Enhancing Board Resilience: Boards and Crisis Communications
Audley recently delivered an educational session for Women On Boards looking at the critical need to address crisis communications and the pivotal role boards play in navigating turbulent times. Read on for crisis management insights from the session…
Despite the increasing complexity of crises faced by organisations, only a mere 8% of boards engage in crisis simulation exercises with management. Shockingly, merely 25% of executives have explicit discussions about the board's crisis roles and responsibilities in the preceding 12 months. This underscores a significant gap in preparedness that boards must urgently address.
Activism and litigation targeting boards and directors have intensified, emphasising the importance of non-executive director (NED) and chairman behaviour and character. Focusing on fiduciary duties and environmental, social, and governance (ESG) factors has become imperative amidst today's crises, which often revolve around leadership incapacitation and conduct-related allegations.
A culture that fosters openness, transparency, and a ‘speak up’ mentality is essential for encouraging NEDs to challenge management and ask difficult questions.
In an environment where NEDs feel empowered to voice concerns and question management assumptions and decisions, the likelihood of identifying and addressing potential risks increases significantly. Non-executive directors bring diverse perspectives and experiences to the boardroom, which can lead to more robust discussions and better decision-making processes. However, for NEDs to fulfil their oversight role effectively, they must feel comfortable challenging the status quo and expressing dissenting views without fear of retribution.
Furthermore, when NEDs feel empowered to ask difficult questions, they can uncover potential blind spots and mitigate risks before they escalate into full-blown crises.
However, fostering a speak-up culture requires more than just lip service; it requires a commitment from both the board and management to create an environment where dissenting voices are valued and respected. This may involve implementing formal mechanisms for NEDs to raise concerns, such as anonymous reporting channels or regular executive sessions without management present.
In addition, proactively building organisational resilience entails embedding a systematised crisis management approach into the corporate DNA, encompassing culture, processes, and communication protocols.
Pre-crisis readiness necessitates a broader view of risk, with boards defining risk appetite and aligning risk registers with communication strategies. Scrutinising executive crisis management plans, conducting simulations, and developing crisis playbooks are imperative steps. These playbooks serve as guides for coordinated responses, ensuring business continuity and facilitating learning from crises.
During crises, the operational management of the crisis should be left to the CEO (unless compromised) and their team, and the board should play a supportive role. This includes asking the right questions, testing management’s assumptions while framing challenges with appreciation for and support of the stressed executive team. The authenticity and compassion exhibited by boards and executives in communications are pivotal. Transparency, rapid decision making, and employee engagement are paramount. Boards must support management while actively engaging with key stakeholders and demonstrating resilience in the face of adversity.
Most critical is agreed communication channels between the CEO and the chair, the CEO and the board, and the chair and board. The chair must play an important role in managing information flows while providing the CEO and team clear guidance to manage the crisis.
Boards should also consider the long-term impact of the crisis and plan for changes to the company’s future strategic direction; for example, new operating models, divesting of a division, greater diversification, changes to supply chains, adapting to customer behaviours, and changes to improve employees safety and well-being.
Post-crisis, introspection and investigation are vital for identifying root causes and implementing necessary changes to enhance resilience. Boards should reflect on their crisis management approaches, incorporate lessons learned, and adapt to evolving risks. By prioritising crisis preparedness, fostering resilience, and embracing transparency, boards can navigate challenges adeptly, safeguarding the interests of stakeholders and ensuring organisational longevity.
If you would like to learn more about Audley's proprietary 3i model for crisis management, please get in touch at info@audleyadvisors.com.
By Annie Coleman, Senior Advisor at Audley, and Meglena Petkova, Director at Audley.