During this time of the Covid-19 pandemic, it has been a very challenging situation for Enterprises. Especially when many of the Enterprises, particularly in the MSME space, are worried about their future as an entity – Corporate Governance as an activity may come under pressure.
Corporate Governance should be viewed more than just a set of activities to be adhered to for the enterprise and regulators – it is a reflection of the company’s core values. Additionally, it is their core values (or lack of them) that get epitomized strongly during a crisis situation.
While the Central and State governments have given some leniency in some of the matters related to filings, payment of fees and taxes, Board Meeting relaxations, etc – this still does not take away the importance of ensuring proper governance continues with best possible efforts, balanced properly with the humanitarian need of the hour, especially keeping employee/worker welfare in mind.
It is very important to keep in mind that the fiduciary responsibilities of the Directors of the Board may actually be higher at this point. The Directors and Executive leadership of the company must therefore be very clear about their roles and responsibilities during such situations, and actively monitor the company affairs in as unbiased and reasonable way as possible.
While the regulatory oversight during this time may be minimal, it is quite possible that when the situation becomes better – the respective regulators may start cracking down with an iron hand on perceived irregularities or non-adherence to compliances.
Areas to focus on to bolster Company’s Corporate Governance:
- Meet all statutory obligations: Ensure all statutory obligations are met on time. Keep yourself updated with any changes with respect to the regulations as they may be applied during this pandemic.
- Concerns of employees: Along with regular and transparent communication, ensure that all mechanisms related to reporting and managing employee concerns are in place. It is possible during this time that any gaps in company processes could be exploited by those with malicious intent. Therefore, whistle-blower channels also should be open and managed with extreme care and caution.
- Internal and External stakeholder management: Ensure streamlined communication channels with stakeholders, internal and external during this time. The Board and Executive Leadership will have to play a very strong role in ensuring transparency in these communications. Remember your stakeholders are your employees, shareholders, regulatory authorities, government and in some cases, even the society at large.
- Keep the Board actively engaged: Regular updates to the Board related to important matters of the company affairs should be done. Virtual meetings can be conducted to present key data points or updates in company where you need strategic inputs from the Board during this time. Important points to cover during these meetings would be the employee health status of the organization, emergency and contingency plan reviews, management of regulatory matters and disclosures, financial health, etc
- Critical functions to be operational: For effective work management, certain key functions of your company should be operating at higher efficiency. The IT department is a core function at this point of time. Ensure their availability, and support them with the necessary means to fulfill their responsibilities. While we are operating in lockdown mode, your offices may still have to be maintained and cleaned. Most likely, these would be staffed by contract agencies. Ensure that their staff are provided all safety mechanisms, and also that your contracts with these agencies and other critical function vendors are in place, and reviewed with respect to the present pandemic situation.
- Working Capital Management: This is a key and critical area for enterprises at this moment. For many, the revenues have been severely impacted. For them to ensure that they continue to be operational until and beyond the lockdown at least for the next 3-4 months, the cash flow situation needs to be critically assessed and monitored. Short term liquidity requirements should be identified and met.
- Cyber Risks: With most or all employees working from home and outside company networks, there is a huge potential of cyber risk. The IT or Infosec teams should be monitoring these risks and continuously evaluate and tighten their controls. Increased employee awareness sessions on the importance of cybersecurity and the methods they need to undertake to ensure the same, would be important.
- Partner and Other Vendors Management: Partners and other vendors whose revenues (or portion of revenues) are dependent on you, will have to be managed sensitively. Any breach of contract from your side could open your company and Board to liabilities. Manage the conversations sensitively with your partners and vendors – and at the same time, review the respective contracts to understand potential risks to your company.
- Review existing BCP and DR procedures: Your BCP/DR processes may now be tested over and above your expectations. Keep in mind that this is also a good opportunity for you to review, re-evaluate, identify gaps and fix these processes so that your organization is better tuned to react in case such a situation arises again in the future. Ensure continuous documentation of your observations so that they could be actioned upon immediately or when the business goes back to normal mode. Also ensure that you are aware of regulatory updates related to BCP and DR provisions, and that you incorporate them into your SOPs.
This pandemic is holding a mirror to many organizations, and quite a few may feel that they are falling short. However, this is also a very good opportunity for enterprises to look at innovations in business models, and at the same time review and tighten their crisis management measures. It might well prove to be a catalyst for growth for many companies. Let’s hope and look forward to a brighter future!