The COVID-19 pandemic has led many business leaders to reassess how they manage business risk. Here's how to turn panic into productive action.
Since the start of 2020, about 43 percent of U.S. businesses have closed, at least temporarily, due to the coronavirus pandemic. The owners of these businesses cite reductions in demand and staff health concerns as the top reasons for closure.
The coronavirus pandemic is one of the most devastating infections in human history. Since it started spreading from Wuhan, China, to the rest of the world, the virus has hit the global economy hard.
Businesses in every sector are reeling from the effects of COVID-19. Business leaders must find new ways to manage business risk to successfully navigate the changes that face them now as well as get ahead of the curve in managing new upcoming risks.
In this post, we outline several proven risk management strategies that can help your business cope.
What Is Business Risk Management?
Risk management is the process of identifying potential risks and disasters before they happen. This way, you can set up procedures to avoid them, reduce their impact, or find ways to cope with the consequences. Every business needs a solid risk management plan given the many threats that face today's businesses.
These risks include operational risk, marketing risk, credit risk, and reputational risk.
With a sound business risk management plan, it's easy to detect possible threats and eliminate them before they materialize so they won’t derail your business and hinder your success as a company.
What Risks Have COVID-19 Posed to US Businesses?
As the coronavirus crisis deepens, businesses throughout the country continue to face unique challenges they must overcome. These include:
Disruption of operations due to social distancing. One of the top actions that health officials have recommended to slow down or stop the spread of COVID-19 is social distancing. The practice entails keeping at least six feet between yourself and other people who don't belong to your household. It has often restricted hours of operation and capacity limits for businesses.
Social distancing policies are going to continue to be necessary in U.S. workplaces, learning institutions, and other places for some time to come. As a result, most travel and business events have been canceled or curtailed to curb the spread of the highly infectious virus.
Social distancing policies have significantly disrupted physical buying cycles. These cycles account for most of worldwide business activity. It's the reason so many businesses have had to halt operations.
Reduced employee productivity. All industries have been affected by plummeting staff productivity. Many Americans are unable to work because of illness, either directly or indirectly. Sure, your employees may not be sick, but there is a good chance some will not be able to work due to the need to take care of a sick family member.
Many employees have been forced to work in shifts or remotely. Some employees need more flexible working hours because of daycare and school closings. Business operations have been affected as a result.
Strained supply chains. The world economy remains highly integrated, with most companies and countries relying on vendors to run. COVID-19 has caused purchasing delays and delivery holdups.
Manufacturing and heavy equipment supply chains have been highly affected. Businesses that deal in pharmaceuticals, electronics, and consumer goods haven't been spared either.
Recession and investment pull-back.
The hospitality industry hardly shows any signs of a quick recovery. People have lost jobs and investors are cutting back growth investments.
As of now, experts are still unsure whether a proven coronavirus vaccine will be available before the start of 2021. Businesses need to brace themselves for difficult times ahead.
Civil unrest and economic instability. With the election cycle, times have never been more uncertain for U.S. businesses. The election represents two different sets of policies that will alter how businesses operate. Add to all this “good” news the vitriol that is accompanying the election with dire predictions of long-established norms being tossed out, outcomes contested, and who knows what else, wearing rose colored glasses is not a risk mitigation strategy we would recommend!
Now that we've seen some of the business risks associated with the pandemic, it's time to look at what you can do to defend yourself against these risks. Below, we discuss seven mitigation steps that can help maximize your employees' wellbeing while keeping your company up and running.
Create a Crisis Management Task Force
To manage a crisis, especially one as big as COVID-19, you need sound governance and process management. If you don't already have a crisis management task force, this is the time to set up one. This task force should directly report to senior management.
The crisis management task force's first responsibility is to assess potential risks and come up with possible responses. Other responsibilities include monitoring, analyzing, and reporting how your business is coping with the crisis.
Identify Existing and Emerging Risks
During uncertain times, a business can face multiple risks at once. That's why you need to initiate a risk assessment project when setting up a crisis management task force. Make a list of all the current and potential business risks, including cybersecurity threats.
After making an inventory of the risks your business is facing during the pandemic, your team will have a clearer understanding of what's really going on. This information provides them with the fundamentals they need to manage the situation.
Your risk identification process should focus on four main areas:
- People. Find out the safety risks of COVID-19 to your staff, customers, and other stakeholders. Identify things that have the potential to affect employee motivation and engagement.
- Financial aspects. How will COVID-19 affect your company's finances? Will your clients continue to buy and make payments? What liquidity risks should you prepare for?
- Supply and operations. What are your supply chain and production risks? Find out how the pandemic is affecting your operational processes too.
- Demand changes. Chances are there's going to be a disruption of demand for your products or services. How will this disruption impact your business?
Formulate a Pandemic Preparedness Plan
Now that you have identified current and potential risks, it's time to create a robust preparedness plan if you don't already have one. Sure, states have started to open up for business once again, but there's a strong possibility additional waves of the pandemic could hit and require even more drastic lockdowns.
That's why you need to make your pandemic preparedness plans right now. Keep in mind that most business insurance policies do not cover business losses due to epidemics or pandemics. If you can find one that does, this is the ideal time to go for it.
Revisit Your Business Policies
As COVID-19 continues to evolve and new information about the pandemic arises, companies need to revisit, update, and communicate their policies.
For instance, many companies are revising their work-from-home policies as the pandemic continues to restrict movement and physical interaction. If you're considering adopting this work model across your organization, find suitable team communication and interaction solutions that will keep your staff connected and engaged. The good news is that there are advanced telephony technologies and other options that can help you achieve just that.
Stay on Top of Assistance Programs
With many businesses closing down and others struggling to stay afloat, governments are moving fast to help. There are many current funding programs that aim at helping businesses weather the COVID-19 crisis.
Even private organizations are lending a helping hand by establishing business grant programs. Find out if your company is eligible and apply.
Strive to maintain compliance with the set industry standards and regulations. This measure alone can go a long way in helping you manage business risk.
There are lots of reliable compliance and risk management digital solutions out there to help you with risk assessment, test control, etc. These tools identify any compliance gaps and issue alerts when these gaps occur. Even better, these programs provide a comprehensive risk mitigation and compliance checklist.
Any tools that can help you streamline your business through automation are an excellent investment.
Remain in Control of Your Business During the Pandemic
The coronavirus pandemic may have devastated businesses the world over, but it doesn't have to condemn your business to an early grave. By taking the necessary measures to manage business risks, you can keep your business alive during the crisis.