COVID-19: Crisis Management

Companies dedicate time and resources to enterprise risk management.  This is a much broader focus than legal and compliance risks – instead, enterprise risks identifies some of the major catastrophes  — e.g. one company had serious weather event risks and disruption of manufacturing activities or another faced supply chain risks when relying on a single source of supply.  These are the kind of global enterprise risks that require he familiar calculation: likelihood of occurrence x impact of occurrence.

We are now experiencing the COVID-19 enterprise risk occurrence – for the foreseeable future, we will be examining and assessing pandemic risks.  The impact of this occurrence is devastating and companies will eventually reflect on this experience for future planning purposes.

Given the devastating impact of the current COVID-19 crisis, companies are exercising their crisis management programs to assess, analyze and implement appropriate responses.  A crisis management program can be used for a variety of “crisis” situations but the current pandemic is a significant test for any crisis management structure. 

Companies have implemented a crisis management team consisting of senior executives and critical functions, including legal, financial, compliance, human resources, security, and government and community relations.  The crisis team has to move quickly – health and safety concerns override all other issues and the crisis team has to figure out how to operate in that framework.

Depending on the specific industry, health and safety concerns and government orders to avoid interpersonal contact, companies have little room to move and to survive.  Employees can work from home but that may have little relevance to the business, if the company manufactures goods or operates hotels or restaurants.  The travel and related industries have shut down. 

In this crisis mode, companies have to connect with relevant government entities and communicate to the community, employees, shareholders and other interested parties.  A public relations communications strategy is important – companies have to answer questions and concerns from their stakeholders.

Companies have three significant initial hurdles in the  COVID-19 context:

(1) Can the business continue to operate while protecting health and safety of employees and stakeholders?

(2) If so, how can business continue and operate efficiently?

(3) What will be impact on business from discontinuation of related industries?

Most companies are being forced to shut down or substantially curtail operations.  For those businesses able to continue on a limited basis, there are significant operational questions that are subject to change relating to sale of products/services, access to customers, market viability, supply chain reliability and other basic questions.  Businesses face a stunning number of difficult questions concerning continuity that at some point, companies have to weight a serious option of temporarily shutting down. 

There are so many changing variables that a crisis management plan has to adapt to new or revised information and circumstances.  The federal, state and local governments are significant actors in any crisis like this pandemic and their decisions can have a dramatic impact on an ongoing business.  A crisis management program has to establish an ongoing and positive working relationship with governments.  As the government makes decisions or considers alternatives, companies have to be ready to react, plot out scenarios and prepare options for response.

We are in for a difficult time – for the next few months, our country will experience significant challenges that will result in suffering and disastrous results.  But as an optimist, we will make it through this crisis.  The private sector has to play an important part in surviving and eventually recovering from this pandemic.  To do so, companies have to rely on their crisis management protocols, adapt to the situations and ultimately learn from the experience.

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