Heading into 2023, developments in the war in Ukraine, tensions with China, supply chain disruptions, gas shortages in Europe, cybersecurity, inflation, interest rates, market volatility, trade tensions, and the risk of a global recession – combined with the deterioration of international governance – will continue to drive global volatility and uncertainty.
This environment will call for continual updating of the company’s risk profile and more scenario planning, stress testing strategic assumptions, and analyzing downside scenarios. Leaders will need to assess the speed at which risks are evolving, their interconnectedness, the potential for multiple crises at the same time, and whether there is flexibility in the company’s strategy to pivot.
Oversee management’s reassessment of the company’s processes for identifying and managing these risks and their impact on the company’s strategy and operations.
- Is there an effective process to monitor changes in the external environment and provide early warning that adjustments to strategy might be necessary?
- Is the company prepared to weather an economic downturn? Are stress tests sufficiently severe?
- Help management keep sight of how the big picture is changing: connecting dots, thinking differently, and staying agile and alert to what’s happening in the world. Disruption, strategy, and risk should be hardwired together in boardroom discussions.
Challenge and question management’s crisis response plans.
- Are they robust, actively tested or war-gamed, and updated as needed?
- Do they include communications protocols to keep the board apprised of events and the company’s response, as well as to determine when/if to disclose matters internally and/or externally?
Make business continuity and resilience part of the discussion. Resilience is the ability to bounce back when something goes wrong and the ability to stand back up with viable strategic options for staying competitive and on the offense in the event of a crisis, such as ransomware, a cyberattack, or a pandemic.