A crisis like the COVID-19 pandemic is almost always unexpected. How does one anticipate and prepare for something like this? Planning for the unplanned is a critical business process, but it is tough to take the time and effort to do it—running the day-to-day business seems like enough for most people. Yet all companies can and should prepare.
But it needn’t be difficult nor elaborate. People think of crisis planning as a special project, something you do if you have a lot of time on your hands. Traditional crisis planning involves developing preparedness plans and checklists, setting up crisis response teams, conducting periodic crisis response exercises and the like. While these are all fine—and important particularly for larger, more complex organizations—they are rarely sufficient. And in smaller and mid-sized companies such crisis planning just doesn’t get done.
There is a way, though, for even small companies to prepare for crises. Good governance is key to any well-run business, and can become the basis for dealing with a crisis as well. Regular strategic and annual planning processes help drive sound business decisions, but they also provide companies with the platform to pivot more quickly to new business opportunities that may come up in a time of crisis. Regular management meetings and reporting processes are important in any business environment. But these can become a critical communication and coordination tool in a crisis situation. Clear delegation of authority policies, governing who can make what kinds of decisions, are good for business generally, but also serve as a great starting point for modification to address a crisis. In short, a well-run business with a baseline of established systems and processes is much better prepared to address and weather whatever challenges are thrown at it, including a pandemic.
Is it enough? Maybe, although I’ll admit, it doesn’t hurt to have a few of the simpler crisis planning tools in place, too. The best is an up-to-date contact list—with multiple points of contact (phone numbers, addresses and emails) maintained in multiple locations for ready access. An identified communication coordinator is also helpful. And having at least a few management folks who can remain calm in a panic situation can also go a long way toward keeping the team calm and focused.
Brenda Furlow is an experienced corporate executive who has held senior management roles in the compliance, corporate governance, legal, regulatory and human resources fields. Currently, she is Senior Vice President and General Counsel for Bio-Techne Corporation, a mid-cap global life sciences company, and she also serves as a corporate board director for an early stage health technology company. With her broad experience and knowledge of legal, compliance, regulatory, human resources, and governance requirements and best practices in today’s complex business environment, Ms. Furlow’s expertise is in identifying and managing issues at the intersection of business opportunity and risk. Prior to her current role with Bio-Techne, Ms. Furlow was a legal and compliance executive at other life science and medical device companies for over 20 years. She began her legal career with a Chicago-based law firm before moving to corporate counsel roles. Ms. Furlow received her law degree with honors from the University of Chicago.
To date, companies have defined risk in two major categories: core elements such as strategic, operational and financial, and emerging risks such as cybersecurity, emerging technologies, climate change and geopolitical risk. Effective organizations spend time at both the management and board levels understanding, managing, mitigating and providing oversight to both present and possible unforeseen risks. Board committees have specific oversight roles, as does the full board regarding risk oversight, with broad implications for strategic direction and disruptive events.
2020 has created a cataclysmic disruption to our traditional view of risk planning, mitigation and oversight. We have been humbled by the degree of systemic change that the COVID-19 pandemic has inflicted on life and business as we know it. Executives and boards have been challenged to not only respond in real time to the event but to rethink what they can do better to prepare for those ill-defined risks that we will face in the future.
To that end, executives and boards are further defining risk categories, expanding the overall focus and placing a higher-resolution microscope on certain risks that have always been on the radar but were rarely considered a game-changing concern. Overnight, cyber risk has assumed a heightened pervasive importance as the workforce moves to a fully distributed model. Regulatory risk is one that businesses are challenged to address as less of a threat and more of an opportunity to mitigate through partnerships. Supply chain diversification, and a rethinking of competition in a global or potentially more national environment as workforces are repatriated, will challenge organizations. Talent management has risen to a new risk level, as mitigation strategies will need to be completely redefined as the traditional view of face-to-face employee development and succession management may no longer exist. Workforce safety risk has been blown open, expanding beyond the traditional view of protecting “safety-sensitive” positions to include the health and well-being of all.
Executives and boards will engage more frequently to understand the entire organizational system, not only focusing on direct risks, but those that are further removed. We are faced with an extraordinary opportunity to innovate, evolve and transform the way that we manage the enterprise in an environment that has been upended.
ProPetro, Boingo Wireless And CallidusCloud
Michele Choka is an executive with over 30 years of experience in human resources and finance. She currently sits on the Board of Directors for ProPetro, an oilfield services company based in Midland, Texas, where she is a member of both the Compensation and Nominating and Corporate Governance Committees. In addition, Ms. Choka serves as Compensation Committee Chair and as a member of the Audit Committee of Boingo Wireless, Inc.’s Board of Directors, roles she has held since 2018. She additionally served as Chair of the Compensation Committee, member of the Audit Committee and member of the Nominating and Corporate Governance Committee for CallidusCloud, Inc. from 2005 to 2016. Ms. Choka served as Vice President of Human Resources for Highpoint Resources for nine years, as Group Vice President of Human Resources for Level 3 Communications, Inc. for four years and as Vice President of Human Resources for Sun Microsystems, Inc. for seven years. She has previously held human resources and client account management positions for Prudential, JP Morgan and Sony Corporation. Ms. Choka earned her bachelor’s degree from Wesleyan University, has attended Stanford University’s Director’s College and participated in the Financial Times’ Director Exchange.
