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Firms Must Tread Carefully in Shift to Pandemic Recovery Phase

16 October 2020

The Association of Insurance and Risk Managers in Industry and Commerce (Airmic) and Control Risks recently launched a new report that highlights the lessons organisations have learned from the COVID-19 crisis and charts the future of crisis management. It warns against knee-jerk reactions and early shifts into the recovery phase without proper planning.

 

Organisations need to know this crisis is different because it is ongoing. Organisations that break too early, assuming it is over, and launch fully into recovery, will face serious problems. Organisations need to time their exit into the recovery phase carefully.

 

The report is based on a roundtable meeting of the Airmic enterprise risk management special interest group in June 2020 and a survey of 132 risk professionals carried out in August. It is designed to gain insights into how risk professionals and their organisations acted and fared during the pandemic and what competencies are now needed to be “future-fit”.

 

Sadly, no silver bullet to pandemic crisis management has been discovered. Leadership has been challenged by a lack of useful intelligence and data to support their decision making. This has led in some cases to knee-jerk or short-term reactions. Particularly, some supply chains were caught off guard with limited contingency plans for strategic sourcing options in an interconnected global crisis. It is for this reason that companies need to be aware that this crisis is different to those in the past because there is currently no end in sight.

 

It is the crisis that keeps on giving. Typically, an event will happen, there will be a relatively short emergency period and crisis period, followed by recovery. But of course, what we are getting is a mix of the crisis coming back again and experiencing a second spike, which is in effect like a second crisis as businesses are trying to recover. So, it is changing the context constantly and therefore a crisis loop that may come back again and again until the solution is achieved.

 

The key thing for risk managers and their senior management colleagues at this stage is not to rush into the recovery phase without properly analysing the risk landscape ahead. Organisations should think about the solutions they are putting in place for recovery. They should not rush to make change that is not thought through properly. One should not exit the crisis until the time is perceived as being right.

 

The longevity of this crisis means those involved in the crisis team are under a lot of stress. Crisis teams need to look after themselves. One cannot manage a crisis for six months and not need a break. So, taking care of teams that manage crises is also key.

 

Several core elements to resilience are emphasised by the report. These are leadership, data, people, and operating models. The report notes that effective leadership is regarded as the most important resilience principle that organisations prioritise. Some 70.7% of respondents said it was among their organisation’s top three priorities. This requires striking a balance between involving senior leadership in continuous crisis management, while avoiding knee jerk, ill-informed leadership decision-making, the report points out.

 

The second element is data. Organisations were heavily reliant on data supplied by their respective governments for risk intelligence during the Covid-19 crisis. Some 84% of respondents found it the most useful source of risk intelligence. This was followed by third-party sources, used by 54.7% of respondents. Meanwhile, less than half of respondents relied on tailored advice and guidance from risk advisers (45.3%) and insurance advisers (22.7%).

 

The third element highlighted is people. There was high confidence that risk professionals had the right competencies to deal effectively with the pandemic, especially when it comes to risk awareness and scenario planning skills. Some 85.4% of respondents believed risk professionals in their organisations have the right knowledge, skills, and behaviours to achieve this. They felt further development is required to tackle risk interconnectivity and engage with business issues. However, the structure of the current workforce in some organisations is not set up to meet future requirements. 39.5% of the respondents said their organisations were not considering remote working as a permanent option, even for roles that allow for it, or were still tentative about remote-working options.

 

Operating models are also crucial to resilience, the survey found. There was a very strong perception that the crisis management of organisations was effective during Covid-19, according to 96.6% of respondents. Perhaps not surprisingly, a significant proportion of organisations (41.7%) plan to make changes to their supply chains.

 

For further information you may access the Airmic and Control Risks Pandemic Survey 2020 “New Challenges, New Lessons”.

 

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