How to address ERM during Covid 19

by Velu A

Till yesterday Enterprise Risk Management’s (ERM) main focus was on Business Continuity Plan (BCP).

Having fall back IT infrastructure like backup server in a safe zone with real time replication of data, redundant leased lines for bandwidth to handle data connectivity and a call centre in a tier II to tier III city as part of BCP to handle customer care (CRM) without any interruption were part of the plan. 

However the onset of Covid 19 has changed the entire perspective of how we look at ERM and BCP. It has brought down entire economy to stand still all over the world.

People are reluctant to get out their home. Domestic and international travel and cargo movement are yet to start. Factories are still not fully functioning (other than Pharma). Only few service sector industries continue to provide their services from home.

How soon the economy will recoup from the slumber? What is going to be New Normal?

How to continue to maintain social distance even after lifting of lock down to avoid further spread of the pandemic? There are lot of unanswered questions like this in everyone’s mind. Only time will tell the answer for these questions.

Need of Common Minimum Program

However as entrepreneurs and senior leaders of organisations we need to have a Common Minimum Program (CMP) to address the uncertainties.

Men, Material, Machine and Money are the four resources which are required to run any organisation smoothly. BCP’s needs to be redrawn in such a way that criticality and continuity of all these four resources are built into it.

Importance of Cash Flow Monitoring

Cash is king and Money is required to run the business without any interruption. Every entrepreneur /leader needs to have this in mind and create buffers in their business plan.

Cash flow monitoring should be part of daily routine, which will bring in the discipline. Part of positive cash flow (profit) should be parked in liquid funds to dip into when it’s emergency. (Bare minimum to manage one month’s fixed cost).

Boardroom Restrategizing on material management

With Just in Time (JIT) inventory Management followed all across the universe as part of cost management tool, BCP is compromised.

Everyone has to get back to their boardroom and redraw their strategy for material management keeping in mind the current eventuality.

Material procurement strategy needs to be redrawn to mitigate the risk related sourcing of material. Risk of dependency on one country for majority of raw materials, one or few suppliers from same state suppling raw materials/ packing materials, etc.

Managing Employee Expectation

Managing employee’s expectation and keeping them motivated during such period becomes the priority. When organisations are forced to implement cost saving measures, they need to take cognizance of its psychological impact on employees.

In addition to that plan needs to in place to ensure safety and security of employees, health and hygiene, social distancing and screening of employees. To avoid using bio-metric attendance system.

Have distributed lunch hours to avoid crowding during the meal time. Ensure safety during travel from office to home, etc.

An inventory and Check List as SOP

An inventory of critical capital equipments and maintenance and protection plan needs to be in place.

Check list to be in place as an SOP to be followed before restart of the factory / offices. To enable employees to work from home may require additional investment on infrastructure for the service sector or support service roles.   

All these planning will help organisations to start the business smoothly soon after the lock down is lifted.

Velu A is a Chartered Accountant and a Management Expert with 18 years of professional experience in areas of strategic planning, budgeting, MIS reporting, fund raising. He is a CFO of a limited Company of great legacy in India