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Sustainable Business Policy publications - Corporate governance

Governance in crisis: how boards can respond to challenges like coronavirus

20 Mar 2020

board

Coronavirus has come to threaten both the health of individuals and the viability of many organisations. A crisis scenario, whatever its origins or specific circumstances, is the ultimate test of the Board’s ability to maintain organisational resilience.

Such situations require strategic, adaptive, and timely responses from Boards in order to preserve their enterprises - or indeed take advantage of opportunities which the crisis may create.

At all times, the Board should remember that it retains the ultimate legal responsibility for the organisation. Of course, in normal times, the Board will likely opt to delegate many aspects of decision-making to executive management. However, at times of crisis the Board will often need to play a far more involved role. A crisis may mean that boards are expected to take on some responsibilities and to make decisions that would ordinarily fall within management’s purview. Speed is of the essence in managing a crisis meaning that even the board may have to put in overtime.

During a crisis, Boards will need to begin meeting and communicating on a much more regular basis.

In addition, they may need to set up sub- committees or working groups to focus on particular issues. Such sub-committees may wish to draw on external expertise where appropriate.

A more direct role for the Board is necessary not only because Boards are ultimately responsible but also because the Board should be able to offer a more considered view. Directors unlike management will not be immersed in the day-to-day running of an organisation. The non-executive directors in particular may be able to offer a more objective and neutral perspective on key decisions, and how they relate to the best long-term interests of the organisation. In the midst of a crisis, many managers may simply be too invested in particular activities in order to identify or support the right decision.

With its links to the wider world, the Board is also well placed to understand the perspectives of a wide range of stakeholders. It can assess the impact of decisions on the organisation's reputation and longer-term development.

Consequently, a crisis situation like Coronavirus is a moment when Board members should quickly adapt to a different kind of role which is far removed from part time oversight at monthly or quarterly set piece board gatherings. Their success in adapting to this challenge will determine if the organisation navigates the crisis or sinks beneath it.


carum basra

Carum Basra, Corporate Governance Policy Advisor

Carum joined the IoD in August 2019 to work on Corporate Governance policy.  Prior to joining the IoD, Carum served as a Senior Associate at a leading strategic communications consultancy where he advised clients across a broad range of public affairs issues.

Carum holds a BA in Politics from the University of London and studied International Corporate Governance at Queens University, Belfast, graduating with Distinction in 2019.

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