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Boards and the virus: seven perspectives on the day after

12 May 2020

These days, humanity’s top priority is our personal health and safety as well as that of our families and employees. As corporate directors, we also need to keep the cash coming through the company door—and to preserve it as much as possible.  

However, corporate boards and leaders will sooner or later emerge from their domestic trenches to rebuild their company’s—and the world’s—economic future. And the future will not be what was imagined in pre-coronian times.

This note proposes a seven-point framework for organising  the board’s thinking on this radically different “day after”, to help to map changes that are relevant to the company , to develop useful scenaria against which the firm might identify  opportunities and threats, and to trace a strategic way forward.

  1. Interconnectedness

    The death of pre-Coronian times was foretold more than ten years ago by the global financial crisis, but no one quite believed that the times of post-war would come to such an abrupt end.

    Choices for the future of our interconnected world are starker than ever: one path leads to accelerated globalisation which must be underpinned by more global governance arrangements; the other reverts to the nationalistic (some would say, almost tribal) historical mean. The emergence of nationalist/populist governments seems to be pointing to  

    The second path, but it is too soon to tell.

    Stark choices loom in every set of trade or investment relations these days: the deepening or break up of the post-Brexit EU/Eurozone, US vs its neighbours, China vs US, EU vs US—you name it. Every company whose business, supply lines and workforce extend beyond national borders needs to consider these choices and their consequences as it plans its post-coronian future.

  2. The macro-political economy

    Global governance and international trade and investment are not the only concerns for firms. Current estimates for global GDP contraction go from 10 to 30%, largely depending on where policy makers will strike the unenviable trade-off between individual human health and social/economic welfare.

    One thing is sure: the levels of debt in the pre-coronian world, considered already quite high, will seem like child’s play. Over-indebtedness will mean different things for different economies, but its more or less radical monetisation by central banks is a foregone conclusion. This might soften an otherwise precipitous fall in asset values, but will it be enough to stop it? Will this unprecedented debt overhang result in the resurgence of that old monster, inflation? What will it mean for the balance sheets of the world’s financial institutions? Most importantly will it manage to address deepening social and economic inequalities and avoid social unrest?

  3. Perceptions of risk

    With COVID-19 in full swing, the fear gauge is rising, including among those  at the helm of large economic organisations. Fear is compounded by a feedback loop generated by the massive policy response of social distancing and lockdowns—however necessary they may be from an individual health perspective. Even after the emergency is over, this fear ratchet will result in much higher risk sensitivity.

    Experience shows that humans, including corporate leaders, focus on the risk that last materialised (availability bias). Pandemics will headline the risk map of many risk managers for years to come – not only of Bill Gates who argued more than five years ago that they should have always been there. They will top the charts for a long time to come even though, from a purely probabilistic perspective, they should probably be now moving down the ladder. In its turn, these new perceptions of risk will have important consequences on corporate budgets and organisation, and on capital and liquidity management by financial institutions.

  4. Consumer preferences

    The longer radical social distancing persists the more likely it is that long-term consumer preferences will evolve. A “frugal” consumer ethic, not unlike the one prevalent in the post-World War II era, might prevail. This would hurt industries from luxury goods to automotive. It will have profound effects on savings and investment. The firms that will map the new consumer “normal” early on will gain a big comparative advantage.

  5. Accelerating technology

    It is certain that the virus will give a mighty push to technology applications in our everyday lives in areas that have hitherto been reticent targets.

    Health applications, from self-testing to monitoring is the obvious first candidate. Innovation in this sphere might also bring forth a deeper change regarding our online moral code, for better or for worse. We might become more tolerant of the breeches to our private sphere, as data becomes more widely shared and “big” so that effective monitoring of our preferences and physical movements can be achieved.

  6. The future of work

    Accelerating technology will, in turn, boost another trend that has been around for quite a while: the transformation of the way we work, especially for “knowledge workers”.

    The function of the physical office as such might be called into question, much more so than in the previous phases of this communication technology-defined era. What will the demise of the office mean for corporate organisation and its hierarchical legacy, for the top-down delegation and control of decision-making that is its current blueprint?

    The future of work has also been changing in a much bigger way, through the “robotization” of many professions. Will, here too,  the virus have an accelerating effect in the substitution of humans by machines? 

  7. The role of the state

Most of the potential pathways I discuss above will lead to a significantly larger role for the government in our economies and societies. Hayek is already turning in his grave as we take what he described as the “road to serfdom”.

But “serfdom” might be necessary to counter a sharp rise in inequality, as many around us suffer the economic effects  of the virus and the ensuing lockdown. This might call for remedies hitherto considered radical such as widespread (direct or indirect) nationalisation of the economy but also universal (or quasi-universal) income support.

All the trends discussed in this note were with us already in the pre-coronian period.  The virus is acting mostly as a catalyst and/or an accelerator. Each firm needs to identify the changes that will occur on its sector, positioning and core markets, The seven-point framework proposed in this note is a conceptual tool  to help map these changes and organise them  within possible scenarios.

In closing, one needs to ask the obvious question to the governance consultant that I am: what are the consequences of all this for corporate governance and its cousin, ESG? The answer is of course “huge”. To be continued… 


Stilpon Nestor, Managing Director, Nestor Advisors Ltd.

This is shortened versions of a Nestor Advisors “letter from the trenches” note to clients. The longer version can be found here.