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For a Fistful of Dollars

February 11, 2021 by Twan van de Kerkhof

Total control is an illusion but leaders have become more aware that they need robust risk management. A zero-risk society in which adversities are eliminated doesn’t exist but leaders are looking deeper into the potential perils that their organizations may have to deal with. The measures that they took included amplifying their financial buffers and managing their liquidity, seeing that the short-term paper market all but evaporated overnight. They realized that costs are quite certain and revenues are not and that it is easier to manage a crisis when their house is in order. They developed scenarios (but also continued to make forecasts); they planned on ‘what if’ and were ready to act on it.

Many leaders are taking potential secondary effects of the current crisis into account, for example bankruptcies in the second half of 2021 if government support and payment holidays will be phased out.

The current crisis has made leaders more aware that tail risks can occur: risks with a small probability but a huge impact. Climate change with its huge potential impact and high probability has moved up in the hierarchy of risks that executives consider.

This is the third leadership lesson drawn from 36 interviews about leadership during and beyond corona. Send us a message if you wish to receive the paper with all eight lessons.