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COVID-19 has given financial services organisations a crash course in crisis management. Whether you were ready or not, your skills in incident or crisis management are fresh now, and your processes are as good or better than they’ve ever been. But is that good enough?
Originally published in Superfunds, BlueChip's managing director and founder Carden Calder looks at what super funds and other organisations have learned about crisis management during COVID-19.
COVID19 has bought industry disruption, greater scrutiny, and criticism of superannuation as a system, individual funds and individuals.
Is this now part of the ‘next normal’? And if so, what does it mean for the industry long term: its stability, its social licence and reputation, and its place in governments’ plans for the nation?
We don’t have to look far for one potential outcome. A bruising Royal Commission into industry misconduct left the reputation of other sectors in Australia’s financial services industry in tatters. For the businesses involved, rebuilding trust, and keeping it, will be tough. For the individuals it’s often impossible.
Superannuation leaders are asking how superannuation can avoid a similar fate.
Securing the reputation of the industry now seems like a no-brainer - a critical pre-condition for a strong system that can continue to serve Australians well. Using crisis management frameworks to analyse the situation you’re in – and prepare for the next challenge – can help the super industry ‘make its own weather’.
The early warning signs of a reputational crisis
COVID-19 is the sort of black swan event that causes us to sit back and reassess crisis and business continuity plans. Some - but not all – of those plans included pandemics. I’d argue no one prepared for every challenge we have faced so far this year. It’s now time to ask what we can learn from this, and previous crises, such as the banking Royal Commission, and to apply this to future challenges.
1. Pattern spotting
Most crises are predictable and preventable. Improving our pattern-spotting means superannuation executives are now applying their newly sharpened crisis response capability to the next potential crisis. One looming threat some are calling out is to the social licence of super in its current form.
Seeing a pattern is one thing but effective prevention or preparation requires action. That can be “reactive, responsive or pre-emptive”. A pre-emptive approach requires more than good crisis or issues management. It requires, among other things, the ability to think long-range – ten to thirty years – about the sort of reputation risks your fund, and the industry might face. Then actively working to reduce risk, via pre-emptive action, particularly where your reputation might be more vulnerable. Longer duration planning allows us far more scope to intervene, to ‘make our own weather’ and predict so-called ‘black swan’ events.
2. Early warning signs
There were plenty of signs, in retrospect, of both a looming global pandemic and the reputational damage of the Royal Commission. There were also long-lead-time warning signs before the GFC resulted in extreme market volatility, or 9/11 rocked the world. Not everyone was looking for the signs or amplifying the weak but important signals that did exist.
If you look at the COVID19 response of a few asset managers, and global firms outside financial services with both world-class crisis management capability and sizeable Asian operations, you’ll see some acted early based on the trajectory of the virus, global media, and the data or on-the-ground experience they had access to. First to move, or prepare, were those well tapped into diverse industries, operating across geographies, and globally well-coordinated. Many had learned from SARS or similar. This mix of inbound information, local and global capability and diverse industry experience led them to synthesise the threat and choose an elevated response level far before most Australian organisations and governments did so.
Effective early warning systems sort important signals from noise. Sources might include global news, online reviews, large-scale sentiment research and former employees or detractors. Listening to them all then filtering and amplifying certain red or pink flags is good risk management and gives opportunities to move closer to your audiences and meet their needs as they change. Some funds were able to do this with excellent member insights and data analytics.
Whether we’re protecting a fund or industry reputation, data is useful, but it doesn’t give us complete immunity from paradigm blindness. If you’re prepared to “confront the brutal truth” there are some excellent lead indicators of crisis. What do your stakeholders say when you’re not in the room? What do they find when they research you online? Protecting your reputation during a crisis means having several proverbial doors covered in real-time. Preventing one takes looking for ominous information in a mountain of information, over time, then selectively increasing the volume.
This has been done by financial and non-financial brands conducting diligent digital digging, and taking innovative approaches to discover what their broad stakeholder audience thinks.
Looking at the data to date, for instance on early release payments and member enquiries, as well as the number of reviews and inquiries into the system to date, the industry can pre-emptively prepare for future challenges to the system. The next step is to prepare for the crisis, and potentially change not just how you communicate, but the behaviour of your fund and the industry pre-emptively.
Three evidence-based ways funds are preparing for the next crisis
1. Scenario planning
Ask “what would break us?”… then solve for that
COVID-19, and the Royal Commission beforehand, showed that being able to control outcomes is important at a fund level, but also for the entire industry. With boards, CEOs, marketing and PR leaders and their teams expected to reach an ever-receding horizon of community standards, having frameworks in place can help you unpack and reach these goals while ensuring that our industry is equipped to weather future storms.
