09/07/2021

How CEOs Should Rethink Risk Once The Pandemic Ends

It could be the springboard to a new level of prosperity

One thing we’ve learned from COVID is that big companies are still run by flesh-and-blood human beings, not artificially intelligent data-crunchers. Despite frequent warnings about potential pandemics, most companies and CEOs did little to actually prepare for the calamity. Eight of the 10 largest publicly held U.S. companies didn’t even identify pandemics as a risk in their 2019 SEC filings. If we hadn’t developed successful vaccines so quickly, we’d be looking at a lot more bankruptcies.

What happened? Nearly all big companies have board-level committees charged with assessing and protecting against major risks. But it turns out that in practice, these committees rely on management to surface and estimate the risks. And those leaders, like the rest of us, tend to overestimate the familiar problems (supply chain disruption, regulatory blowback) and play down the strange ones (global pandemic).

Many risk management consultants, along with the U.S. director of national intelligence, identified pandemics as a rising threat. But hardly any company or CEO took seriously the initial reports out of Wuhan. And the few industries that were prepared for the shutdowns, such as cruise ships, who had built up cash reserves only because leaders were nervous about volatility after a period of rapid growth—not because they foresaw a devastating pandemic.

Please select this link to read the complete article from Chief Executive.