As businesses seek to address both immediate and long-term risks, the reinsurance industry is at the forefront of conversations to create forward-looking solutions in conjunction with policyholders, insurance markets and key policymakers.
The National Association of Corporate Directors (NACD) recently released its 2020 edition of Governance Challenges in collaboration with their five strategic-content partners, which includes Marsh & McLennan. Guy Carpenter is a business of Marsh & McLennan.
The 2020 edition of Governance Challenges focuses on the board’s role in strategy. Marsh & McLennan’s contribution, Facing Uncertainty: 25 Strategy and Crisis Questions for Directors, outlines how strategy discussions at a time of crisis create a venue for management and the board to pressure-test assumptions underlying strategy and hone a clearer vision for the organization post-crisis.
Boards and management teams face two critical challenges at the time of a crisis:
1. How to keep the strategy and mission resilient in the face of threats that have the potential to make existing business models obsolete, change industry structure or operating conditions, or derail growth?
2. How to provide a transformative opportunity for the long-term strategy of the organization?
One such example is the current COVID-19 crisis. A fundamental difference between this COVID-19–driven crisis and previous crises is the lightning-fast impact and the significant scientific uncertainty about its duration. (1) The United States went from having a booming economy and full employment into a recession with skyrocketing unemployment in a matter of weeks. No one knows when the world will return to normal, or what the “new normal” will look like.
The forces at play are unforgiving, and boards have a careful balancing act ahead of them: companies cannot afford to either underreact to the crisis (thereby risking financial ruin) or overreact to it (thereby diminishing relative competitive positioning or losing investor confidence). And while survival is a first-order existential priority, to thrive is the aspirational opportunity and thus this is also a time for strategy.
1. Responding to COVID-19: Almanac, Oliver Wyman, June, 2020.