Meetings about risk management in pandemic times are becoming increasingly frequent in the manager’s agenda. There are uncertainty scenarios that leaders need to face in the near-term future as the coronavirus has spread worldwide, completely changing the way of people’s lives.
We faced a panorama of uncertainty, fear, and isolation. Working at home was not always easy neither for companies nor for employees, and we used to believe it would last only few months, yet we are currently living and reacting to the second year of COVID-19.
While it is impossible to predict all risks (especially in a pandemic time), having a well-planned risk management model prepares the organization to better face the challenges and uncertainties that may arise.
At Actio we work to ease the implementation of efficient risk management practices in varied types of companies and organizations from different sectors, avoiding our clients’ worries about uncertainty.
Do you want to learn how we do it? Keep reading this article.
The importance of risk management in times of pandemic
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Let us agree that risk is the probability that an event will affect our interests directly or indirectly.
In this sense, it is important to be aware of the possible consequences so managers can decide how to react, since they cannot only reduce or mitigate a risk, it can also be used to reorient your company’s activities in such a way that it keeps growing in difficult times.
Thinking under this perspective, as a result of the covid-19 pandemic we have several scenarios that can bring risks to different types of companies, mainly related to business profitability, such as:
- Lockdown obligation, closure of physical stores, and little experience in e-commerce;
- Decrease in customers’ purchasing power;
- Covid-19 infection among collaborators whose work cannot be remote;
- Data protection risks and cyberattacks because of the work-at-home model;
- Disruptions in supply chains;
- Bankruptcy or inability tomeet financial commitments, among others.
According to a study conducted by Fortune magazine, 94% of companies producing building materials had to change their operating plan quickly to generate and execute a short-term tactical plan that could minimize health risks to people since production cannot be performed remotely, thus ensuring the continuity of global supply chains.
How efficient risk management should be
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To make the risks management so efficient, the first step to do is to identify risk potential. By planning each of the processes and activities, as well as the projects started, it is possible to check which are the threats and opportunities related to your business. In addition to defining risks, it is essential to define what treatment will be required for each identified risk and define control points and policies at acceptable levels.
This is not an easy task, sometimes because managers are not sensitive to the issue of risk prevention. Some of them consider their companies have enough financial liquidity to weather any situation that may arise, as if that were all they need to foresee.
Our management experience shows that companies are increasingly susceptible to losses from unforeseen risks. In a globalized world, the probability of a crisis arising in China, Europe or the U.S. might affect our local business has noticeably increased. A good example of this is the crisis caused by the covid-19 pandemic.
Planning requires constant review. For example, in the World Economic Forum’s Global Risk Report 2020 the risk of “infectious disease” ranked last in the top ten risks in terms of impact and it was not even mentioned in the list of the top 10 risks in terms of probability.
Zurich, the world-renowned insurance company who took part in the preparation of this report in 2019 , did not foresee the risk of a pandemic by the end of that year.
In addition to identifying risks and implementing response actions, it is very important to verify control points and monitor changes periodically.
The purpose of constant analysis is to weight changes in probabilities of each risk variable.
There are tools that help managers to detect evolutions in risks, update the information, and develop new mitigation strategies.
In the map above, for example, the risks of infectious diseases and cyber-attacks are not linked, but remote work triggered the correlation between the two risks, since now the company’s confidential information is not concentrated in a single place where its dissemination can be controlled; with the work-at-home model, the information is dispersed and the probability of data loss or theft increases, as well as cyber-fraud.
Do you see how important constant risk review is? Therefore, we reinforce it’s not about simply listing the risks, we need to constantly weight changes in their probabilities to better manage them..
Efficient risk management in times of pandemic
These are seven aspects we recommend considering when it comes to risk management in pandemic times:
1. Map the local and global risks to which your organization may be exposed
It is essential that you look to understand which problems may, to a lesser or greater extent, affect your company in the short and long term.
Then you need to calculate the risk probability and classify them by probability levels.
Finally, analyze the impact on your business in case an unfortunate foreseen event occurs.
2. Organize teams to make agile decisions in emergency situations
Today, emergency measures are increasingly common in the fight against COVID-19.
Their aim is usually to find alternatives that allow controlling the spread of the virus and minimizing the negative impacts they cause..
Therefore, it is important that you have already organized one or more teams to respond quickly to these measures, effectively avoiding or minimizing the negative impacts of events such as the local government’s decision to declare lockdowns or force companies to temporarily suspend operations.
In addition, the implementation of emergency measures allows your organization to improve the response to other risks, such as:
- Suspension of the rule of law;
- Tax increase;
- Financial bankruptcy of suppliers and customers;
- Food crises;
- Economic crises.
Therefore, having the support of your team to face these different types of circumstances will help you to respond faster to upcoming threats.
3. Have flexible processes and autonomous teams
ECompanies and teams must have well-developed adaptative skills to minimize the impacts caused by crises.
Therefore, having processes configured in a way that simplifies your flexibility is a competitive advantage when it comes to tackling difficulties.
According to a study by The Getulio Vargas Foundation in Brazil, companies that have well-structured processes become more flexible after granting more autonomy to their teams, by trusting their organization capability, so they can easily adapt to new contexts. This explains why the employees were able to organize themselves to continue performing their job activities at home just as well as at the office.
4. Share information appropriately
It is important to share information appropriately..
It is useless to have a very well-prepared action plan if those who are going to carry it out are unsure about what their responsibilities are.
In other words: it is essential to ensure that collaborators understand the instructions on time, and without communication noise.
5. Pay attention to the physical and mental health of employees
Your main resource when you emerge from a crisis is human capital. Take care of it!
Having a high rate of sick employees will have a direct impact on productivity and maintaining the company's processes.
Therefore, exercise a management that also considers the physical and mental health of employees.In pandemic situations it is particularly important to evaluate the psychological condition of employees due to elevated levels of stress, changes in routine, fears, and possible grief.
6. Always keep the customer relationship in mind
It is essential to plan you will communicate change in the company’s productive model to customers before it negatively affects them..
Find ways to reduce hassle and improve your company’s efficiency in delivering products or services.
7. Optimize your risk management tools: use technology to your advantage
Technology has been a facilitator and helped managers to deal with risk management in pandemic times.
It eases the monitoring of business performance by integrating different areas and contributes to a more effective and closer dialogue with customers.
The Risk Management module from Actio helps companies track threats that can compromise the business results in a practical and efficient manner, providing the information you need to make decisions on a single software. It is not by chance that our client portfolio has kept growing in times of pandemic!
Our system allows the identification and registration of threats, the definition and creation of action plans for treatment of raised risks and, in cases of residual risks, allows control and management to ensure, efficiently, the correct monitoring of these risks. In addition, it allows to organize risks in arrays that help their analysis and management, as well as applying best practices in management of preventive and corrective action plans.
Conclusion
In this context, we can conclude that risk management in times of pandemic is essential to minimize the effects that companies may suffer during this period.
Therefore, it is essential that companies invest in processes and technology to define the risks that involve each business and its treatments, define control points and policies at acceptable levels, carry out constant reviews and analysis of deviations so that their operations are more secure in the face of of the countless uncertainties that may affect them directly or indirectly.
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