In spite of warnings and alarming situations from abroad, one or two weeks ago none of us could imagine the full extent of the effects of the corona virus. In just a few days, we have shut down businesses, closed offices, relocate businesses to virtual offices as much as possible, found web applications and IT tools to work remotely, and organized ourselves in best manner possible to minimize business losses. How to manage a company and its employees successfully in times of crisis, and more importantly, in the aftermath, remains the biggest question for all entrepreneurs as leaders these days.

The situation, which is certainly unique in modern history, requires a great deal of ingenuity and flexibility. In addition to curbing the spread of the virus itself, these days are also crucial for actively planning and managing business damage. Now is the time to take crisis measures which will affect the fitness of your business after the crisis. With the recovery in mind, you may or should ask yourself what should we do today to protect all the stakeholders that are important to us in the business process?

In the blog Risk Management & Business Continuity: Is Your Business Ready for Disaster?we already wrote about why a business continuity management system should be established. This time, however, we offer you a summary of tips on how to survive an outbreak of a corona virus in a business. They were prepared by the Boston Consulting Group, the consulting firm which in their recent global survey also found that only a quarter of companies is adequately prepared for a major external shock.

1. COMMUNICATE OPENLY, REGULARLY, AND IN A CONTROLLED MANNER

Sometimes, business executives think that employees, stakeholders and suppliers have enough information about what is happening and what decisions are made: Is that really the case now? Do all your employees and stakeholders know what they need to do and what is the current situation in the company?

In times of crisis, events change daily, sometimes even hour by hour. That is why it is crucial, especially in larger companies, that your communication with key stakeholders is focused and controlled: meaning that all relevant information is located on one (web) site, is easily accessible to everyone, and also that your organization reports consistently. Make sure your conclusions, opinions and instructions are structured and organized and avoid mixed messages, ambiguities and misinterpretations that can also lead to the spread of untruths and perplexity.

During this time, leaders and communicators need to work closely together to establish a crisis communication strategy I which you define the key speakers, topics, channels and frequency of messaging. Be aware that on your involvement will reflect on how your (non) crisis preparedness will be perceived by employees and external audiences. Building confidence and constantly informing people about what is happening, taking action and making decisions is therefore a prerequisite for maintaining stability.

2. WORK ON IMPORTANT RELATIONS, MAINTAIN SUPPLY CHAINS, AND STAY LOYAL TO TRUSTED BUSINESS PARTNERS AND CUSTOMERS

Certainly, this time is not easy for anyone – keep this in mind even if one of your regular business partners is not able to make the deal or make the payment on time. It may be appropriate for you right now to consider extending payment deadlines, adjusting prices or offerings. The moments we are witnessing require listening to a fellow human being and understanding the context of the situation. Maintaining humanity and good relationships is therefore a core value that will pay off in the long run.

It is also a good time to think outside the box: what can you, as a business, to help your clients getting through this difficult period? The answer to this is your added value, which will be appreciated long after the crisis is over. How can you redeploy teams and stabilize supply chains using security stocks, alternative resources and new collaborations? Now is the time to be flexible, communicate with all existing and new relevant stakeholders and design temporary solutions. We are also convinced that the time is right to establish a range of collaborations and innovations that may also bring you the start of new, successful stories.

Get involved socially as much as possible. Every day we hear new, positive stories about how the home economy is activating and finding solutions to the health and social system in times of distress. That way you not only become part of the solution – you also build trust in your brand and showcase what values you as a business live on.

3. ESTABLISH A CRISIS MANAGEMENT GROUP AND ASSESS OPERATIONAL RISK

The current situation and the crisis need to be viewed from several angles in order to take the right measures and at the same time ensure business stability to the greatest extent possible. Your crisis management team should include experts in various fields; it is also imperative that the latter have the power to make decisions within the short time available to them.

Among the measures that are crucial for the duration of the quarantine is, first and foremost, the protection of the people and the provision of adequate protective equipment: for employees as well as for everyone with whom you are in contact; it is also essential to maintain and visibly support those employees who are at the same time fearful and are also facing private challenges.

It is also high time for any flexible work plans that involve teleworking or other solution infrastructures. And with that in mind, switching to digital tools for remote work is a great solution, but remember that it also puts a strain on your existing IT system. Therefore, pay special attention to the security of your communication and ensure adequate protection.

