Aon Insights:
There was an overwhelming agreement that the key lesson to take away from this event was the need to have an enterprise-wide approach to risk.
"
Marc Spurling, UK Head of Enterprise Risk and Resilience, Aon
87.2%
*Data collected July – October 2020 by Aon’s proprietary Readiness Assessment from over 50 Work Travel Convene Coalition participants from the U.S., Europe, and Asia. Respondents span over 15 industries and represent multinational organizations with global footprint.
As infection rates fluctuate across the globe and vaccine rollouts vary across regions, every company is adopting an ongoing crisis management posture. Even companies that have moved beyond the react and response phase may find themselves back at the beginning, reacting to large-scale changes or new restrictions. The companies that take this moment to establish their “react and respond” approach—balancing agility, speed and structure—will be better prepared for other long-tail risks that require them to manage shifting priorities in real time.
There is a long way to go before we are in the post-COVID-19 era. The overwhelming majority of companies believe COVID-19 will continue to impact their business a year or two from now, and this may be compounded with other emerging risks, such as cyberattacks, that will become more apparent as companies work in virtual environments and rely heavily on digital infrastructure. The actions organizations take during the react and respond stage can help define an effective response to both the current pandemic crisis and future shocks.
For instance, very few organizations have sought to make an insurance claim as part of their response to the pandemic. This confirms the importance of pre-event crisis management planning and the speed with which organizations had to respond and adapt. However, it also exposes the inflexible nature of the commercial insurance market and how this rigidity leaves many significant commercial risks uninsurable.
43% of respondents did not believe their organization would be more dependent on risk financing or insurance as an instrument to help smooth volatility of performance, even if insurance products are available that apply to pandemic risk impacts. This may indicate those organizations who were best prepared are confident in their response to such a major event, as 48% of organizations considered their business to be resilient despite the impact of COVID-19.
Companies are also evaluating where to invest in building greater resilience, from shoring up their supply chains to strengthening their workforce agility. Pre-pandemic, geopolitical forces had already pushed risk managers to make their supply chains less vulnerable to disruption. Incorporating more digital technology such as sensors, predictive analytics, and other tools were a start to smarter supply chains—but companies still need to be able to absorb shocks from all sides. Just over a third of companies faced a slowdown in demand as customer behaviors changed, and almost 20% struggled to source materials. Companies can use today’s experience to better react and respond to emerging long-tail risks that have the potential to severely disrupt their supply chains—from climate risks such as hurricanes and earthquakes to cyberattacks, particularly as companies seek to digitize the supply chain. As the risk landscape shifts, their enterprise risk management models
must too.
There are regional takeaways that can help organizations prepare in the future. Prior to COVID-19, 52% of respondents in APAC had a pandemic plan in place, compared with 31% in North America and less than 30% in both EMEA and LATAM. Organizations in APAC were supported by state-run track-and-trace technology and had built more robust pandemic programs in response to earlier threats such as Severe acute respiratory syndrome (SARS) and the swine flu. Still, these companies report that they are accelerating a review of their ERM strategy, which highlights the urgency many companies, even those with a more mature risk response, feel. The response of organizations from other regions signals a global gap: A proportion of EMEA (36%) and LATAM (21%) organizations did not think the pandemic would accelerate a review of their ERM program, though 31% of organizations in EMEA did report that they would review it. North American organizations reported the lowest number (25%) responding that they would review their ERM process, but a higher proportion had not decided.
A critical part of reacting and responding to crises and building a successful enterprise risk management strategy is ensuring the workforce is able to adapt, communicate and collaborate when crisis strikes. Companies must invest in the right tools and processes to support that level of agility. In a recent Aon pulse survey, the overwhelming majority of respondents said technology infrastructure and communications infrastructure and tools were very or extremely important to build and maintain an agile workforce. And the pandemic will likely change how companies plan their workforce and attract and retain talent—more than 80% of respondents said a diverse workforce and inclusive culture was very or extremely important for workforce agility. By building workforce resilience through strategic and targeted talent approaches and investments, companies will better position themselves to react and respond to risk effectively, mitigating disruption and maintaining productivity in the face of change.
Unlike preparedness plans for large-scale disasters such as hurricanes, the pandemic’s global impact was far more complex. Laura Schlicting, Accenture’s North America Geographic Services Lead, recalls the lessons learned from teams in China – the country first imposing lockdowns due to COVID-19: “We were able to learn from the approach that China took – how our teams were able to get ready and respond.” As the pandemic’s scope and scale grew, Accenture’s teams were able to build from the approach that was taken in China and continuously iterate and improve, all the while taking into account local variances – from government regulations in specific countries or in the case of the U.S., a patchwork of local laws.
Continuously Adapting, Adjusting and Improving Frameworks
A structure that supported integrated decision-making helped Accenture put strategic action plans in place. Leadership set strategic direction while various subgroups — procurement, human resources, employee relations, technology — brought their own targeted solutions and executed. “Across our most senior leadership, there was a group that met routinely, regularly, daily, as they set the strategic direction,” Schlicting says, and that “all-in” approach was replicated throughout geographies. “We pulled together a configuration of people who wouldn’t typically work together, at least in such a collective way,” says Keil. “That constant communication helped all of our teams prepare for rapid shifts in direction. Everybody had a 360° view on the totality of the situation on an ongoing daily basis. We were able to continuously manage the situation because of really close coordination and collaboration.”
Making the Best Decisions During Rapidly Evolving Situations
Organizations’ Pandemic Response
React and Respond