On The Edge 2023: Most CEOs Are Not Prepared For Crisis
A new report by US think tank The Conference Board has revealed that, notwithstanding the volatile times we live in, most CEOs across the globe are not prepared for crisis.
The Conference Board 2023 C-Suite Outlook, which was based on a survey of 1,131 C-suite executives including 670 CEOs, was wide ranging in its remit. Yet whilst those surveyed recognised that the global economic downturn, regional recessions, inflation, continued disruptions from the pandemic in Asia, global geopolitical instability, supply chain issues and labour shortages would continue to challenge their organisations during 2023, a significant minority had any plans to improve their risk management processes or invest in crisis management. European CEOs considered such plans as their tenth most important priority; for US CEOs they did not even feature.
In general, CEOs were more pessimistic than the rest of the C-suite team about organisations’ level of preparedness to handle a major crisis. However because they had recent experience of events such as pandemic, financial instability or a surge in energy prices, they said they were relatively more confident of their ability to handle them than they had been before: they were less confident in their ability to lead through other types of crisis, such as extreme violence, terrorism, major food or water shortages.
Whilst only 36% of CEOs thought that the war in Ukraine would intensify during 2023, 81% believed that cyberattacks outside the theatre of war would intensify as a result. Yet 49% of US CEOs and 45% of European CEOs did not believe they were well prepared to deal with cyberattacks (interestingly, this rose to 79% amongst Chinese CEOs).
61% of global CEOs felt they were not well prepared to deal with the risk of financial instability; 69% with high inflation or a surge in energy prices; 72% with supply chain disruptions; 84% with extreme climate events; 87% with civil unrest; and 92% with war.
These are extraordinary findings which should alarm shareholders and global systems alike. Given their overall responsibility for risk management, it would be interesting to know whether the Boards of these global companies are aware of their executive teams’ level of unpreparedness for crisis and if so, whether they have any plans to address this.
Not all crises are global in nature. Many come about as the result of human failure or as the result of ill chosen words at the wrong time. Although these events were not considered in the survey, they can have a significant impact on an organisation’s reputation and the time it takes to recover normal business operations.
The golden rule for crisis is that prior planning and preparation aids prevention. Think ahead. Get ready. Head it off if you can. If global CEOs feel better prepared for crisis having experienced one themselves, then it makes sense to help them think through potential crises in a strategic and managed way well before any crisis actually happens. Scenario planning is a useful tool here and many providers use crisis simulations as a way of helping CEOs and their teams to think in crisis mode ahead of time in a safe environment, and to identify any gaps, strengths and weaknesses in their crisis response.
There’s an old adage that the best laid plans don’t survive first contact with the enemy. Yet money spent on risk management and crisis preparedness is money well spent. We live in a risk-plagued environment characterised by persistent economic weakness, civil unrest, extreme weather events, uncertainty and volatility: this is not an easy operating environment. The best way to reduce damage, disruption and grey swan events is to take preventive measures to reduce risk exposure. This might include developing processes to model possible events; proactively building contingency plans; establishing and rehearsing a cross functional crisis team; building new systems; preparing crisis communications. It may also involve reviewing corporate governance structures. Amongst other things, the Corporate Affairs function is responsible for monitoring the external environment, effective communications, maintaining good relationships with stakeholders, managing an organisation’s profile and reputation. It has an essential part to play in preparing for, avoiding and managing risk and crisis. As such, a Corporate Affairs presence in every C-suite and Board will provide organisations with an extra layer of support and protection during these unprecedented times.
Image credit: Leio McLaren