The COVID-19 pandemic is clearly becoming a global crisis. Supply chain disruption, travel bans, and changing consumer behaviour are threatening business organisations and national economies alike. In this time of unfolding crisis, organisational leaders will need to step up to reassure and guide customers, vendors, stakeholders, and employees.
However, managing such a rapid and complex crisis is fraught with risk for your reputation and your organisation and needs to be approached carefully and honestly.
"Be under no illusion: A really bad crisis can destroy you, your personal and professional reputation, as well as the reputation of your organisation," stated Chris Philipsborn, managing partner in the London office of Kreab Worldwide, a global strategic communications firm. "And it can absolutely destroy huge amounts of value."
Companies that don't handle crises well can lose customers and credibility and see a significant plunge in shareholder value and stock prices, said Jonathan Hemus, managing director of Insignia, a crisis management consultancy in Birmingham in the UK.
As this current crisis plays out, finance heads will play key roles, since almost everything revolves around money and the company's financial survival. Finance leaders "tend to take you back to the bottom line, tend to be the voice of realism, and tend to take you back to the reality of having to pay your people at the end of each month", Philipsborn said.
But leaders frequently make errors once a crisis hits. They don't take "a strategic view of the situation", Hemus noted. They also often fail to address the issue quickly enough and then face a media firestorm. Or they neglect to speak with key stakeholders — employees, investors, and customers — until it's too late.
"In every crisis every stakeholder expects the leaders and the company to care, and failure to show you care quickly causes trust to fall," said Helio Fred Garcia, president of crisis management firm Logos Consulting Group in New York and author of the book The Agony of Decision: Mental Readiness and Leadership in a Crisis.
So how do you as a finance leader respond in real time to a crisis like the worldwide spread of the new coronavirus? Over and beyond your company’s essential risk preparedness programme, what skills and abilities do you personally need to possess? These three communications experts offer the following:
Mental readiness. Before a debacle occurs, you should be psychologically ready, which is a finely tuned state of preparing yourself to how to handle a cataclysm. "The foremost mistake that leaders make is they are not mentally ready when the crisis happens," noted Garcia.
When it does, you must be able to contain panic quickly "because panic leads to bad decision-making and sometimes to paralysis", he said. You should also be able to avoid reactivity or blaming others for the mishap, both common blunders. And you must be humble. "Arrogance is a toxic leadership trait in a crisis," he added.
Team-building skills. During a crisis, you must also "surround yourself with the right people and people you trust — and you need to figure out in advance who those people are", Philipsborn advised. Make sure that you are working with other leaders within the organisation to develop a strategic plan and communicate regularly amongst the team to adhere to the strategy.
Analytical and decision-making skills. In a catastrophe, company leaders will be bombarded with information, some of it speculative, inaccurate, or conflicting. You will need good analytical skills to make sense of this noise, and financial leaders often naturally assume this role.
You must "identify what is true, what is important, and what the implications of that information are in order to guide decision-making", Hemus said. Also, you should have solid organisational and decision-making skills so you can help your company avoid confusion and take the best course of action. "The worst decision is no action at all," he noted. "Then you will find the crisis managing you, rather than you managing the crisis."
Emotional intelligence. During a crisis, it's vital that you or another leader express empathy for stakeholders and have an ability to see the situation from their perspectives, Hemus said. Also, you should mindfully listen to the rest of the crisis management team to understand others' points of view. You can't learn these skills through training necessarily, but if you are not empathetic or a good listener, help identify someone on your internal crisis management team who best owns this skill.
Communication expertise. Leaders, particularly CEOs and CFOs, must communicate effectively to stakeholders and the public to help influence the course of action following a crisis and to ensure the company's voice is being heard. News spreads fast, thanks in part to social media. "In all crises, communication is half of the solution," Hemus said. "The other half of the solution is fixing whatever has gone wrong."
Establishing goodwill. Relationship building — with employees, shareholders, and clients — is crucial for managers and leaders. Place strong emphasis on establishing amity, accord, and support with those stakeholders who matter the most. "You need to set up a bank of goodwill in good times, to draw on when a crisis hits — and the best leaders know that," Philipsborn said.
For more news and reporting on the coronavirus and how management accountants can handle challenges related to the outbreak, visit FM’s coronavirus resources page.
— Cheryl Meyer is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.