Though the world was put on notice when the coronavirus first appeared last year, COVID-19 was not perceived as a Black Swan event in the U.S. until a few weeks ago. Black Swan events, such as the September 11th attacks and COVID-19 are rare and unpredictable with a severe impact. COVID-19 has fundamentally changed the way in which business is conducted and it has proven to be industry agnostic; from aviation and hospitality to financial services and higher education, no sector is immune from its impact.
From a corporate governance perspective, it highlights the critical role of risk management and mitigation. Though preparing for unanticipated risks, particularly those highly unlikely to occur, may seem like a distraction or even unnecessary exercise given the day-to-day requirements of operating a business, its value is incalculable when Black Swan events occur. Pandemic planning is certainly not part of the normal calculus and it is important to resist the temptation to confuse business continuity planning with pandemic planning. Business continuity planning addresses how an organization will function in the event of disruption. Pandemic planning addresses how in the midst of a public health crisis, with limited staff due to widespread infection, how to operate as well as how to protect and insulate employees who are working. While businesses may not be able to anticipate the exact nature of Black Swan events, developing risk management processes that are rigorous and robust places employers and employees in the best position when potential unanticipated events occur.
In addition to highlighting the need to consider Black Swan events as part of the risk assessment and planning process, COVID-19 gives organizations an opportunity to demonstrate their corporate values, and by extension, their organizational culture. It has long been recognized that culture can be an asset or a liability. From how companies handle furloughs to how universities treat students forced to leave campus, the way in which organizations choose to handle disruption is a reflection of their culture. At one end of the spectrum, the Pennsylvania Attorney General has received over 1000 consumer complaints regarding price gouging of products ranging from toilet paper to hand sanitizer.
Conversely, companies such as Facebook and Charles Schwab have taken positive, expansive crisis management measures by paying their employees cash bonuses during the outbreak. Other companies, ranging from restaurants donating excess food and paying 100% of employee medical premiums for a designated period of time, to retailers compensating employees for lost shifts during the temporary shutdown, are engaging with their stakeholders in ways that reflect their organizational values and culture. By doing so, these companies enhance their brand image, increase their brand equity, and serve as examples of corporate culture as an asset.
COVID-19 forced us to shift paradigms. It is disruptive and it is uncomfortable; however, like most Black Swan events, it demands that we think critically as we navigate a new landscape, which may forever be altered.