From the perspective of the boards I serve, I’d say that we were prepared for a significant disruption, but a pandemic was not the most likely event on our list. We were planning for scenarios such as a major cyber event, a factory shutting down, power grid failures or supply chain disruptions. We did do multiple scenario analyses on these potential situations, and planned how we would compensate for a variety of disruptive events. This preparation was very helpful as the full extent of the pandemic and required response became clear.
To be best prepared, boards should do crisis planning every year. By doing that, you have a good degree of consideration of how major events could affect your business, even if you haven’t prepared for the specific event that actually occurs. It’s establishing a kind of muscle memory. My observation is that many companies have done a good job of dealing with this crisis. At the companies I serve, we have kept the operations running, kept employees safe and found work-arounds to do processes that are difficult to do in the new environment—and we had practiced for many of these potential changes in our operating environments.
To prepare even better for the future, I hope everyone took good notes on how they’ve handled the pandemic ... good or bad. We’ve invented new processes for office work and new ways to run factories. My advice would be to not forget how we’ve managed to cope with this crisis and hence become more resilient in the future. A good example is having employees work from home who normally do not. We have had to make sure employees have the resources to work from home: the hardware, software and cybersecurity. We’ve redesigned workspaces in factories and distribution locations. Let’s keep this creative thinking in place. There will be another crisis in the future, whatever and whenever it is, so let’s not forget how we were able to innovate in order to deal with a new one.
W.W. Grainger, Inc., Beacon Roofing Supply, Inc. and Hillenbrand, Inc.
Neil Novich is the retired Chairman, President and CEO of Ryerson. Prior to its sale to private equity, Ryerson was a Fortune 500 company with sales of $6 billion and was one of the largest global metals fabricators, processors and distributors. Prior to joining Ryerson, Mr. Novich was a partner with Bain & Co., an international management consulting firm. He has a degree in physics from Harvard University and masters’ degrees both in nuclear engineering and in management from MIT. He also has multiple certificates in machine learning and analytics from IBM/eDx, as well as multiple certificates in cybersecurity from RIT/eDx.
Mr. Novich currently serves on the boards of W.W. Grainger, Inc. Hillenbrand, Inc. and Beacon Roofing Supply. He also served on the board of Analog Devices from 2008 to 2020. He has been the compensation chair of four public companies and the audit chair of two. He is a Trustee of the Field Museum of Natural History and advises a variety of startup companies in Chicago. He is also a member of the Economic Club of Chicago and the Commercial Club.
The COVID-19 pandemic has impacted Corporate America in unprecedented ways, challenging the operating success of large and small companies, including the survival of many. Every organization is scrambling and learning about critical issues, responding with new actions and solutions. Organizations are testing the limits of resiliency, at every level and every location, and are leaning on prior initiatives related to risk assessment and mitigation. Many are thinking about what other mitigation initiatives should have or could have been implemented.
The following actions should be considered to mitigate risks of future pandemics:
In summary, business practices have changed forever. Business leaders need to envision what their future might be and adjust/accelerate plans to benefit from the new reality.
Rite Aid Corporation, Lithia Motors And Oportun Financial Corporation
Louis (Lou) Miramontes is an experienced senior executive and Corporate Director. He is a member of the Board of Directors for Rite Aid Corporation, Lithia Motors, Inc. and Oportun Financial Corporation. He serves as Chairman or member of the respective audit committees and is an Audit Committee Financial Expert. Mr. Miramontes was previously a partner with KPMG, serving in many leadership roles, including managing partner of the San Francisco Office and Senior Partner for KPMG’s Latin American Region. He is a member of the Latino Corporate Directors Association and NACD. He is a graduate of California State University, East Bay.
Early in a pandemic, a company must immediately grasp the situation and activate its action plan for the company’s survival.
Learning from this current pandemic, all boards should be asking management to develop and maintain a ready business contingency plan that is continuously updated as the business evolves. The plan should address various scenarios and key elements, including: crisis management teams, employees, customers, suppliers, supply chain continuity, shareholders, financial, health and safety, potential government actions such as lockdowns, workforce continuity and a communications plan.
The plan should also cover pertinent questions developed by the board and management such as:
As we reach the end of this crisis, boards and management should do post-mortems to prepare for another catastrophic event such as a pandemic and develop the best business contingency plans possible. The board should review and approve the updated business contingency plan annually. Management should conduct tabletop exercises and mock crisis drills each year to help ensure the company’s readiness.
Frontier airlines and Levi Strauss & Co.
Patricia Salas Pineda is a corporate and nonprofit board member and a former officer at Toyota Motor North America, Inc. and New United Motor Manufacturing, Inc., where she held diverse leadership roles overseeing legal, corporate communications, corporate advertising, human resources, philanthropy, Hispanic business strategies, government and environmental affairs. Ms. Pineda retired from Toyota in 2016.
Ms. Pineda currently serves on the boards of Levi Strauss & Co., Frontier Airlines, Cedars-Sinai Medical Center and EarthJustice, where she sits on compensation, nominating and governance, audit and marketing committees. She previously served as chair of the audit and compensation committees at Levi’s. Ms. Pineda also previously served on the boards of Anna’s Linens and Eller Media. She is a founder, chairwoman emeritus and board member of the Latino Corporate Directors Association.
Ms. Pineda received her B.A. from Mills College and her J.D. from Boalt Hall School of Law, University of California, Berkeley.