In an evolving crisis, companies that made decisions quickly and communicated directly set themselves up for success.
We’ve heard it many times: When the COVID-19 pandemic broke out, many organizations weren’t prepared for its magnitude or its duration. Risk managers were forced to think and act quickly, and companies had to pivot fast to keep their businesses afloat.
Part of the reason so many companies were caught off guard is historical. In recent years, enterprise risk managers have had to develop incident response plans for several potential crises, including the Y2K software problem, the SARS outbreak of 2012 and the swine flu (H1N1) pandemic in 2009. None of these events caused the interruption that businesses expected, setting the expectation that COVID-19 wouldn’t disrupt on a large scale either. Indeed, when asked in a survey prior to COVID-19 if a pandemic or other major health crisis was in the top 10 on their organization’s risk register, 82% of respondents said no.
And yet, despite the lack of preparedness, some organizations not only survived — they thrived. Here’s how the most resilient companies moved through the three phases of crisis management in the COVID-19 era and what risk managers can do to prepare for the next unknown.
Phase 1: React and Respond
It’s no coincidence that companies that had some sort of pandemic plan in place and practiced rolling out those plans fared better in the “react and respond” phase of the crisis. Globally, the Asia-Pacific region had the largest percentage of organizations — 52% — with pandemic plans, and significantly higher numbers of businesses that thrived during the pandemic (11% compared with 7% overall). 
A second category of companies that maintained resilience practiced nimbleness. They saw immediate needs for their capabilities and adapted accordingly. Manufacturing firms, for example, quickly revamped plants to churn out personal protective equipment and respirators instead of auto parts, while distilleries transitioned to producing hand sanitizer.
Third, organizations that had strong balance sheets showed stronger tolerance for risk, as did companies that quickly transitioned into survival mode to weather the storm through layoffs and other cost-cutting measures.
Across all these categories, organizations that succeeded in the “react and respond” phase had strong business continuity plans, cross-functional crisis management teams, a holistic understanding of their financials and internal structures that allowed for quick decision-making. Externally, these companies had vendors with strong business continuity management, the ability to quickly adapt or modify their supply chains, and the humility to learn from regions and organizations that had already experienced the pandemic.
Leaders who were able to digest large amounts of information, determine what was relevant to the company and communicate directly with the entire employee base — rather than through cascading messages — also fared well.
Phase 2: Recover
As companies moved from “react and respond” to recovery mode, the most resilient companies understood the need to reevaluate their existing enterprise risk management (ERM) plans to apply the lessons from the pandemic to other existing and emerging risks. Part of this process includes identifying new risk financing strategies to cover costs associated with events that may not be insurable and looking to unlock new sources of capital, such as intellectual property. Another key component is ensuring that risk scenarios are evaluated regularly and analyzing how they’re trending on a quarterly basis.
While reevaluating entire ERM plans can be daunting, organizations that thrived during the COVID-19 crisis approached this work in a piecemeal fashion:
- Prioritize and tackle risks one at a time.
- Quantify risk scenarios.
- Invest in activities that result in the largest reduction in risk.
- Study and keep up to speed with the most pressing new and emerging risks.
- Speak with external consultants or advisers.
- Get a cross-functional perspective within the organization.
In addition to retooling ERM plans, risk managers at thriving organizations communicated regularly with executives about plausible but severe risk events, allowing leaders to embed risk into the decision-making and budgeting processes of the business.
And while it can be difficult for risk managers to stay focused on longer-term ERM planning with many real-time challenges coming their way, the more adaptable they can remain, the better the overall risk outcomes are likely to be.
Phase 3: Reshape
The pandemic brought widespread changes to the economy, the workforce, business operating models, consumer behavior and more. Organizations that thrived during the pandemic considered all these factors and changed their businesses based on the lessons they learned about everything from remote work to consumer-purchasing behavior. To increase their companies’ resilience, risk managers should reflect on these lessons, think through the long-term impacts of the pandemic and model several possible versions of the future. This will help them identify commonalities among business, supply chains and industry innovations and shape ERM going forward.
Anticipating and reacting to changing consumer behavior will be key to informing these models. Respondents to an Aon survey said that during the pandemic, fluctuating demand presented a more significant risk exposure than supply. To mitigate this risk, risk managers should identify consumer behavior trends from the pandemic that could continue, such as grocery delivery and remote-work opportunities.
Thriving organizations are also changing the way they communicate internally in response to the pandemic. They recognize the power in giving all employees the same information at the same time. Risk managers should recommend that management use communication practices such as all-company video conferences for important announcements and crisis communications.