“One constant among the elements of 1914—as of any era—was the disposition of everyone on all sides not to prepare for the harder alternative, not to act upon what they suspected to be true.” ― Barbara W. Tuchman, The Guns of August
Wars in Europe have this nasty habit of getting out of hand in ways no one anticipates. What disaster might a European war in the digital age invite? No one really knows, but there will be plenty of damage, both intended and unintended, and not just in that region.
I sent a version of this checklist to our CEO audience earlier this week and hope it will be useful to directors as well. As we look at the current situation with Ukraine, perhaps it’s not a terrible idea to think through—perhaps again—what your board might be asking management about how they’ll handle some possible global shocks that are likely in the cards for the weeks ahead.
You’re hardly a Cassandra if you ask your CEO, CFO and CIO/CISO to brief you on their planning for some fairly obvious risks:
- Soaring energy costs. We’re seeing some of this already, it is likely to get worse. What’s their best thinking about conservation and cost containment or pricing? Have they modeled the business with energy costs up 25% or 30% or more? What if those increases last a year? What about the cost employees and the knock-on impacts that will have on their wage requirements—has the CHRO thought that through? What about the impact on the purchasing power of customers?
- Cybersecurity in the business. Businesses have already been warned that once sanctions are levied on Russia, retaliation via cyberattacks is inevitable. As Gen. Stanley McChrystal pointed out in our recent masterclass on risk, anywhere you use technology you also create vulnerability. Has your CIO/CISO briefed you in the last few days on what they’re hearing from their counterparts at other companies? From their contacts in government? Are they having these conversations? Has management communicated with the rank and file the need to be extra cautious in the days to come?
- Cybersecurity and national infrastructure. Have you asked management how the company might deal with a substantial power or internet outage? What if it lasted more than a day or two? What if it impacted more than one region of the country or world? How would this impact your ability their communicate with employees or partners and conduct commerce? When was the last time the board had a conversation about this?
- Supply chain. Already brittle, has management explained how they might handle even greater strain? What are the vulnerabilities across the full value chain? How about their suppliers? How is the CEO thinking about all of this, and have they been asking their team to think about it enough? Have they modeled and stress tested their assumptions?
- Banking/financial system. Big picture, it may be hard to think through all the potential risk angles. But it is easy enough to ask your CFO when they last had lunch with your bankers. At a large multinational, that’s likely recent and routine. At mid-cap firms, that conversation may have last happened during the Covid crunch. Perhaps it’s worth asking the CFO what the company’s bankers had to say when the CFO last asked them their view on things.
- IR/Comms. As we prepare for our upcoming masterclass on leading through inflation (March 24, join us), Ram Charan points out that shareholder/analyst engagement during a time of popping inflation is critical. “It is imperative to have your IR person—and perhaps your CEO as well—reach out to critical investors to understand their assumptions about the economy and the industry they operate in. Ask them for their views. Then, educate them on yours. Say: ‘I’d like to give you our world view of the industry under inflation.’ Getting at the reality of what the buy-side people are thinking is going to be the most important thing an IR person can do to help the company.
We’ve published some good resource material with key questions to ask around these different areas, including this discussion with Gen. McChrystal on building a better risk immune system, and Charan’s 5 board priorities during rising inflation. Our sister site, StrategicCIO360 has a ton of great thinking on cybersecurity, including this look at protecting OT networks. We hope it all helps. It certainly can’t hurt.