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Why governance is so important in this current climate

- 1 min read
Hayley Stephenson
Hayley Stephenson

Although met with much disdain from other political figureheads and the public, Prime Minister Boris Johnson made the call to ease the lockdown in place in England on Wednesday 13th May. It was a highly contentious decision, one which Scottish First Minister Nicola Sturgeon and First Minister of Wales Mark Drakeford chose not to align with and instead continue with the original lockdown rules set out in March.

This certainly isn’t the first time in 2020 Boris Johnson and his Conservative government have been faced with repercussions from their decisions during the current coronavirus pandemic. The government is tasked with responding effectively to conditions which are changing day-by-day and comes with many unknowns. It’s a time at which completely consensual decisions are almost impossible to make.

The same can be said for day-to-day business leaders who will be facing similar challenges and questions from myriad stakeholders. Some will be under pressure to put viable action plans in place to mitigate as many business risks as possible, while some will feel uncertain and unsure what their next steps are. In the interim, leaders will have to make a number of decisions to solve short-term problems, and boards should be supportive whilst looking to the longer-term purpose and values of the organisation, ensuring good corporate governance is still in practice.

While the board would typically take a step back from day-to-day activity, during a crisis situation, boards should stay well-informed of the developments happening within their organisation and be attuned to the rapidly changing coronavirus pandemic. The board should be monitoring the actions taken by management, assessing whether they are taking appropriate steps and be providing additional guidance and direction where necessary. The board should also demonstrate accountability to stakeholders and to the wider public, through increased communication surrounding decisions and measures taken.

Below, we’ve outlined some of the key organisational concerns boards should have oversight of during the pandemic and what boards can do to ensure good corporate governance is still being practiced.

Communication strategy

In fast-moving and uncertain situations, there is nothing more important than the way the senior leadership team communicates, both internally to their workforce and externally to customers and shareholders. Internally, organisations will need to be thinking about reducing panic and making sure their workforce is as informed as possible.

The workforce may also have a lot of questions about personal safety, job security or even the future of the organisation. Preparation is key, and the organisation must have a concrete plan in place for managing and addressing these concerns. Externally, considerations will need to be focused on the message that’s being delivered to customers and establishing reassurance and confidence with shareholders. Although the future is still uncertain, shareholders will need proof that the organisation has a survival plan in place and can still deliver a return, even though some processes and operations may have changed.

Health and Safety

During a world health crisis such as the COVID-19 pandemic, the health and safety of employees needs to be at the top of the board’s agenda. There needs to be a strong communication strategy in place to ensure that employees know the organisation is protecting their wellbeing and acting inline with the government guidelines.

Health and safety must also be placed at the forefront of decisions made on how the organisation moves forward, such as deciding whether there are enough safety measures in place for remote employees to return to the office. Similarly, organisations must ensure they are able to operate safely whilst protecting the health of suppliers or customers to instill confidence in these relationships moving forward.

Decisions around health and safety are certainly not something organisations want to get wrong as the consequences can be truly catastrophic and cause serious reputational and financial damage.

Business continuity planning

The disruption to the UK businesses and their workforces has been monumental. With many employees either working from their homes if possible or on government furlough schemes, key workers serving on the front lines are the minority whose working conditions have gone relatively unchanged. Boards and businesses must ensure their workforce feels supported and has all the tools they need to be able to conduct their operations as normal, despite the these disruptive and unfamiliar methods of working.

There may also be disruptions to the supply chain, especially if an organisation is in the manufacturing sector. There will be a multitude of risks for boards to consider, such as whether they need to look to alternative sources of supply, if there are workforce safety issues to consider and whether the business is still able to meet the demand of its customers.

Succession planning will also need to be thought about in the case that a key manager or CEO contracts COVID-19. Does the board have relevant contacts they can reach out to in this instance and how will they be remunerated for their time?

Financial Implications

While board members have a variety of fiduciary duties as set out in the Companies Act 2006, in times of financial distress, they also have a further duty to spread their focus and ensure that they act in the best interests of the shareholders. Having clear oversight over the organisation’s finances will be absolutely critical as it will be the financial data that gives the board the clarification as to whether the organisation can survive the pandemic. The board must regularly review the short-term and long-term financial impact of the pandemic on the organisation, with predicted revenue and cash projections given by the senior leadership subject to rigorous interrogation. The board must also think about business continuity planning should alternative financial arrangements need to be considered.

We recently launched our brand new COVID-19 Leadership Learning Hub which features a wealth of guidance and advice for board members mitigating the risks and challenges of the pandemic.