How boards can combat pandemic-induced uncertainty

To face fallout from the lingering pandemic, boards are likely to prioritize five matters.

As the pandemic lingers, matters expected to demand the attention of boards of directors reflect much uncertainty.

Coronavirus variants have prolonged the pandemic despite available vaccines. Some of the worst global supply chain disruptions in decades are idling or delaying production and leaving retail shelves empty. The economic recovery is choppy. And some countries are experiencing labour shortages.

In the UK, "boards are feeling a little bit under the weather", said Simon Laffin, FCMA, CGMA. "They're uncertain about the pandemic. They're uncertain about getting enough labour. They're uncertain about the recovery, and they don't trust the government." 

Laffin is a nonexecutive director at Tokyo-based global media company Dentsu Group Inc. and UK property company Watkin Jones plc. Previously, he chaired the boards of three large public UK companies and served as a nonexecutive on several others. He is the author of Behind Closed Doors: The Boardroom — How to Get In, Get On and Make a Difference.

According to the 2021 Governance Outlook, a report by the National Association of Corporate Directors (NACD) in the US, the three key risks boards are facing are financial resiliency, supply chain disruptions, and risks related to employees, such as racial and gender equity and overall health and wellbeing.

To tackle the risks, the NACD report suggests boards focus on:

  • The right management team for the crisis.
  • Liquidity.
  • A viable core business.
  • Quick and astute decision-making.

"The pandemic has woken boards up that, above all the rules and regulations, fundamentally, you have to do the right thing," Laffin said, adding that in the UK for example, boards have repaid furlough money to the government, even though they were entitled to it. "But nowhere is it written down exactly what doing the right thing for stakeholders is," he said. "Boards are having to apply their own judgements, and all directors have got is their own moral compass."

Topping board agendas

Top board concerns in the US, as outlined by the NACD report, overlap largely with matters UK boards focus on, Laffin said. But one difference is that Brexit consequences are adding a distinct flavour to the pandemic fallout in the UK, as evidenced by the fuel crisis caused by a shortage of truckers, he said.

According to Laffin and the NACD, boards are expected to focus on the following five matters to face potential long-term implications of the lingering pandemic:

Financial resiliency: The monetary value of goods and services generated worldwide is projected to increase 6% in 2021 and 4.9% in 2022, according to the International Monetary Fund. It is a swift improvement from 2020, when the global economy contracted by 3.2% due to pandemic lockdowns, but the economic recovery is sporadic and still marred by epic supply chain disruptions.

Boards can help management emerge from the crisis by making sure the business has a strong balance sheet, the NACD report suggests. That's particularly important at a time when interest rates may rise and banks reassess their borrowing, Laffin said.

Liquidity has proved vital for many businesses to survive economic lockdowns and an uneven, choppy recovery. Boards should request forward-looking cash flow analyses based on fiscal scenarios that include worst-case assumptions to monitor the crisis management, according to the NACD report.

Also, the pandemic altered large parts of the business landscape. Boards should assess management's recovery plan and determine whether the company's strategic plan should be reassessed, the NACD report suggests.

Supply chain disruptions: Under pressure from tariffs, natural disasters, and the pandemic, supply chain bottlenecks in the past year have experienced the worst delays in about a quarter century. Following improvements in the second half of 2020, delivery times of manufacturing supplies again slowed drastically in the first half of 2021, according to a survey IHS Markit conducted with purchasing managers in 44 countries. The UK-based provider of business insights projected supply chain disruptions and delays in the container shipping system to persist into 2022 and maybe even 2023.

The NACD report identified supply chain disruptions as a key concern for businesses and suggested companies diversify their supply chains and gain good visibility into all supply chain tiers. To ensure management takes the right steps, boards should ask for assessments of supply chain risks and mitigations.

For example, management could present to the board scenario analyses around supply chains with recommendations that may lead to entertaining the possibility of reshoring or moving the supply chain away from Asia.

Workforce wellbeing: The pandemic focused attention on workforce health and wellbeing, flexible work schedules, and communication technology as lockdowns sent knowledge workers around the world home to work remotely.

By the end of 2021, 32% of workers worldwide are expected to work remotely, up from 17% in 2019, according to Gartner. But the global IT service management company projects numbers to vary widely geographically. In the US and the UK, more than half of the workforce is expected to work remotely (53% and 52%, respectively). In Germany and France, remote workers are expected to make up about a third of the workforce (37% and 33%, respectively). Rates are projected to be 30% in India and 28% in China.

The shift to more remote working is not only affecting the future of work but also compensation and retention and recruitment of talent. Boards tend not to get too involved in operational aspects of the business, but the workforce shifts can affect the future of companies. The NACD report suggests directors ask for assessments to ensure management adapts recruitment and retention strategies to the shifting challenges.

Diversity and inclusion: Having gender, social, and professional diversity on boards matters, and institutional investors in particular are pressuring companies to increase board diversity. Combined with a culture that values different perspectives, diverse boards can improve business performance, research suggests.

Many countries require companies to disclose the representation of women and social and ethnic minorities on their boards of directors. In about a dozen countries, companies face sanctions for not complying with mandatory provisions, such as board diversity quotas, according to the 2021 Corporate Governance Factbook by the Organisation for Economic Co-Operation and Development (OECD).

But results vary, the OECD's factbook shows. For example, from 2017 to 2019 the number of women represented on boards of public companies rose to 31.7% in the UK (up from 26.8%), 26.1% in the US (up from 21.7%), and 10.1% in Indonesia (up from 3.3%). At the same time, the number of women directors decreased to 13.1% in Greece (down from 17.6%), 21.6% in Israel (down from 23.1%), and 39.2% in Norway (down from 42.2%).

More attention should be paid to increasing the number of women and social and ethnic minorities in the executive management ranks, Laffin said. "The long-term answer to more diversity on boards is more diversity in the executive."

Women's participation in management ranged from 45.8% in Latvia to as low as 14.8% in Japan in 2019, according to the OECD factbook.

Incentives to retain women and minorities and help them through the ranks would go a long way, Laffin said.

More regulation: Technological advancements such as machine learning and artificial intelligence rely on data collection, but increasingly countries regulate whether and how companies may collect and use personal data.

More than 60 countries, states, and other jurisdictions have enacted or proposed privacy regulations since the EU adopted General Data Protection Regulation (GDPR) in 2018. That includes Argentina, Australia, Brazil, India, Indonesia, Japan, Kenya, Mexico, Nigeria, Panama, Singapore, Thailand, and more than half of the 50 US states, according to Gartner. The global IT service management company predicted that by 2023, 65% of the world's population will be covered by privacy laws that protect personal data.

With consumers increasingly valuing companies that protect their personal data, data privacy is turning from a compliance issue into a reputational risk, a recent report by the NACD suggests.

Also, more reporting rules on environmental, social, and governance (ESG) issues add to the increase in regulations, particularly in Europe and the UK, Laffin said. He considered the reputational risk of flouting increased ESG reporting requirements in the age of social media as a key incentive why boards feel pushed to abide by them.

"Boards are worried about the sheer weight of ESG reporting that's coming in," he said. "And writing reports is different from doing the right thing."

Sabine Vollmer ( is an FM magazine senior editor.