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  • The New ‘Normal’ for Business - from reacting to embedding resilience

The New ‘Normal’ for Business - from reacting to embedding resilience

20 May 2020

As the COVID – 19 pandemic progresses, several countries are beginning to ease restrictions previously imposed to contain the spread of the pandemic. Most employees have been working from home for more than a month. Executives and boards are beginning to make decisions on how to handle this transition phase. The keys risks are spread across strategy, operations, technology, people, and compliance. Most companies will develop a return to work plan, which should consider various options and operating models. The key areas/issues the management and the board should consider are as follows:

Management will need to review the “return to work plan” to identify blind spots and risks associated with the plan. Possible questions - has “return to work plan” considered all the legal, compliance, information technology and supporting infrastructure, human resource, and stakeholder requirements? What are the fall-back options in the event of a sudden change in regulations by the government which could affect “return to work plan”? Is the decision-making process and allocation of responsibilities criteria clear?

Most companies will potentially start with a hybrid model of a certain percentage (most likely below 30%) of the total number of employees resuming work from the office and the remaining continuing to work from home. Management needs to identify who are the key employees to be in the office to ensure the smooth running of the business. If an employee is selected as key, – what are the implications if they express that they are not yet comfortable to work from the office? These are some of the considerations that management will have to think of and the associated risks on operations and efficiency and employee cohesion and engagement.

Due to the COVID – 19 pandemic, there has been changes in all aspects of business, thus making the current business plans and strategies irrelevant. Consumption patterns will significantly change in the near future across various sectors such as aviation, automotive, retail, and hospitality. Management will need to build resilience in the business models, including scenario planning in the short and long term to minimise risks.

Most governments are issuing several regulations to guide business re-opening to ensure businesses operates within the required safety and health requirements and minimise the spread of the virus. This will potentially mean the office space will be re-arranged to accommodate the social distancing and testing requirements. “Return to work plan” will need to be reviewed to identify potential non-compliance risks which could attract penalties or result in spreading of the virus and putting the health of employees at risk. Health and safety risks will become a big issue when employees return to the office. Risk and compliance functions will need to update their risk and compliance frameworks to incorporate emerging issues. 

Several companies may find themselves failing to fulfil their contractual obligations to their clients and customers and on the flip side - their suppliers may also fail to fulfil their contractual obligations due to COVID – 19 restrictions. Some of the key contracts to be affected are commercial contracts, construction contacts, rental contracts, and insurance contracts. Management should identify potential risks arising from these contracts and put in place the necessary mitigations. In some cases, they may need to seek help from external subject matter experts such as insurance experts and lawyers. Management will need to anticipate potential requests from clients and suppliers to re-negotiate contracts – what are the potential legal risks arising from this, and how can management mitigate them?

Human resource teams will be implementing “return to work plan” – sending out the necessary communications to key employees required to be in the office and explaining to those remaining at home why they may still need to stay at home. There are several risks within this process which needs to be proactively identified and mitigated. For example, what happens if an employee who has been identified to be in the office is not willing to be in the office because they fear for their health? Having some employees in the office and some at home creates additional risks on employee morale and engagement – how do you keep both sides engaged and working together effectively?

For some companies with all employees resuming work in the office, how do they give comfort to the returning employees that the workplace is safe for them, considering that the perception of safety is different?

For some companies, COVID – 19 significantly increased the technology spend as companies invested in technological infrastructure to enable employees to work remotely. Most companies were forced to "go green" during the lockdown period, and significant cost savings were realised. Are our clients and customers going to continue to accept digitally signed documents? Hard copy era is slowly disappearing - what are the risks with these arrangements in the long run, and how can these be mitigated? Does the company have adequate financial resources to sustain the digital transformation brought by the new normal? Board and senior management will need to be abreast with key technology and cyber risks arising from the extensive use of technology to support the business processes.

The “return to work plan” brings a new normal which needs to be accepted and understood by all stakeholders – suppliers, customers, regulators, employees etc. Management will need to identify the risks on non-acceptance of the new normal by other stakeholders and how this can be managed through a change management strategy and stakeholder management action plan. Management may also need to assess and identify changes that have happened to their stakeholders, and pro-actively manage them by identifying potential risks and mitigations plans. 

Supply chains have been affected by COVID- 19, and for most organisations, the management will need to revisit the whole supply chain model. Some of the key actions will be to profile all the key suppliers within the entire supply chain and identify key suppliers which will restore normal supply in the short, medium, and long term. What are the concentration risks of suppliers from one region? For example, several companies have a significant dependency for raw materials and ensuing business continuity if the region is impacted by extended lockdown. The era of functional silos within the supply chain is past and management will need to have full visibility of the whole end to end global supply chain to identify unexpected supply bottlenecks and demands.

Risk management processes will play a key role in assisting management to manage the current risks and the emerging future risks. Management must not only identify key risks and mitigations but use this opportunity to improve their business processes and bring inefficiencies and ensure consistency. This can only happen through a coordinated process of change management involving all key stakeholders. Trusted risk advisors can work together with the management and the board to identify and monitor key risks and the related mitigations.