.
Many companies are actively reviewing their supply chains and other dependencies as they seek to build greater resilience. They do this against a backdrop of increasing geopolitical tension, economic recession and globalisation in retreat. Finding a path to stable growth will not be easy. The need for agility remains as critical as ever.