mini wooden figures knocked over

Well-crafted and implemented business continuity plans (BCPs) typically aim to quickly and efficiently restore normal service through the actions of staff and management of the organisation. The presumption is that most, if not all, levers of action are the in the hands of the organisation.

In a pandemic, by contrast, recognition and response to the event rests almost entirely at a national or state government level. The levers of primary action are in their hands. It is for all organisations to respond in an appropriate fashion to restore normal service for all as soon as possible.

So, what are the most productive activities and key choices ahead for boards that are not being made at a state or national government level?

1. In a dynamic fashion, start by contemplating optimistic, expected and pessimistic scenarios using the key variables of:

  • time elapsed before normality can resume;
  • economic markers of severity;
  • workforce health and readiness; and
  • commercial arrangements with counterparties.

2. Distil critical and operational choices with the executive, such as they exist now during the pandemic escalation phase, and execute important emergency actions in real time. Unfortunately, for many small to mid-sized organisations with limited capacity to absorb the impact from such an event it’s all too late, this time around.

3. Plan for ‘care and maintenance’ or ‘survival mode’ where the pandemic has resulted in reduced activity and demand. Preserving precious capital is mandatory. Winding down operations in an orderly manner and compassionately and transparently dealing with people is critical. You will need them when you are ready to recover.

4. Or plan for very high activity, potentially beyond normal limits, where the enterprise is part of the response to the pandemic. There is limited time to do this planning but it’s a critical part of performing to expectations. Work out what is ‘mission critical’, devote your best talent to it and give them all the available resources as needed. Be pragmatic. Carefully trade off checks and balances necessary under normal circumstances for expediency where time is of the essence. Curiously, the competitive nature of market participants may take on a much more collaborative approach to deal with the pandemic. Note international willingness to share commercially valuable information about the COVID 19 and its mutations by all. Initiate, explore and carefully make use of this spirit of collaboration where possible.

5. Looking to the recovery phase, individually and as a board, engage in a dynamic, almost daily, contemplation of what the world might look like, given the intelligence that comes to light. For example:

  • Might the pandemic accelerate the transition of customers’ comfort with, and share of wallet of, online retailing?
  • How might consumer and supplier behaviour change in your arena as a result of such a once in a century event?
  • Could workforce experience with remote working become a source of cost reduction and operational flexibility or efficiency in the future?

6.  In the depths of the pandemic, when it’s at its most extreme, begin to plan contingent options for recovery. Target financial resourcing, hiring and client priorities, re-contract with relationships nursed along during the worst of the pandemic. Formulate short- and medium-term priorities. Longer term plans have to wait until the level of uncertainty reduces to an acceptable level in your arena.

7. Once the pandemic peaks and begins to recede in Australia, be prepared to quickly execute your plan, on direction from regulators that normal service can resume. One of the bigger tests for us all will be the need for a longer ‘lock down’ than most are emotionally ready for. Don’t jump the gun. This isn’t just about ‘restoring normal operations’ which is the normal aim of a BCP. Rather, recognition of how the world has, or has not, changed and orienting the organisation appropriately. This is a strategic conversation for the board who has to comprehend the significance of change and strategise accordingly. The regulatory environment is likely to remain volatile at a national and international level. This will present both opportunities and challenges.

An optimistic COVID-19 scenario as a base case

The following is an optimistic scenario as a base case from which to build – amend, add to and update as circumstances change:

  • Australia succeeds in containing the pandemic to a fraction of the population (less than one per cent or 250,000 infections for the whole of the ‘curve’) through effective mitigation strategies.
  • The pandemic peaks in Australia in May and is on a steep 8 to 12-week decline. New infections reduce to less than one per cent of peak infection rate in June and continue to reduce.
  • Governments in Australia contemplate lifting social distancing restrictions in July 2020 and in an orchestrated fashion, key elements of the economy come back online.
  • An effective vaccine is ready and the population is immunised by the end of October 2020. Most elements of the economy are free to begin operating again by December, though severe restrictions on international travel remain to contain reinfection by incoming international travellers.
  • The Federal Government has ensured access to capital remains abundant and affordable. The market begins to reinvest in rebuilding the economy. Steep growth in recovery through first three months of 2021. International trade recovers quickly.
  • An expected, more realistic, scenario sees the above timeframe stretched out to second quarter or third quarter of 2021.
  • A pessimistic scenario sees the failure of government initiatives to contain the pandemic and an 18-month delay in vaccination of the general public in Australia. The fabric of the economy starts to come under significant stress, supply chains have to be rebuilt from scratch given the loss of so many links in the chain. Full recovery envisaged over a period of years rather than months. The economy slowly recovers from a hard reset.

_____________________

About the author

Arash Rashidian assists boards and executive teams, in and out of crisis, to realise value from strategy and to use strategic risk as a lens with which to examine alternate futures and their implications. He has been a facilitator of the AICD Company Directors Course for the past 10 years. He is principal of Lighthouse Advisory, providing public and private sector clients with over 30 years of advisory experience.

About us

The Australian Institute of Company Directors (AICD) is committed to strengthening society through world-class governance. We aim to be the independent and trusted voice of governance, building the capability of a community of leaders for the benefit of society. Our membership includes directors and senior leaders from business, government and the not-for-profit sectors.

For more informationt: 1300 739 119w: aicd.com.au

Disclaimer

This document is part of a Director Tool series prepared by the Australian Institute of Company Directors. This series has been designed to provide general background information and as a starting point for undertaking a board-related activity. It is not designed to replace a detailed review of the subject matter. The material in this document does not constitute legal, accounting or other professional advice. While reasonable care has been taken in its preparation, the Australian Institute of Company Directors does not make any express or implied representations or warranties as to the completeness, currency, reliability or accuracy of the material in this document. This document should not be used or relied upon as a substitute for professional advice or as a basis for formulating business decisions. To the extent permitted by law, the Australian Institute of Company Directors excludes all liability for any loss or damage arising out of the use of the material in this document. Any links to third-party websites are provided for convenience only and do not represent endorsement, sponsorship or approval of those third parties, or any products and/or services offered by third parties, or any comment on the accuracy or currency of the information included in third party websites. The opinions of those quoted do not necessarily represent the view of the Australian Institute of Company Directors.

© 2020 Australian Institute of Company Directors