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  • Alistair Nicholas

Risk and crisis management for black swan events – lessons from the coronavirus


The first lesson from the coronavirus that governments, corporations and organisations need to learn is that “black swan” events happen. You’d think it would have been learnt given the number of black swan events seen in recent years, particularly when it comes to epidemics. But, despite new disease outbreaks since SARS (2002/3), such as swine flu and bird flu (2009) and MERS (2012), the world was no better prepared than it would have been had these previous events not occurred.


If there is one lesson we should take from the coronavirus, or Covid-19 as it is formally called, it is that one of the most likely black swan events we will see in the next decade is another outbreak of a highly contagious and highly deadly disease. The mathematics would suggest that the outbreak of a disease like this is more probable than nuclear war or other types of black swan events.


Black swans are not fictional

For those not familiar with the term “black swan event”, it relates to a high profile, unpredictable (or hard to foresee) event that has a major impact on an organisation, or society, or whole country, or even the world. The term is drawn from the fact that Europeans, prior to arriving in Australia over 200 years ago, had never thought black swans existed, except as artistic constructs.


The coronavirus is such a black swan event – no one saw it coming and it has had a major impact. While that impact was initially on Wuhan and Hubei Province in China, the virus has since spread to other parts of China and several other countries.


And the impact is not only on the health sectors of the countries experiencing outbreaks. China’s economy has slowed and that is impacting other economies. Indeed, Australia may be looking at its first recession in almost 30 years because of the coronavirus, according to the Financial Times. Large outbreaks in South Korea and Italy this week have led to major falls in global stock markets, including the ASX. Most observers are now expecting the world economy to take a major hit if the crisis continues beyond March, and certainly if it is classified as a pandemic (so far the World Health Organisation has not deemed it such).


Prepare now for the future

Leaving aside the current crisis, what should governments and organisations learn from this epidemic. Here are some hard and fast rules to ensure crisis readiness, including for black swan events

  1. Rule nothing out – organisations, even governments, often fall into the trap of saying “that could never happen” or “that won’t impact us even if it happens”. Well, guess what - the impossible might happen. And even if it happens to another organisation or somewhere else, it might just impact your organisation. Your plans need to take into account black swan events along with the run-of-the-mill events that could impact business, and nothing should be ruled out;

  2. Scenario planning and mapping – undertake a scenario planning and mapping exercise to determine what are the threats to your organisation’s business and / or reputation. If you don’t have the expertise to do this in-house, bring in someone with the relevant experience to help;

  3. Establish a culture of empathetic listening – This is essential and cannot be undervalued. In more than 35 years of working in this business I have seen a lot of crises develop from what started out as small or low-level issues that could have been averted if better handled from the outset. Too often nothing was done because people in an organisation didn’t report what they were seeing or hearing “up the line” to their managers. And too often it was because they were afraid of the consequences of raising an issue that their line managers prefered to see swept under the carpet. Not surprisingly this is exactly what happened in Wuhan – frontline medical workers were aware of a new illness in the city as early as November 2019, but had been hushed by their bosses and the city’s authorities, who preferred to stick their heads in the sand like ostriches. Had someone listened to the "whistleblowers", the disease could have been contained a lot sooner. Instead, the world is now preparing for a possible pandemic precisely because of the attempts to hide the new disease in its early days. Organisational culture shifts are hard, but they are not impossible – start working on changing your organisation's culture now.

  4. Develop a robust crisis management plan – A good crisis management plan needs to include both operational requirements as well as the communications perspective. While your plan may not cover every possible development of an unfolding crisis, it should at least have a framework in place that ensures everyone on the crisis management team understands their role and can take action immediately in their areas of responsibility as soon as the crisis hits;

  5. Hold regular trainings and scenario drills – Once you have a crisis plan in place it is imperative that you train your team on how to use it and conduct regular crisis scenario drills to test its robustness. Think of your organisation as an airliner carrying hundreds of passengers. If an engine fails, you don’t want the pilot looking at the manual for the first time – rather, you want the pilot to have experienced a similar situation a few times in a simulator so they have “gut feel” and “muscle memory” responses kicking in before the plane starts to nose dive. It is important to think of your organisation like an airliner and your management team as its pilots. They should learn to deal with emergency situations in a simulator and not on the job;

  6. Have a business continuity plan – Managing the crisis aside, organisations need to think how they will continue their operations in the event of various crises, including black swan events. Currently many businesses around the world are grinding to a halt because of their heavy reliance on supply chains from China. With businesses in China not operating overseas companies buying from China are unable to get the supplies they need from that market. Similarly, companies that sell to China, including in the healthcare sector, have found their businesses impacted because of difficulties delivering products to customers with so much of the country in lockdown. A business continuity plan considers how an organisation can continue to operate in difficult circumstances, or, at the very least, continue with “mission critical” activities.

  7. Managing critics, sceptics and conspiracy theorists – A final note needs to be made on managing critics and sceptics, and, also, conspiracy theorists. In the age of social media everyone with an axe to grind against an organisation has a soap box to climb on and will easily find an audience on Facebook, Twitter and Instagram, to name just a few of the platforms available. We are certainly seeing this with the current coronavirus crisis. This emphasises the need to communicate and keep communicating facts and useful information throughout a crisis situation in order to counter the “fake news” that will inevitably appear. There is no such thing in a crisis as “we have finished communicating our perspective”; as soon as you stop communicating, your detractors will fill the void. Don’t leave a void for them to fill. In ensuring your communications are listened to, engage third party advocates – trusted sources – that will be able to explain and clarify the facts to your customers and the wider public. (It should be noted that to deal with the fake news and conspiracy theories around the coronavirus, the WHO has set up a website to correct misinformation and present the facts - epi-win.com.)


If you'd like to have a confidential discussion about your organisation's crisis management planning feel free to contact me via alistair@alistairnicholas.com.

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Alistair Nicholas Consulting

Australian Business Number (ABN): 47 393 236 557

alistair@alistairnicholas.com

Tel: +61-419-290-578

Level 23, Suite 2301,

Forum West Building,

3 Herbert Street,

St Leonards, NSW, 2065

Sydney, Australia

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 © Copyright Alistair Nicholas Consulting, 2020.  

Disclaimer: Information and advice contained on this website, including in the "Insights" blog posts, are general and for information purposes only and should not be construed as constituting professional advice from the website owner. Readers are advised to obtain professional advice pertaining to their specific circumstances prior to acting on any information, advice or recommendations contained herein.