Today’s economy is similar in key ways to the economy in 2008. Your board would do well to assess the parallels.

Business leaders will continue to brace for uncertainties as the economy limps through 2023. After declining for six consecutive quarters, The Conference Board Measure of CEO Confidence has recently hit its lowest level in more than a decade. In the United States in particular, The Conference Board Leading Economic Index projects a recession, likely starting in the coming weeks and extending through Q3 2023. 

Recessions present unique challenges that require a different set of oversight skills and crisis management strategies than those used during periods of economic growth. Those skills were recently tested by the March-April 2020 downturn, when the COVID pandemic wreaked havoc worldwide and brought to a sudden halt the consumption of many goods and services. As in most other turbulent times, the onset of COVID taught business leaders the importance of agility and adaptability. However, that recession was in many ways extraordinary. Its causes were unique: Rather than the result of deteriorated economic conditions, it was induced by government lockdowns and travel restrictions meant to contain the spread of the virus and protect public health and safety. Unlike other recessionary periods, the COVID crisis prompted an unprecedented level of government interventions around the globe, not only by limiting the ability of many people to move freely, but also by enacting measures of fiscal support that, at least to those extents, were hardly used before. Finally, that recession stood out for the severity and the speed of the downturn — the shortest on record in the United States. Instead of a slow erosion of confidence, the recession was brought about suddenly and violently, with economic output beginning to recover almost as quickly.

On many levels, the current economic situation has more in common with the Great Recession. It is developing over a much longer time frame, driven by a range of factors rather than a single calamity. In the 2007-2008 financial crisis, those factors were a housing market bubble fueled by low interest rates, excessive risk-taking by financial institutions in the subprime mortgage business and a sharp contraction in credit availability. This time around, the economic slowdown is accompanied by inflation, geopolitical instability, supply shortages, heightened competition to attract and retain talent, and accelerated digital and sustainability transformations of the economy. These are just some of the complex issues board members and CEOs will be facing as they steer their companies through the expected downturn.

Yet data shows that most board members and CEOs were not in their current positions in 2008, when the Great Recession took place. According to a database maintained by The Conference Board and ESG data analytics firm ESGAUGE, the median tenure of corporate directors is 6.3 years in the S&P 500 and 5.7 years in the Russell 3000. In both indexes, more than two-thirds of all sitting directors have been serving for less than 10 years, and about half were elected less than five years ago. Even though the median tenure of currently serving CEOs has inched up since the beginning of the COVID-19 pandemic — most likely due to the decision to ensure leadership continuity during already uncertain times — it does not exceed 5.9 years in the Russell 3000. (In the S&P 500, the number is 5.5 years).

In the wake of the Great Recession, The Conference Board released The Role of the Board in Turbulent Times: Leading the Public Company to Full Recovery, work that was updated during the COVID crisis. Most of the suggestions shared then remain relevant today. CEOs and directors who are facing a recession for the first time may want to consider the following insights.

During turbulent times, events can unfold quickly and defy easy interpretation. Business leaders should remain up to date on economic and market trends and appreciate their implications on the business. This can help them stay ahead of the curve and be proactive in addressing new risks and uncertainties. It may require seeking out advice from third parties such as strategic consultants, business advisors and financial specialists with a specific expertise in navigating downturns. Directors should promptly reassess their ability to devote extra time to the oversight of the impending crisis so that the company is well-positioned to weather any economic turbulence.

The current challenges underline the importance of adaptable business strategies and financial resilience. Directors and CEOs should be open-minded and prepared to adapt the business strategy and investment plan as needed. Business leaders often bring a vision to their job and may find it difficult to put that vision on hold. However, economic turmoil requires responsiveness and agility. Budgets should be reviewed, priorities should be promptly reassessed, and the use of resources reconsidered to cut costs and increase efficiency. Financial resilience is key. Among its key responsibilities, the board should ensure that the company maintains the strong finances necessary to weather the recession. If a company faces financial challenges, the board should lead the effort to explore alternative sources of financing, including new access to the public capital market, private equity investments and government loans.

Communicating with stakeholders — conveying clarity, competence and resolve — is an important component of the crisis management plan. Business leaders should use this opportunity to unify employees, customers and local communities around a commonly shared business purpose. Everyone worries about uncertainties. CEOs and directors should not operate in a vacuum; instead, they should keep their employees, shareholders and customers informed about how the recession is impacting the company. They should clearly articulate what steps they are taking to respond to specific challenges. This is an opportunity to convey to stakeholders the purpose that drives the enterprise — purpose operates as a system of values that can unify different stakeholders during a time of crisis.

Senior leaders should foster a culture of innovation and urge teams to embrace entrepreneurialism and ingenuity in the face of recession. Entrepreneurial spirit and creative thinking cannot be in short supply when a business is looking for additional sources of revenue and more efficient ways to deliver products and services to its customers. Board members and C-suites should encourage their teams to think outside the box on these issues. Most risks come with opportunities, and a recession can stimulate an organization to innovate and modernize.

Matteo Tonello is managing director of ESG research at The Conference Board.