The Key Challenges Boards Face Now

The COVID-19 pandemic is just beginning to take off in India [in late March]. Nonetheless, the Indian government has undertaken a preemptive 21-day lockdown to flatten the curve. As a result, companies are already grappling with massive disruptions. As a board member of several leading Indian companies, I am already observing some major challenges.

First, we are dealing with major workforce and revenue disruption situations. Many workers in India are the “last mile” connection to customers. This is common in financial services and the automotive sector. The option to work from home is difficult to implement for such remote field forces. Management and the board have to consider these workforce constraints: What do you do with your workers? How do you retain them in the face of uncertain layoffs and work stoppages? This is a real dilemma in places where infrastructure or other constraints prohibit putting a workforce on hold. And what happens when things return to normal? Will these workers still be available? Will they even want to return after months of uncertainty? If no vaccine or cure is found for COVID-19, the pandemic could last a year or more. The damage to businesses, relationships, and the bond between employer and employee will then be even more serious.

Second, we are dealing with situations where revenues go to zero because all operations have to shut down, for example in factories. Even before the current crisis we were examining black swan risks to cash flow and the ability to raise capital under those circumstances. How do you raise cash when revenues are in a steep decline? How can you unlock capital from other sources when everyone everywhere is suffering from liquidity constraints? Some companies may have the capacity to sell down some assets to maintain operations, but to whom? Across our businesses we are delaying noncritical spends, and some M&A activities are on hold, while we sort these questions out.

This crisis may provoke a change in thinking about maintaining massive cash reserves, but in principle we have not seen or had that discussion yet. In any case, businesses that are not cash-generative or are engaged in aggressive growth will not be able to generate any appreciable reserves.

Third, we are evaluating the resilience of global supply chains. An event of this magnitude may precipitate some rethinking on these far-flung supply chains. Discussions focused on diversification and resilience become much more important. Business continuity plans will certainly be an important focus area. Diversifying revenue streams and moving away from single point of failure dependencies will also get attention.

None of my boards is evaluating management capability and executive leadership just now. The focus right now is on getting the job done, ensuring survival. One aspect of leadership that has become even more vital, however, is effective communications with all stakeholders. Communication is always very important, even more so at times of high uncertainty and when no one can predict resolution. But strong leaders will present real facts and options and ensure the necessary tough discussions.

Every crisis is also an opportunity. Some of my companies are already pivoting towards innovation after seeing the vulnerabilities that the pandemic has exposed. It's likely that in some areas we will see an acceleration of AI and robotics to get certain key functions done more reliably. And there is likely to be a “rethink” on globalization aspects such as setting up supply chains, differing rules and regulations across borders, planning cycles, regulatory regimes. The list goes on.

Finally, countries and companies will be motivated to explore ways to collaborate and work together. Companies with dispersed workforces across nations, regions, and borders may want to take a look at how a global crisis is addressed. Boards will engage proactively with management to formulate policies that enhance resilience and account for black swan events.

— As told to Scott Chase

Punita Kumar-Sinha, PhD, is a 2019 Directors & Boards' Directors to Watch honoree. She serves on the boards of CFA Institute, JSW Steel, Blackstone-Embassy REIT, and Infosys.She has served on more than 15 boards in India and North America.