“People will panic and the virus will be the least of our worries.” Contagion, 2011

“People will panic and the virus will be the least of our worries.”
Contagion, 2011

As recently as February, a client Board which had engaged me for a governance assignment, wanted me to fly interstate in late March to attend a scheduled offsite Board meeting to present the findings of my investigation and report.

But that’s not what happened. Instead, I presented to the Board in their Sydney head office with only the Chairman and the Managing Director present in the cavernous boardroom, and all of us observing the latest “social distancing” health guidelines. The other Directors, including one in self-isolation after returning from overseas, were participating in the Board meeting by video conference.

The global corona virus pandemic has changed how we do business in every way. The lexicon of our times includes words, phrases and acronyms like “home isolation”, “flattening the curve”, “QE”, “the R nought” “PPE” and “WFH”.

What we thought was normal today, changes again tomorrow.

Just like my client, Board meetings are being held virtually, using video and teleconferencing technology, rather than having eight to 10 Directors meet in the same room for a day, with members of management and guest presenters coming in and out. It was once common for the external auditor to bring other members of the team, if only to gain experience of presenting to a Board. Now the presentation is via videoconferencing and conducted only by one of the audit firm’s partners.

In conversations with clients these past weeks, I have asked Chairmen, non-executive Directors and CEOs, “to what extent has the corona virus pandemic impacted the Board’s Agenda?”. “It is the Agenda,” one Chairman replied. Said another: “It’s all we talk about.”

The pandemic impacts every aspect of business continuity and crisis planning simultaneously –

liquidity, funding, staffing, cash flow, revenue, resource allocation, strategic planning

When Boards consider crisis management, it’s usually in the context of a single event which can be corralled to some extent – a cyber terrorism attack, a fatal accident. But the corona virus pandemic infects everything, and there is currently no end in sight. Federal and State government policies which have progressively shut down the country and the economy have created a ripple effect in consumer behaviour that has quickly become a way of being.

The key conversation for Boards is about scenario planning: “what happens if the stock market drops x% further?”; “how do we maintain cash flow and remain solvent?”; “how do we look after our staff?” and “what happens if we have an outbreak of corona virus in our offices or off site locations, here or overseas?”. Said one Audit Committee Chair:

“We’re stress testing cash flow scenarios that would have been laughable only a few weeks ago.”

Listed companies are pulling earnings guidance as it’s impossible to make financial predictions in an environment where the shutters of the economy are gradually and systematically pulled down. AGMs are being postponed or being held virtually; dividends are being delayed. At least the state of the share price is less painful when everyone else is in the red, too.

The mantra from Chairmen and Boards is to let management get on with the job in these mission critical times. CFOs are working even more closely with Audit and Risk Committee Chairs as companies move through essential work, such as half-yearly reporting, as quickly as possible to leave the Agenda free for essential conversations at a time where little stays the same for very long.

“At the moment it’s all about survival,” a Risk Committee Chair commented. “Anyone who went into this with a highly-geared balance sheet is in trouble.”

To cite Warren Buffet’s famous comment during the GFC: “only when the tide goes out do you discover who’s been swimming naked”.

But in adversity there are opportunities, too, as some companies offer deals on their assets to financially-strong competitors in order to remain liquid.

The 2011 movie Contagion is eerily prescient, and as it turns out, is a playbook for our times. Its most important message is to practice truthful and regular communication. As one character implored, “We just need to make sure that nobody knows until everyone knows” only to find that without clear messages, panic will cause people’s behaviour to disintegrate quickly into a dystopian world, or at least a new world order where we hoard toilet paper and pasta, and gather in large crowds on the beach.