Scenario planning includes creative planning for the worst possible scenario, then designing a response that works at that level as well as the scaled-down scenarios.
Rehearse and refine
Many board and leadership planning and risk management cycles now include crisis training. That might not be needed annually, but larger funds are actively debriefing now, considering the frequency of training going forward and updating crisis management tools and playbooks.
That might include simulating, all (not one, or some) of the following happening simultaneously: market volatility, withdrawals, unprecedented inbound traffic, a critical supplier failure, system failure (overload, cyberattack, human error), losing a key person, a conduct issue and an ensuing reputational crisis with an escalating media and social media furore.
The people you’ve chosen for your crisis management team should also be tested. Team and individual ability to function under pressure drives the quality of business response and long term reputation. Under pressure some people step up while others go to “flight or freeze”. This is good time to build skills so all function well.
Given much of that just happened, it’s only what wasn’t tested and proven that might need stress-testing now. Or you might need to re-run March to June 2020 with newly acquired skills, systems and governance to debrief and refine your plans, ‘baking in’ the capability.
Beware of believing what others (like you or me) think
Most leaders know the dangers of a close-knit team being oblivious to opposing but often important, ideas and opinions. When a crisis hits and remains urgent and important, high levels of team unity can eventually, insidiously, become a problem.
Good sustained decision making is helped by analysis of our external context, rotating team members to bring fresh thinking and skills, and ‘always on’, independent, reputational “red flag” reports.
Some funds and providers permanently or periodically introduce an “outsider” to their crisis, management and product decision teams. This can be an independent ‘scrutineer’ under a confidentiality agreement. It might be an empowered junior staff member who’s demographically different to the leadership, seeing different media and circulating in different groups.
2. Communicate, don’t hesitate
Careful and considered communication in a crisis is important but very low value if you’re silent when stakeholders need to hear from you.
Members are more engaged now than during the GFC, and super funds are communicating accordingly. In the early stages of COVID-19, the stock market tumbled, taking nominal super balances with it. Some, but not all, super funds were quick to communicate to members to acknowledge market movements and start to address logical fears. This included decisions on whether to shift into cash. Not all were so fast to speak to members.
The timely communications spoke directly to worried members’ fears and built context about their super’s performance over the long term, and, later, the potential effect of ERPs on their savings balance. On the other hand, some funds’ early silence created member angst and some preventable but precipitous action….
When news and social media, not you, is the “source”
Delaying communication to avoid making a mistake or fuel more panic is an understandable, but often flawed, decision. If a crisis is already high profile – and early during COVID-19, ABC Business’s Alan Kohler led most fund’s member comms, with the lead on the 7 pm news about calamitous damage to superannuation account balances - it’s too late to avoid “mentioning the war”.
Media reporting, including social media discussion, was alarmist and focussed on ‘today’ not a working lifetime of investment.
Then, regular fact-based updates from members own funds and investment managers and super funds became the perfect counter to daily news.
These built confidence and helped fund members make good, considered choices. Many funds tell us that member switches during COVID19 market volatility were lower than the GFC, suggesting that fund communication worked to ensure better member outcomes.
At the bigger picture level the principle of controlling the narrative applies to whole industries.
Arguably super should be one of those industries, now, uniting across traditional lines to overtly and openly acknowledge and address whole-of-industry criticisms. We may not agree with the premise or method of some critics, or even what damage the criticism will ultimately do. We might agree that it takes finding, and holding, common ground to get ahead of predictable reputation risks to a whole sector.
What if the banks and wealth managers had done this well over the last decade? Royal Commission, no Royal Commission or a different Royal Commission?
3. Debrief
Even with the recent increase in cases, many funds are able, now, to review their management of COVID-19. Debriefs help hone recently gained skills and process sharpness that might otherwise dull if not documented, practiced and intentionally developed.
How? Assess your performance honestly. Look for improvements, not just wins. Write or revise your crisis playbook, using rehearsals to update it annually.
There’s much good in what funds have learned from COVID-19.
Our searing memory of what didn’t work and what did, won’t be what it is now. There may not be another pandemic, but there will be another crisis. It’s just what happens if you live long enough.
This article was originally published as "Being crisis prepared" in the August 2020 edition of ASFA SuperFunds. To read the original article, click here.
If you’d like to discuss adjusting your communication strategy for the current times, please call us or fill out our contact form here.
