COVID-19 has spread all over the world. Some sectors are slowly returning to a “new normal” while many others continue being heavily impacted and are struggling for survival. CEOs and their teams have never before been more in need of the foresight and seasoned judgment that a well-functioning board of directors can provide. This may well turn out to be the moment when a board proves its value or shows its flaws.
There are topics that board and committee chairs should prioritize and key questions that should be asked in every board meeting as the board and management steer their organizations through unprecedented uncertainty. Many board chairs and CEOs are looking for guidance from organizations like the National Association of Corporate Directors (NACD) on the new role they should play in these challenging times. Many articles have been published on topics such as board governance during COVID-19, crisis communication, crisis management, cyber security, risk management and strategy review and redefinition.
I will summarize several subject matter expert recommendations published by the NACD in a three-part series on the above-mentioned topics. This article (1/3) will highlight the role definition for the management team and the board. Also, what are some of the questions that should be asked and addressed while managing the effects of transitioning to a new workplace, a different business model and the impact on the organizational structure?
1. The role of Management and the Board: Your CEO and the management team are under huge pressure to handle the rapidly evolving and potentially escalating issues the crisis is throwing at them. Management is responsible for developing and implementing the overall strategy to protect the health of the workforce and enable them to continue to work productively. Furthermore, management has to be vigilant of signs of mental fatigue among employees.
The board is responsible for advising the management team as it executes the company’s response to the crisis and monitors progress. The CEO’s job is tough enough at the moment. Boards should resist the urge to get overly hands-on. Rather they should follow the old saying: “nose in, fingers out”.
2. Management’s internal communication plan: Communications are vital during any crisis. Communication is more than disclosure: it is about transparency. It is important to share with multiple stakeholders the impact of the crisis, however, the most important communication is for the benefit of the employees. What are their new objectives, the modified strategies and new action plans? Is there an appropriate sequence of communications from various leaders as to what is happening in other departments and business units so that employees are not feeling left in the dark? Do internal communications convey empathy to employees? Are they forward-looking and trustworthy to reassure everyone that employee commitment and contribution is very much valued and appreciated.
The board should ask management to develop a strategic crisis-action plan that will guide the organization’s response over time and request the same standard reports on the up-to-date scenarios and actions that management reviews. These reports will keep the board abreast of the major issues the management team is working on, what new scenarios it is considering, and what actions it is planning to take.
3. Ask management about the company’s transition to a remote work environment. Highly nimble organizations can make the transition to a remote, work-from-home workplace relatively seamless—that is, among employees who can work remotely. But this transition can present formidable challenges to organizations that are anchored to their offices and physical facilities. During check-ins with management on crisis response, ask what the company is doing to support the technology, tools, and cultural challenges created by the sudden shift to virtual work, if applicable.
Prior to the pandemic, most businesses were hesitant to allow widespread telework policies for their employees due to a variety of concerns, including technological risk and potentially reduced productivity. According to a study by the Brookings Institution, less than 25 percent of the US workforce worked some hours from home prior to the pandemic. This situation has drastically changed after most organizations have shifted to remote work only.
Boards and management have to find a way to find a balance between protecting the security of the organization and allowing employees to carry out their duties while working from home through digital transformation.
Two of the traditionally most difficult cyber security issues– malicious insiders and supply chain or third-party vendor services- come under increased pressure as organizations rapidly shift to remote-only day-to-day operations. As organizations adapt to telework, more are relying on third-party and teleworking cloud services to ensure business continuity.
Here are several cyber security questions for the Board to review with management:
How many third parties have access to the company’s systems
What controls are placed on them
How does the Board receive actionable cyber-threat intelligence
What is needed to fully include cyber security oversight in current supply chain management
What steps will management take to distribute protocols for tracking incidents, roles, responsibilities and escalation procedures
How are core business functions integrated into a cyber security response plan
How often and effectively are employees being trained on cyber security threats and best practices
4. Which areas of business and oversight processes may need to be reassessed: In a recent study by the National Association of Corporate Directors (NACD), directors identified the following areas for their companies and boards to reassess:
Remote working and alternative work schedules
Strategy—both short and long-term
Crisis readiness and response
Supply-chain/third-party risk
Labor force, including automation and artificial intelligence
Balance sheet, use of capital for buybacks and dividends
Company’s risk profile and ERM processes
Directors also mentioned several aspects of the current board’s operations, engagement, and effectiveness during COVID-19 as potential areas for improvement as follows:
Understanding the company’s strategy and risk profile
Willingness to challenge management on fundamental assumptions regarding strategy and risk
Need for more frequent meetings and informational communications
Information flow and reports to the board
Allocation and coordination of risk oversight responsibilities among board committees
For further ideas on how the Board can further support Management during Covid-19 please refer to future articles 2/3 and 3/3 of this three part series.
Also, please refer to the NACD references and publications below:
Refer to articles on Covid-19; strategy; crisis communication and crisis management; cyber security and risk management
Refer to articles by Jim DeLoach; Don Lowry; David Brown; Barton Edgerton; NACD - Adaptive Governance during COVID-19: A practical guide, et al.
