FCG Webinar on Crisis Management – Key takeaways
Last night, FCG hosted a seminar together with INSEAD Professors and Programme Directors Ludo Van der Heyden and Peter Nathanial based on their extensive experience of corporate governance and crisis management, and a newly released paper on “A Crisis Management Blueprint for COVID-19” (read more about their findings on the link to your right). FCG Group CEO Kristian Bentzer and CEO of FCG Risk & Compliance Sweden Christine Ehnström set the stage on the Nordic financial sector, and shared their thoughts on how the pandemic has and will affect the financial industry as well as joining in on the closing Q&A session. FCG’s Alexander Schiander summarizes the webinar and some key takeaways:
The Covid-19 pandemic’s impact on society has undoubtedly been severe, and will continue to be so for quite some time, still. The pandemic’s impact on the financial industry (and society as a whole) might have some resemblance to the financial crisis in 08/09.
However, the different nature of this crisis entails that the “old” approaches and lessons learned on crisis management from the financial crisis in 08/09, might not be sufficient to solve this one.
The Nordic financial industry
The Nordic financial industry specifically was rather well prepared for Covid-19, financially. This is, among others, due to the improved capital and liquidity buffers, resulting from revised capital adequacy rules following the last crisis. Consequently, most Nordic banks enter the Covid-19 crisis very well capitalized, meaning that we have a substantial cushion to absorb losses, which also provides provides many firms with valuable time to react and respond appropriately.
However, it’s still a question mark when it comes to the financial industry’s preparedness to respond to a non-financial event like Covid-19, where large parts of society is locked down, and without anyone really knowing how long this will last. Even though most companies, and especially banks and other regulatory entities, already have (quite often good) business continuity plans in place, it is our experience that they mostly don’t fully, or at all, address a fast-moving, non-financial event like Covid-19.
We must, to a much higher degree than before, “expect the unexpected”, such as a pandemic as this one, and also plan for such events to occur with a higher frequency than we are used to. In such an ever-changing environment, the very crisis management process itself is more important than crisis management plans alone. Having a principles-based approach will help us tackle crises of varying types, enabling a swifter adaption and a more prompt reply.
In light of this, one might ask what this Covid-19 “crisis” is really all about: The virus itself, or the lack of government’s appropriate response and coordination?
In order to better deal with Covid-19, or any crisis for that matter, one should apply the following, intertwined, practical five steps- framework for crisis management:
Start with framing what the crisis is really all about, using knowledge and memory of past crises. Many Asian countries, having previously experienced virus outbreaks such as the SARS-virus, proved to be far more prepared for the Covid-19 pandemic than western countries. The western “notion” in the early stages that Covid-19 was a pandemic limited to Wuhan and China, and the lack of an early, proper framing of the crisis as a collective crisis, proved to be fatal.
Segmentation and triage is key: You can’t wait with acting until you have all the information you want. Determine what data you have access to, analyze, sort out “fake news” and real information, and take action.
Set your narrative through short, medium and long-term goals: Communicate your purpose, choose wisely how and when each goal is presented, and ensure that these are ligned to each other.
Make sure to be prepared to hit the “bottom”, and survive there- for a while. Show that you are resourced for contingencies. Also, make sure to have clear goals that you will actually be able to achieve, and show that you are making progress. This builds trust and credibility.
Admit mistakes and keep learning, and adapt to avoid a repetition of a similar crisis in the future. Conduct “pit stops”, making “stay or leave” decision when needed: Be clear on what is needed to survive the crisis, and what you might have to let go of.
In addition to the above, one should make sure to have a broad panel of experts available when a crisis occurs. This is important to ensure that the framing and further handling is correctly done from the very beginning. Also, it’s crucial to identify which business functions that will be heavy loaded during a crisis, at different stages, in order to ensure a proper resource planning and allocation.
Lastly, one thing is for sure: How we got into the Covid-19 crisis is definitely not the way we (want to) get out of it!
Thank you to Mr Van der Heyden and Mr Nathanial for an inspiring and interesting talk!