Fund Boards crisis management put to the stress test

By The Directors' Office (TDO)

Fund Boards typically meet four (4) times a year. Occasionally, they have ad hoc meetings to deal with specific issues escalated to them by executive management (usually the Management Company). Matters for escalation are usually well defined and documented in operating memorandum or delegation matrices.  


In 2020 when Covid forced Governments to confine people to their homes and shut down many businesses, markets reacted sharply. The uncertainty and inability to project when things might come back to normal sent stock markets tumbling as one would expect. Board meetings were convened at very short notices to take stock of the situation often having to face the following types of questions.

How come we didn’t see this coming-could we have? 

Are stock market valuations still reliable? 

Is the market for each given security still liquid? 

Should the whole portfolio or individual stocks be fair valued, i.e., discounted? 

Should a haircut be applied and what level?  

What instruments (gating, swing pricing etc.) tools do we have? 

How do we serve shareholders’ best interest? 

How and what do we communicate with/to our shareholders? 

What reporting is required? 

Fair questions, but they take time and at least some of them should not have to be asked, rather should already be known. With hindsight, it appears that markets were relatively resilient and there was no major disruption as was experienced during the Banking crisis of 2008/9.

On February 24th, 2022, Russia invaded Ukraine, an event that very few would have included in their worst-case stress scenarios. Reactions from the US, EU, Japan, Canada, etc. were immediate and sanctions against Russia, its flagship companies, oligarchs, etc. had an instant impact on markets and investment fund portfolios. Securities of these companies and Russian Government Bonds were sanctioned and could no longer be traded. The result was that they had to be marked down massively.

So how did Boards cope with this tragic crisis? What is a minimum level of preparation that Boards can do? Did Boards have a basic Crisis Management Plan that they could activate to deal with such a crisis?  Most regulated companies are expected to have a Business Continuity Plan (BCP) to address crises, however, Fund entities are different animals and probably would not have had a BCP.

There is value in a BCP, and the following considerations are worthwhile taking into account when formulating such a Plan.

During regular Board meetings, members need to reflect on the economic and geo-political environment but should be open to discuss possible (and impossible) worst-case scenarios.

Crisis situations (not always black-swan events) as determined by the Board need to be documented. Triggers or indicators may also be documented to alert the Board of impending crises.

Board members must be reachable within a very short time frame, say within 12-24 hours. The contact details (phone numbers, email addresses) of Board members should be documented and held by designated persons, usually members of CoSec, Board members. 

Alternatively, a Crisis Team could be constituted, made up of several Board members and key persons.  The Team’s initial task would be to assess promptly if we are in a crisis situation thus triggering the next steps.

In addition to Board members, the key advisers, executive officers and specialists must also be listed and reachable within the 12–24-hour time frame. These would include external legal counsel, investment managers, risk managers, operations executives, communication managers, auditors. The actual attendees will depend on the type of crisis.

The quorum requirements for holding such crisis meetings and the required majority to taking decisions must also be spelt out clearly in the Board authority guideline. Despite all the efforts, it may not be possible to contact and convene all Board members within the agreed timeline.

In the absence of the Chairman for such meeting, the rules for the designation of the standing in Chairman must also be established

The location of the meeting must be pre-defined under normal circumstances.  Several locations with order of priority may also be pre-determined to enable the team to meet quickly.

Teleconferencing is a good alternative and may prove more effective, however, this should also be pre-defined as much as possible to prevent delays in getting technology to work.

A crisis may run over a prolonged period. Therefore the modus operandi of the Board during such period must be defined as more frequent meetings will certainly take.  The Board will also be working much more closely with executives and advisers in reaching decisions.

Communication with the regulators, investors and business partners will need to be ensured.

Activation of the Crisis Management Plan needs to be tested at least once a year and its effectiveness reviewed and adjusted.


At the TDO, INEDs were able to share their experience of managing through this crisis which is far from over. They have witnessed that the above processes and procedures were applied to some extent, although not always in a structured or planned manner. While this inexhaustive list probably seems logical, in practice it is more understood than documented. The latter is recommended. From recent crises, and those before, we can expect that the next one is just a matter of time. The ‘golden hour rule’ in medicine applies here as well; preparation can be a lifesaver as Boards can address the problem immediately, thus safeguarding shareholders’ interests.  

In executing their functions, the Partners of the Directors office aim to adhere to and implement the highest standards of good corporate governance. We are proud to announce that we have updated our website to a new format on which you will find our thoughts on governance in About Governance.