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5 Essential Leadership Components for COVID Recovery and Risk-Adjusted Returns

5 Essential Leadership Components for COVID Recovery and Risk-Adjusted Returns
Author Name: Katrin Scholz-Barth
Date: Jul 27 2021
Category: Leadership

Think: Awake a different mindset for new business models and operation.

Act: Innovate inspired by nature.

Lead: Dare to create the future.

 

5 Essential Leadership Components for COVID Recovery and Risk-Adjusted Returns

 

COVID has brought risk management and risk exposure to the forefront of every business. The key difference between previous conventional risk management and COVID response is that COVID emerged as an unpredictable risk and unfolded as a global pandemic. Every industry, community, supply chain, and stakeholder were affected at an instant. There was no escape.

 

How business leaders responded to the economic standstill varied widely, however. And that response determined survival and recovery rates to some extent.

 

Business as usual is over. Companies around the globe, in every industry, have spent the past 12 months confronting challenges both practical and existential. Some have failed. Many have simply survived. A select few have flourished, remaking their businesses and illuminating the way forward for others.” 


Executives who could empathize and recognized the impact on a very human level, prioritized on creative problem solving, and offered flexibilities over financials during these hard times, stood out. People, as it turned out, drive business and recovery, not numbers.

 

Pivoting toward new products, processes, and markets, fueled by a determined and committed workforce that felt safe and supported, drove innovation and delivery of new demand channels, in a variety of industries, from healthcare to food & beverage, hospitality, entertainment, to online learning and fitness. FastCompany selected and celebrates the World’s Most Innovative Companies of 2021


A year into the ongoing business disruption by a novel virus, new risk assessment and mitigation practices emerge for recovering and rebuilding the economy. Data suggests that companies who had or since have implemented an environmental, social, governance (ESG) framework fared much better during the crisis. Why?

 

Traditionally, risk management was a compliance driven, reactive process that assessed past events and circumstance, to then focus on mitigation efforts.

 

What the COVID crisis uncovered was that all crises are interconnected. It uncovered the inequalities, imbalances, and inefficiencies of business-as-usual. It also revealed that business leadership is a personal choice and responsibility and that until now, business-as-usual has prioritized profits over planet and people. The reality check and challenge for COVID recovery and risk-adjusted return will be whether we manage risks by design or by disaster?

 

High ESG rated companies outperformed and fared better during the COVID crisis simply because of lower exposure to systematic risks, which in turn proved more stable earnings and stock prices. The ESG process added resilience to performance even during previous downturn markets over the long-term and especially during the short-term COVID crisis. 


As executives plan to reopen offices and reenter the markets, a bigger challenge still looms – how to manage and reduce future risks to scale risk-adjusted returns? COVID recovery and risk-adjusted returns require a new approach and new tools for the average business.


Here are 5 leadership components to drive COVID recovery and risk-adjusted returns:


  1.  Empathy – if not already done, start the foundation of becoming sensitive to employees’ needs. Understand the mental, physical and emotional impact. Women are invaluable and crucial members of the work force. Extra flexibility and support will assist those who became primary caregivers for children and elderly family members to stay in or return to the work force.
  2. Communicate Corporate Purpose – when the CEO and executive leadership team directly communicates with employees why the company exists, what its purpose and values are, will assure staff. Employees are important internal stakeholders and deserve to be recognized for their contributions and commitment to equality, inclusion, and equity. Demonstrate corporate purpose and lead by example.
  3. Green Education to enable Nature-based Innovation – "comprehensive transformation of education ... the need for critical independent thinking ... all education and all jobs should become green. ... emphasize our interdependence .... Valuing these jobs more and investing more in them should be part of the green vision.” Sustainability literacy also drives behavior, shapes public opinion, and will inevitably drive innovation and entrepreneurship to solve our most pressing problems. 
  4. Intentional Integrity – building a culture of integrity is an effective and inexpensive tool to prevent legal violations and also to reduce reputational and other risks. AirBnB makes a strong case for intentional integrity, communicated from the CEO down, for risk reduction, and lowering operating expense. Employees who are inspired by their company’s leadership stay longer and also act with integrity, which contributes to lower auditing cost.
  5. ESG – leveraging the ESG process as a robust and cross-functional process for risks oversight and business advantage seems common sense for COVID recovery and risk-adjusted returns because of lower exposure to systematic risks. What is emerging post-COVID is a more science-based and data driven confirmation of the effectiveness of ESG for risk management, a forward-looking proactive and non-compliance measure to address future, unknown risks.


Contrary to some expectations, as COVID infections rose during mid 2020, so did the focus on ESG. In fact, COVID proved to be the first real life stress test for ESG and risk management integration since the 2008 financial crisis.


Recovery strategies for regenerative business in the post-pandemic economy require bold leadership traits and readiness for emerging future risks to scale risk-adjusted returns and to persist amid crises. Measuring what matters – the impacts of environmental, social, governance on business performance is just smart business leadership in two ways: addressing potential disasters and risks while identifying possible new business opportunities. 


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