This article stems from the 3rd web “Coffee Chat” organised by ILA, the Luxembourg Institute of Directors on 15 April 2020, and hosted Monique Bachner, ILA Board member and a governance professional involved in various Boards.
Monique was joined this week by Luc Frieden and Carine Feipel. Luc is a partner in Luxembourg law firm Elvinger Hoss Prussen, as well as Chair of the Luxembourg Chamber of Commerce and of the Board of Banque International à Luxembourg (BIL). Carine is Chair of ILA, a lawyer and a board member on several entities, including a bank, insurance companies, investment funds and other undertakings.
How should Board’s lead in times of crisis?
Boards must remain level-headed and continue to look at the global picture. Following disasters, people ask: where was the Board? Often Boards will tend to err on the side of activity than inactivity. Regulators also expect Boards to be aware of more metrics and other considerations than usual. If the Board feels Management is failing, then of course, that Board must step up even further.
Supporting and Challenging management
As Boards must do and know more during a crisis. Fundamentally, Boards should support Management by asking the right questions. Certain Directors may even help with insights due to their particular skills or knowledge. To ask the right questions also implies having access to the right data. The right data is not always obvious or easy.
Ongoing oversight and communication
Being a Director is not only about attending the scheduled Board, appropriate and proportionate ongoing oversight and support is also key. Directors’ sharing experiences from others can be a big help; encourage and support Management in these times.
In the example of a systemically important bank, the Management board was initially meeting daily, and reporting to the Board daily. The cycle had now been revised to a weekly report from management to the Board covering matters such as business continuity, people’s safety and the potential financial impact in general. Being systemically important means being additional supervision by the European Central Bank (ECB). Both the ECB and the CSSF are kept up to date, ensuring they receive relevant information. For banking regulators it is important, for example, to have an overview on the general flows of funds between financial institutions in Europe.
For smaller entities most of the same practices are equally applicable, albeit proportionate to their activities. Boards are focusing on continuity, safety and financial impact on companies. Financial liquidity is crucial for those companies who are not permitted to continue activities and whose staff cannot simply WFH, or cannot currently sell their products (e.g. a construction, retail and the parts of the services sectors). Some boards have blocked a time for a Board call at regular slots such as daily or weekly, just in case such a call may be required.
Blurring of Board v Management roles: When does stepping up become overstepping?
Even in normal times it can be difficult to precisely draw the line between management and Board - perhaps even more so during a crisis.
For a Board to maintain oversight and focused on business continuity, increased reporting and frequency of reporting will usually be required during a crisis. They must, however, remain mindful not to overload Management and distract them from getting on with running the business, and to be respectful of the different roles.
It is also important to remember that Management may be dealing with personal crises or feeling isolated – emotional support is also important. Where appropriate buddy systems or other means for management to be provided with someone to confide or simply talk to or bounce ideas and get things off their chest.
Forward-looking Boards: ensuring longer term continuity and viability
After the initial focus of everything on addressing the immediate crisis, and its faster and more agile cycles, Boards need to get back to looking at fundamentals and strategy. Additional Board meetings are required to update and refocus - based on new data from inside the firm, but also regarding markets and wider economic situation - along with quicker reaction times. This also means not losing sight of the future and strategy. We are seeing some firms separate Covid-19 Crisis Committees from Strategy Committees in order to ensure both keep their focus, with different Chairs able to focus on their workstreams. For example, BIL had just held a meeting on a future project – with all refreshed at focusing on the future rather that the immediate crisis. For longer term business continuity, looking forward is important and must not be neglected.
Post-crisis committees are being established to separate crisis management from planning for the future with, among other things, ESG. We do not know when “post” crisis will be, nor how the “new normal” might look – lasting impacts of behaviours and business opportunities must already be considered now, and continue being considered and reconsidered for companies to be ready as business and the economy change.
By Monique Bachner, ILA Board member and a governance professional involved in various Boards.