In the meantime, it is especially important to look as realistically as possible at the current situation and any damage that has already occurred, and determine where mitigation is needed and how long it will take you to re-establish your business. The key is to be aware of which company activities are systemic and which are optional. Above all, operations that are critical to you need appropriate plans to protect them. Be sure to be rational in financial terms, too, and prudently handle wages, promotions, new hires and similar additional expenditures, so as not to overburden the system.

 

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The eyes of the whole world are now focused on limiting the impact of the new virus and in reality, none of us can know for sure what its long-term consequences will be. Certainly, we can also take the crisis as an opportunity to learn, because in a short time it has shown us where our weaknesses are in the processes and also what we are strong at!

All businesses will need to take greater account of the principles of flexibility in policy development in the future, as we are again confronted with the fact that everything is changing and nothing is forever. The longer the crisis will last, the more changes we can expect. Already think about potential changes in your end-customers’ buying habits, greater digitization of services and offers, but most of all – stay home and stay safe. Even the crisis will one day pass – and then it will be time for new ventures again.

A crucial element of an effective risk management strategy is the setup of the risk control framework and identification of the appropriate KRIs (Key Risk Indicators). This task requires a precise definition of the objectives to select the potential elements that might hinder the achievement of those objectives.

The process of identifying the KRIs may bring significant advantages to an organisation:

A better understanding of risk dynamics: Defining and monitoring KRIs provides a deeper insight into the main threats to the business;

More reliable risk strategies: With a greater understanding of the risk dynamics the management team can define more accurate methods to assess and minimise potential risks;

Risk tolerance levels: Using KRIs, the management can define the company’s tolerance threshold and the risk limits that trigger a corrective action;

Better insight into risk trends: Periodic and regular monitoring of KRIs provides the organisation with a more accurate view of the risk trends. These might be used to determine which activities or business lines are more vulnerable and need further monitoring, as well as new opportunities for growth.


HOW TO SET THE KRIs AND HOW THEY DIFFER FROM KPIs (KEY PERFORMANCE INDICATORS)?
KRI can be explained as the antithesis of KPI, because of the following: while KPI (Key Performance Indicator) indicates how well a company is doing, KRI (Key Risk Indicator) shows the opposite. It warns the company about the dangers and threats and enables the windows of opportunity to react to a specific risk.

KRIs must meet a specific set of requirements:

Measurable: Either in absolute numbers or as a percentage;
Traceable: KRI’s should show a consistent scale of value that allows comparing of their evolution;
Predictable: KRIs should provide early signals of potential risks;
Informative: Providing an accurate outlook on the risk status.

Once the KRIs are selected, the management should define the thresholds that would trigger risk mitigation plans.

HOW FREQUENTLY DO WE NEED TO CONTROL THE RISKS?
Risk control is not a one-time project but needs to be performed as a cyclical process where risks are monitored systematically. But what is the optimal frequency? Real-time, daily, weekly, monthly or yearly?

These two measures need to be taken into consideration when we decide upon the frequency:

i) each realized risk (loss event) can have a different impact on the organisation and
ii) the frequency of risk control is determined by the impacts.

The risk control process must also include the information from the loss event management (do you track your loss events systematically? Stay tuned for our next blog where we will talk about the systematic Loss event management and all it’s benefits for the risk management) and data from all the executed mitigations. And don’t forget: be alert and respond to all the changes.

In general, we can say that KRI’s should be monitored regularly, and their evolution needs to be reported to the organisation’s management so that they are informed to make strategic decisions. In that sense, it is essential to be selective with the KPI’s, as managing too many of them might be complicated and could lead to wrong conclusions.

THE ROLE OF TECHNOLOGY IN RISK CONTROL (AND MANAGEMENT)
In many cases, monitoring and reporting KRIs manually in real-time might be challenging and time-consuming. If you still handle your monitoring and reporting in Excel tables you know what I am talking about. In these cases, only technology allows access to accurate and updated data on the various risk metrics to obtain immediate reporting.

Businesses with a clear risk management strategy in place can leverage technology to monitor the evolution of the KRIs and to deliver periodical reports to the management team. This automated reporting with customizable dashboards would liberate the company’s risk managers from low-value tasks such as risk monitoring, improve data traceability over time and minimise human error. And most importantly: it will save them time, and enable them to focus on the effectiveness.

P.S.: To refresh your knowledge about systematic risk management, check a few previous articles:

How to manage risks systematically?

How to identify risks?

How to define “a risk”?

Risk assessment [Part 1]: Setting up the risk measurement framework

Risk assessment [Part 2]: How to assess risks in practice?

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Contact our team if you need help with risk assessment.

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