The Critical Role of the Board in Crisis Management

At a glance

  • Every company must be prepared for a crisis situation.
  • Expectations have never been higher for management teams and boards to act quickly in order to restore confidence when a crisis hits.
  • Companies that are most successful in navigating an adverse event are those that have made an effort to build trust with all of their key stakeholders, including their investors, through engagement and responsiveness to feedback over time.

Why Preparation Matters

In the always-on news cycle, information that once would have taken days or weeks to reach the public can now be disseminated widely in mere seconds. With an immediate time-frame, companies are under more pressure than ever to respond to a crisis situation even while facts are still emerging.

Companies should consider:

  • What is the plan for engaging with investors before a crisis occurs?
  • How should engagement with key stakeholders be prioritized if a crisis hits?
  • What role will the board play in engagement?
  • How will investor feedback be tracked and implemented into go-forward practices to demonstrate responsiveness?

Speaking in one voice when a crisis hits

In a crisis event, companies must speak in one voice to ensure that a unified message is delivered to all stakeholders. Management teams will be expected to take the lead in communicating to the public at the outset about what happened, what steps have been taken, and expectations for actions ahead. Investors will be immediately focused on a company’s risk oversight mechanisms, management accountability, and board response to the adverse event.

Boards should consider:

  • Which leaders are responsible for communication and to which stakeholders?
  • What is the internal source of information and which third party sources are necessary?
  • Were directors proactive in their oversight of risk identification and mitigation?

Prepare

Companies are increasingly taking steps to ensure they are prepared for Day One of a crisis event.

Boards should consider:

  • What are the most likely risks that a company could face and what are the playbook responses for those scenarios?
  • Have the board and senior management teams practiced their roles in a mock crisis?
  • How prepared is the company today to respond to the kinds of crisis identified in the company’s Annual Report as material risks?

Understanding the ‘long tail’

Companies that emerge from a crisis situation are faced with a series of shorter and longer-term risks. Annual meetings provide a natural assessment point for investors to evaluate how effective the management team and board’s response has been. These votes are the ‘long tail’ of crisis response and, depending on the perceived level of responsiveness, can take the form of ‘vote no’ campaigns against individual directors, votes against executive compensation, or shareholder proposals that target topics related (sometimes tangentially) to the crisis.

‘Every crisis that emerges is an opportunity’

Today’s increasingly interconnected world has only enhanced the need for companies to engage with all of their stakeholders on known and emerging risks. More than ever, engagement discussions with investors encompass a range of environmental and social topics such as corporate culture, gender pay gaps, employee development, and retention and climate change.

Activating the connections, knowledge, & opportunities women executives need to lead at their highest level of impact. Learn more: athenaalliance.com

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