In times of uncertainty or recession, boards need to be fully engaged. Taking the necessary steps in the short term and planning for possible medium- and long-term scenarios are matters of the utmost importance. In this crucial test, board members must prove their worth by asking the right questions.
The role of the board is to help management as it leads during a time of extreme turbulence, while also plotting a course for the future. During any full-scale crisis, companies need their boards’ best ideas and advice.
Great strategy always comes from precisely chosen questions. So, what questions should board members be asking?
Boards should inquire about these kinds of unexpected events and make sure management is thinking about the double-disaster scenario, too.
About the current situation
Practically all businesses have seen a coronavirus-related fall in revenue. Many talented professionals are now working remotely and the markets are plagued by uncertainty. In this context, boards need to be asking various types of questions. At the most basic level, are our staff healthy? Are our workplaces hygienic? How are we mitigating contagion there?
Zooming out, how much are we willing to support our staff while out of work? If new outbreaks occur, as seems likely, how will we cope with recurring waves of staff sickness over the next six or twelve months? We cannot all be Apple or Amazon, with mountains of cash and uber-generous stay-at-home plans. But we all want to do the best we can. These aren’t just short-term decisions, so we have to stay abreast of health forecasts in order to plan for the company’s future.
But we should also be asking what we can do to support the broader community as it struggles to respond to the crisis. Lots of companies are collaborating with soup kitchens, helping the unemployed, and looking for other ways to respond to community distress.
About financial matters
Remember the crash of 1987? That was when “cash is king” became the mantra for businesses struggling to recover. When times are tough, no asset beats cash. Now, as then, boards all over the world should be inquiring about the cash position of their companies. The follow-up questions become central to keeping the company alive. What is our cash position today? Are we generating cash, or burning it? What happens to cash in the case of a further decline in revenues? Do we have additional sources of liquidity? What are our monthly fixed costs, and how much can we reduce them in the case of a prolonged revenue decline? If revenues continue to stay down for a few quarters, companies must find a way to break even. Marks & Spencer, for example, is asking for rent holidays from landlords. Perhaps we should, too?
But even though the situation is already complicated, it can always get worse. Are we prepared for something else to go wrong? A natural disaster, cyber data theft, or another unrelated incident?
Boards should inquire about these kinds of unexpected events and make sure management is thinking about the double-disaster scenario, too.
We have to stay abreast of health forecasts in order to plan for the company’s future.
The value of experience
How much recession and crisis experience do we have on our board? That’s a big question at a time when experienced, tested directors can prove their worth. The most important quality for business leaders to have right now is judgment, developed through long years on the front lines: under stress, accountable, dealing with crises, and prospering in the face of it all. In moments like this, that accumulated wisdom pays off.
Over the next few quarters, every board will be tested. At this critical juncture, they must demonstrate the value of their function. The best ones will be asking all of these questions, and more.
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