Conventional risk management theory tends to view crisis management as more of an event than an evolving process. Indeed, many leading organisations have comprehensive preparation plans and have responded to the current Covid-19 pandemic by establishing teams to develop and manage contingency measures. While these are pragmatic responses, they are still just responses to an inherently narrow view of the situation and reflect the general perception that the organisational response is best managed through a specialist custodian such as the risk management function or a leadership committee.

As we continue to argue, this conventional risk management view is constrained by some weaknesses, the most glaring of which is the almost universal perception of risk management as a specialist ‘centre of excellence’ that is ultimately the shadowy domain of a few professionals.

However, the world is becoming a more complex environment and the impacts of adverse events (the current pandemic is the most obvious example) are being felt with increasing severity and a devastating multiplicity of consequences. The more astute organisations are starting to realize that risk management is more than protecting shareholder value (however enormous and encompassing that may be); risk management now includes the more abstract concept of values-based decision-making. What does this mean in relation to pandemic management? It means that organisations need to develop their capacity to continually assess their organisational and external environments and ensure their readiness to rapidly deploy available resources to respond as needed. It is akin to taking a medical reading of the pulse – just as the pulse reading is a vital insight into the heartbeat, this enhanced organisational capability is similarly critical to the “life” of an organisation.

A key element of this enhanced capability is the involvement of employees from the breadth of the entire organisation (not just specialists like the Risk Management function or specially formed leadership teams).

This is a much more difficult approach to envision than it is to implement. Actually, the real difficulty is trying to shed years of conventional risk management practice and embrace the ideals of a more inclusive approach. The key to enhanced organisational capacity is giving more people more tools to make the right decisions. If you are reading this and you still doubt the value of equipping decision makers with a set of values that will enable better risk management then consider this: some of the most adverse risk events have struck organisations that already possessed extremely sophisticated risk management systems. The evidence is clear: increasing the complexity of risk management systems does not ensure a correspondingly more sophisticated response to risk events. In fact we have known instances where the very complexity of risk management systems has stalled decision making processes during crises!

So what are the core competencies that will allow organisations to thrive in the age of the pandemic and other great crises? In this brave new world, competencies that will allow organisations to thrive are the ones which equip their staff with values-based decision-making capabilities. The following is a simple framework we share with clients:

Practice makes perfect: The frequency of risk management activities in organisations (annual workshops, biannual fire drills, annual audits, multi-year certification exercises etc) is usually quite low. These activities do not inherently encourage values-based decision-making; they tend to reinforce compliance-based decision processes. The trouble is that even in the best of times many issues are overlooked, ignored or simply poorly managed. Organisations need to think about how to establish organisationally representative groups which convene much more frequently (and at least monthly) to engage in crisis simulations. The “leaders” of these monthly simulations do not have to be the same individuals all the time; in fact it is beneficial to rotate the exposure to and leadership of different scenarios. The key principle of values-based decision-making is that the organisation is not attempting to embed precise guidelines to staff but, rather, it is hoping to inculcate collaborative and outcomes-based approaches to problem solving so that staff can more confidently manage crises. In a practical sense this necessarily means shedding some long-held assumptions about the operating environment and embracing new thinking: for example, the more successful organisations will start to view some of their traditional competitors as partners as part of their possible responses to unfolding crises.

Impart appropriate tone from the top: risk management is underpinned by the “actions speak louder than words” maxim. Employees take their cues from the actions of their leaders and in the case of risk management where the shortest possible route is often the most preferred approach, the tones and actions of leadership can leave a significant impact on risk-related outcomes.

When leaders demonstrate a willingness to be an active part of the solution and a readiness to deal with adverse situations, what they are actually doing is transferring behavioural knowledge (how to effectively manage issues) into the organisation’s subconscious. On the flip side, when leaders are reluctant to hear bad news or if they are dismissive of undesirable feedback, they may not be aware that they are inadvertently creating an environment in which ethical shortcuts are likely to be favoured by employees.

A case in point is that of the disclosure of emissions information of the Volkswagen (VW) Group. Volkswagen is composed of a number of other automotive bodies like VW itself, Porsche, Bugatti, Audi, and others. The tone from leadership, which eventually became its strategic goal, was to overtake Toyota as the world’s largest automotive manufacturer. Its growth strategy was to integrate the disparate and largely autonomous bodies named above (whereas Toyota has largely been a homogenous organisation). This ‘drive’ probably led to the win-at-all-costs attitude that entrenched itself within VW and eventually resulted in the organisation making false representations about the efficiency of certain diesel engines to make them more attractive to the consumer market. By all accounts, the damage has been quite material: The scandal wiped out €27.4 Billion of VW’s market value within a matter of days; lawsuits and regulatory fines followed. It has been a costly scandal for the VW Group, both financially and reputationally.

Another example of how the tone from the top can impact the rest of the organisation is the BP Deep Water Horizon disaster. A crisis has a way of exposing poor organisational cultures. Unfortunately, the organisational culture prevailing at the time encouraged short-term pursuit of profits at the expense of safety and environmental standards. We know, for example, that during the planning phase of this exercise, BP elected to use a cheaper casing seal. Ultimately, this culture contributed to the events of April 2010 when the issue was blown open (quite literally) by an explosion on the Deepwater Horizon oil rig which caused a marine oil spill in the Gulf of Mexico. The crisis deepened when it became clear that BP was struggling to cap the gusher on the sea floor (that process eventually managed after months of efforts). BP’s reputation suffered greatly as it lied about the size of the spill (asserted that it was smaller than it was), denied the media any access to clean-up sites and when CEO Tony Hayward displayed a petulant attitude, despite the loss of life resulting from the disaster, a torrent of criticism came rushing at BP as the fallout grew. Damage to the BP brand (recall that previously BP had been a leading light in socio-economic responsibilities) was enormous. The U.S. Environment Protection Agency stripped BP of any bidding rights for new work in the Gulf of Mexico and supplying fuel to the military. In terms of shareholder value, from April 19, 2010, to June 25, 2010, BP’s share price came down by 55%—from $59.48 a share to $27 a share.

Conclusion: It is clear that during enormous crises some true leaders emerge to drive organisations and societies out of the problems. We also know that many leaders prefer to yield to specialists in such times of crises. But to create organisations which are resilient in unpredictable times requires a paradigm shift from organisations whereby the ability to evaluate and adapt is embedded to an extent that it is considered a cultural trait of the organisations. Only then will organisations be in a position to discharge a robust response to crises such as pandemic.