The Society for Corporate Governance Nigeria is a registered not-for-profit organization committed to the development of corporate governance and best practices in Nigeria.
Mrs. Hilda Nkor is the Chief Executive Officer (CEO) of the NGO with over 23 years working experience in the health, banking and corporate sectors of the economy as well as in public, private and not-for-profit organizations.
In this paper Hilda makes an amazing exposition of knowledge on crisis management which couldn’t have come at a better time than now when the world is cringing under the devastating impact of the ravaging Corona virus.
Enjoy the presentation
SERIES: CRISIS MANAGEMENT ( PART 1)
TOPIC: THE ROLE OF THE BOARD
Corporate crisis, simply put, is any threat to a company’s operations, reputation or existence and Crisis management is the leadership process by which it is handled.
Managing a crisis for Corporations is a three-step process that involves:
- Preparing your organization to avoid or prevent a crisis from happening.
- Positioning your organization to minimize impact or losses that may result from the crisis and
- Putting measures in place to guarantee the continued existence/performance of your organization post crises.
As the saying goes, the best time to plan/prepare for a crisis was years ago. Unfortunately, that ship has sailed a long time ago as the whole world now battles with health, social and economic crises as a result of a combination of factors including the decline in prices of crude oil and social shutdown arising from the COVID-19 pandemic.
In view of this, the Society for Corporate Governance Nigeria is committed to supporting Boards and organizations through this period of global economic and social upheaval by highlighting simple, practicable and applicable steps to maintaining and safeguarding effective Governance in the current Business and Economic situation.
This first part of the paper will focus on the Role of the Board in Crisis Management. The second part will address the Role of Executive Management in times of Crisis and Boards guidance on strategic initiatives for mitigation.
Dimensions of Crisis
Crisis may be major or minor depending on response and how it is managed. Deductively, a minor crisis could become major if not properly managed while a major crisis could be totally averted or its damaging effect minimized to a great extent if adequately managed.
The factors behind a Crisis could be internal or External:
Internal– This could be where there are issues with the Board, Executives, Employees, Shareholders, Safety, Product Quality and Financial irregularities
External- Regulatory (Compliance, Ethics, Financial Reporting, etc.,), Security, Customers (Complaints, Business Loss), Systems and Technology (Hacking), Hostile Takeover, Community, etc., and more recently the Covid -19 pandemic.
Crisis situations, like we currently have globally, can change the dynamics of organizational processes, leadership, Management, Business sustainability amongst other aspects of Business performance.
It has become pertinent that Corporate Leaders and Directors not only steer organizations in the direction of minimizing losses to shareholders as a result of crises, they must also ensure that in responding to the crises they maintain a compliance stance that goes beyond legal expectations to safeguard ethical Business practices and ensure business continuity.
What then should Boards do to ensure good governance in these times:
One of the fiduciary duties of the Board is to protect the interests of shareholders and to oversee good governance and management of risk. It should be one part of the board’s normal assessment of the ongoing viability and sustainability of its business.
- Stakeholder Involvement and Management- Communication: The Board should develop and enforce a communication plan for various levels of stakeholders to better manage this crisis. A wrong word, at the wrong time, by the wrong person, in the wrong place could blow a minor crisis situation out of proportion. For Boards, one of the major challenges of a crisis such as we are encountering now is the dilemma of balancing conflicting stakeholder interests (shareholders, clients, employees, management, government, community) as they highlight varying expectations of the Board in light of changing needs and dynamics of the Crisis. Consequently, the Board may often have to manage a challenge or even crisis of its own as it seeks to ingeniously prioritize stakeholder needs and relationships for effective and sustainable enhancement of shareholder interests Information flow is key to ensure that sensitivity of every stakeholder is properly addressed.
As opined by Alpaslan et al 2009, the importance of maintaining support of a broad range of stakeholders during crisis is the major determinant of organizational post-crisis performance and effective communication and relationship of management is very critical to the assurance of stakeholder support.
Corporate Governance indicates that all stakeholder claims are valid and as such every group of stakeholders whether in the minority or not must be given adequate attention. Stakeholder management as a function of good governance therefore dictates that because organizations are not independent entities, they impact and are dependent for resources on external and internal parties. It is therefore very critical to effective Governance that the relationship with these internal and external parties be well managed even more so in a time of crisis. This responsibility largely falls on the Board as an intermediary between shareholders and management and the ones culpable for every direction the organization takes.
Factors to be considered in involving and managing stakeholder relationship will entail amongst others well-coordinated response and communication strategies, role clarification, determine stakeholders to consider, classifying stakeholders in order of priority, identifying potential implication of crisis on stakeholder relationship, integration of stakeholders in crisis management framework, monitor information structure and dynamics of the organization adjusting as necessary and required.
- The Board needs to perform higher than ever at this time in terms of availability to Management. There will be a need to meet more, albeit virtually. There will be a demand on Directors to be more proactive in their approach to the roles both on the full Board and Board Committees. At this time, emergency meetings can be convened to address urgent matters that require Board input and approval as there is now a need to review Budgets, Strategies, Plans, projections across various operations of the business. This implies that there needs to be an adjustment of timelines and expectations of deliverables.
- On a regular basis, the Board needs to address emerging Risks using the Committees available (not only Risk) and Executive Management- Operating virtually, especially with the ‘work-from-home- syndrome has its attendant risks, one of which is data integrity through exposure of sensitive information to cybercrime, missing of sensitive deadlines due to poor internet communication networks among others.
- The Board will need to balance its oversight and intervention functions as the times call for all hands to be on deck to ensure the business is a growing concern. The Board will constantly require that Executive management feeds it with more frequent updates on status of execution on agreed strategies especially regarding the impact of the crisis on bottom line and business continuity. This helps the board determine when there would be a need to revisit plans and make necessary changes.
- All competencies on the Board will be required to operate at full capacity to ensure that a balanced approach is adopted to address the crisis and ensure decisions taken are in the best interest of the Company.
In conclusion, it is recognized that Board response to crises will vary within companies and be largely dependent on business scope and culture. But the tips in this report are proven best practices and highly recommended to our clients. They are simple, practical and highlight the importance of strong Board leadership, business focus, broad communications (internal and external) and enhancing stakeholder relationships as key success factors at times of crisis. We encourage all our clients and partners to adhere strictly to the Covid-19 prevention guidelines by keeping safe and well.
Our best wishes to all at these difficult times.
Hilda Nkor (Mrs.)
Chief Executive Officer www.corpgovnigeria.org