Board Governance Challenges in COVID-19 Crisis
Corporate boards and management face serious challenges in navigating the COVID-19 pandemic. In this difficult environment, companies have to be mindful to apply best practices and exercise care to fulfill their duties of loyalty and care. The challenges are complex and the risks are exponential.
Corporate boards have to exercise responsible oversight by understanding the risks facing the company and the impact of the pandemic to day-to-day and strategic decision-making. As the COVID-19 risks evolve, company boards and management have to identify and manage these rapidly changing risks.
An initial priority for every company is to evaluate employee safety and to assess business continuity plans. Most companies have embraced, to the extent possible, a remote or reduced workforce to minimize employee exposure and risk from the virus. Companies with open offices have to regularly clean and disinfect workspaces as appropriate.
Additionally, companies have to examine business disruption from COVID-19 impact on production and supply chain. Such an inquiry requires review and assessment of customer contracts, vendor/supplier contracts and capabilities, along with access to business insurance relating to these contracts.
As part of this overall assessment, companies have to conduct scenario-based financial analyses relating to capital, liquidity, financial health and survival. Such analyses should include comprehensive short and long-term planning. In reviewing its finances, companies have to assess available credit facilities and existing debt expenses.
Companies have to maintain open lines of communication with federal, state and local government representatives in order to keep current as to pandemic data and government actions. Companies have to incorporate such data and government actions in relation to employee safety, business continuity and business disruptions.
Congressional actions, including the Families First Coronavirus Response Act (“FFCRA”) and Coronavirus Aid, Relief and Economic Security Act (“CARES”), have established new financial relief programs and imposed additional requirements related to paid and sick leave for employees.
State and local governments have issued shutdown orders to various businesses, along with isolation and quarantine orders that apply to workforce populations. State and local responses are fast-changing and scientific modeling may provide indications of future changes in the course of the pandemic and government responses.
Boards and senior management have to assess possible risk of illness of board members and senior management, especially key leaders in the C-Suite. Scenarios should be crafted and used to develop substitution plans and disclosure of these illnesses.
As companies rely on remote employee arrangements, companies have to assess increased cybersecurity and data risks. To the extent employees are relying on residential wi-fi access to the Internet, companies have to assess risk depending on the seniority and responsibilities of employees who may have access to confidential information. In these situations, employees have to exercise healthy cyber practices to avoid a possible data breach or attack from third parties. Employees should be reminded to avoid potential phishing attacks that are intended to take advantage of public fears relating to the COVID-19 pandemic.
To manage the current crisis, companies have to establish a task force reporting to the board with representatives from the business, along with compliance, human relations, legal, finance, audit and security. A task force can coordinate information sharing, planning, implementation and communication to the public and other stakeholders.