How can businesses deliver better outcomes in times of a crisis?
In the event of a crisis, immediate action is what’s required to protect mid- and long-term results. To be able to do so, organizations should have a professional crisis management plan in place – one that addresses employee well-being, brand reputation, finance management, supply chain and legal issues that the crisis might trigger.
Here are five essential steps that we recommend businesses take in the event of a business crisis.
1. Put employee well-being above all else
Your people are your greatest asset. In times of a crisis, organizations have the responsibility to act in the best interests of their people — and their customers and other stakeholders. It’s also best for business in times like these when acquiring, managing and retaining talent while controlling cost becomes tougher than ever before. This will require companies to be adaptable to rapid change.
Companies will have to identify alternative working arrangements and reimagine business-as-usual while also complying with local labor laws in a way that puts first the health and safety of employees. Complement these efforts with relevant and timely communications, and employee support programs.
2. Communicate – promptly, clearly and transparently
The best lines of communication are the most open. Clear, prompt and transparent communications are essentials in all business scenarios. In crisis scenarios, it is even more so, especially if you need to secure ongoing support from customers, employees, suppliers, investors and regulatory authorities. Companies will want to keep customers apprised of any impact to product or service delivery. If contractual obligations cannot be met as a result of supplier or production disruption, be prompt to negotiate. Proactive communication and actions will help mitigate punitive damages, liabilities associated with disrupted customer obligations and damage to brand reputation.
3. Keep expenses in check and have backups for budget deficits
Determine how the crisis affects budgets and business plans. Stress-test financial plans for multiple scenarios to understand the potential impact on financial performance and assess how long the impact may continue. If the impact is material and former budget assumptions and business plans are no longer relevant, remain agile and revise them. Where the business is significantly impacted, consider minimum operating requirements, including key dependencies of workforce, vendors, location and technology.
If required, look at near-term capital raising, debt refinancing or additional credit support from banks or investors, or policy support from the government. At the same time, review overall operating costs and consider slowing down or curtailing all nonessential expenses.
4. Identify and repair broken links in the supply chain
Most companies are likely to experience significant disruption to their operations and will underperform throughout the duration of the COVID-19 crisis. Companies that are operating in or exposed to countries that are significantly affected by COVID-19 will experience disruption to their supply chain and production commitments.
When working with broken supply chains, companies need to maintain regular contact with suppliers regarding their capability to deliver goods and services, and work out recovery plans. When required, promptly consider alternative supply chain options.
Reimagine the supply chain model, leverage digital ecosystems and market networks, and enable newer forms of collaboration to work around disrupted supply chains.
5. Prepare for the unexpected
Organizations are generally prepared for legal roadblocks during business-as-usual scenarios. Unforeseen crises can however present unforeseen legal challenges. Companies will have to conduct contract risk assessment and identify preventive actions, manage customer-supplier contract disputes due to economic impacts or supply disruptions, and even be prepared to invoke “force majeure” clauses when required.
When communicating with relevant stakeholders, consult with legal teams for advice on potential liabilities. Consult also with business units regarding how to manage communication around ongoing breaches and collection of proofs, if any.
Ten questions to rule out crisis paralysis
The best way to manage a crisis is to stay ahead of it. Companies need to keep their crisis management systems healthy and prepared to act on a war footing when required – even when they do not foresee a crisis showing up in the near future.
Here are ten questions you can ask yourself to evaluate the vigor and fitness of your current crisis management systems:
- How will your organization ensure the well-being of your people and the safety of your productive assets in the event of a crisis?
- How can you ensure sustainable financing and stable cash reserves?
- Are there well-coordinated and standardized communication systems and protocols to ensure clear and transparent communication with all stakeholders?
- Does your organization have crisis management teams to manage short-term liquidity impacts and initiate appropriate countermeasures?
- What model do you have in place to assess potential risks and define responses in the event of a crisis?
- Have you considered the impact of a crisis in the budgeting and business planning processes, and implemented early warning mechanisms?
- When a crisis has significant financial impact, how can you adapt your business model to reduce costs, both in the short and medium term?
- How will demand disruption impact you and how will you recover from its aftermath?
- Have you defined supply chain and production risks that crises might pose and what you could do to mitigate those risks?
- Is your business model resilient enough to recover from the impact of a crisis and manage potential crises in the future?
What is of the highest priority for businesses and governments during a crisis is the well-being of people – the individuals. Businesses can contribute and complement these efforts by having a professional crisis management plan. A strong crisis management plan can also help businesses ensure the well-being of their people, keep their resources protected and strengthen their ability to perform optimally when the odds are stacked against them.