Leadership during crisis – Lessons for the insurance industry

A crisis is an event that interrupts the normal business operations, puts pressure on the organization, and threatens its very existence. A crisis can be triggered internally, externally, or may arise from an escalation of a smaller incident not being effectively handled. Different crises can occur and according to PWC Global crisis survey, they can be categorized into technological, operational, human capital, reputational, financial, legal, and humanitarian. Further, the survey identified the most disruptive crises as cybercrime, market disruption, and ethical misconduct from a global perspective. The survey pointed to the top three crises in Africa as financial/liquidity, natural disaster/environmental, leadership misconduct, and technological disruption or failure. These crises have focused leaders at the board and executive level on the need for a crisis management plan.

A crisis causes business leaders concern for the welfare of their people and their organizations. A crisis causes uncertainty and may be beyond the experience of most leaders, yet managing a crisis is an inevitable part of the leaders’ roles. Preparation, agility, and having accurate data are key to managing any crisis and insurance leaders have a role to prepare their workforce and organizations to withstand any crisis. The COVID-19 pandemic has brought to the fore the stark need for every board and executive leadership of insurance companies the need to have a crisis plan that can be activated when the need arises. It is clear that those organizations that did not have a crisis management plan had to quickly put one in place or to review what was existing in order to respond in this uncertain period. Therefore, crisis management plans should be continually reviewed to ensure that they are responsive to the changing business environment and internal business dynamics. A crisis management plan enables an organization to avert a crisis event or to effectively manage an unforeseen event that may face the organization. An organization with an existing crisis management plan enables it to speedily recover from any crisis as opposed to an organization that lacks one which could lead to business failure, disaster, or catastrophe.

A crisis management plan should include emergency procedures, disaster recovery, a communication plan, business continuity plan, and clear roles and responsibilities. The involvement of everyone in the organization in crisis management can impact the successful management of a crisis. The board plays the role of challenging and scrutinizing the crisis management plan to ensure it is sufficient and robust for a crisis situation. The board should also have its own plan that informs the support required in crisis management. The executive leadership including legal, risk, human resource, finance and information technology is critical in the different roles including preparedness, response, recovery, enterprise risk management and communication. The crisis management plan is a live document that needs to be continuously practiced and updated to ensure that it can be effective when needed to manage a crisis event.

An organization is led by the board of directors who delegate authority to the executive or senior management leaders. The board has the fiduciary responsibility to represent the shareholders in ensuring that the executive delivers on delegated responsibilities. According to the Insurance Regulatory Authority (IRA), corporate governance refers to the management of an insurer’s business by the board of directors and senior/executive management. The board is ultimately responsible for the performance and conduct of the insurer by safeguarding the governance, viability, and risk management of the organization. The board delegates authority to the executive management that is responsible for the day-to-day management of the insurer including the establishment of a crisis management plan.

Leading in crisis requires a leadership that is focused on resolving the crisis to emerge stronger post-crisis and being able to return to business as usual. While senior leaders in the organization should respond directly to a crisis, the board should be available to provide the required support and guidance while maintaining its independence. A crisis situation is usually complex and may include changes that call for both effective leadership and management from the executives. There is a need for leaders to make immediate decisions in addressing the challenges posed by a crisis as part of management by creating a semblance of certainty. On the other hand, executives should lead the organization by seeing beyond the crisis, conveying a clear direction and priorities, and continuously communicating in order to focus people on what needs to get done to move the organization through the crisis and back into business as usual mode. Business leaders should be guided by the company’s values in decision making and maneuvering the crisis situation. This builds trust, credibility, reinforces the company’s culture, and gives people the sense of continuity.

Communication is critical during crises. Leaders should, therefore, consistently and continuously communicate so that they can provide truthful and accurate information while allaying any misconceptions or misinformation. This ensures that stakeholders including shareholders, employees, other external parties, and regulators are reassured that their interests are protected and that the business is prepared and handling the crisis.

In the face of adversity, leaders should not lose sight of other risks facing the business. This is because a crisis situation leaves the business exposed and vulnerable as the leaders focus on its resolution which might take away the attention on other existing exposures. Further, leaders must focus on keeping the business running in order to deliver on the overall company strategy. This can be achieved by keeping the momentum of the business in delivering on its purpose. This communicates to the employees that the leadership is still focused on the company’s promise to the customer and other stakeholders in delivering the objectives.

The reputation of an organization is a valuable intangible asset that calls for effective reputation management and especially during a crisis situation. Leaders should, therefore, focus on handling a crisis quickly and effectively through prompt and proactive communication in order to minimize any negative effect on the organization’s reputation. Leaders should understand the situation and the key stakeholders with whom they should convey the right messages that provide reassurance during a crisis situation.

Every crisis creates an opportunity for taking stock of lessons learned and leaders should use the lessons in updating the crisis management plans in preparation for future eventualities. The board should participate in the learnings through support to the executives in transitioning to a post-crisis period by making requisite changes in strategy, decisions, and directions that will impact on the organization’s continuity.

In a crisis like the ongoing COVID-19 pandemic, there is a demand on leaders to be intentional and responsible in decision making as they maneuver their countries and organizations through the pandemic. In the case of Kenya as a country, the government implemented several containment measures in response to the pandemic. These included scaling down or closure of some businesses, stay or work-from home measures, as well as maintaining the distribution of essential goods and services through the Ministry of Industrialization, Trade and Enterprise Development. Further, the government implemented tax measures to cushion Kenyans from the negative impact of COVID-19 by giving 100% tax relief for persons earning gross monthly income of up to Kes. 24,000, decreased Pay-As-You-Earn (PAYE) rate from 30% to 25%, decreasing the value-added tax rate from 16% to 14% as well as decreasing the resident corporate income tax from 30% to 25%.

Through the Central Bank of Kenya, some of the economic stimulus measures that were put in place included waiving bank fees for transfers of money between bank accounts and the mobile wallet, the upper limit for mobile transfers was increased to Kes 300,000 as a way of limiting contact with physical notes, and there was an agreement with banks to restructure non-performing loans for their customers.

Communication on the status of the pandemic and the impact on the country was through presidential addresses as well as ongoing updates by the Ministry of Health. The President continuously called on Kenyans to take individual responsibility by adhering to the laid out protocols to curb the spread of COVID-19. The Ministry put in place surveillance measures that informed the status of the spread of the disease that guided its decision making. Further, the Ministry set up isolation units initially at the Kenyatta National Hospital and Mbagathi hospital, set up a Public Health Emergency Operation Centre to coordinate response efforts and also set up a call center to enhance communication on COVID-19 among others. The Ministry partnered with county governments, the World Health Organizations and other international and local organizations in creating public awareness on COVID-19.

Throughout the pandemic, the government continued working in partnership with the National Security Council and the National Emergency Committee on the Coronavirus Pandemic. This collaboration informed decisions that have been taken on the economic situation of the country that led to the phased opening up of the country as the public adapted to the ‘new normal’. The President as the leader of the nation is aware that though not all is known about the pandemic, a lot more was learned during the pandemic period. Further, this knowledge has helped the government to build resilience and better prepare for the future.

The case of Kenya and how the pandemic has been handled shows that leading into the future will require leaders who are crisis-fit, flexible, and can adapt to the situation. Crises will be more complex and difficult to contain on the one hand while stakeholders will be demanding effective and timely management of any crisis. Considering that the materialization of crisis is a constant, then the impetus is on leaders to handle crisis preparedness from a strategic perspective and as an opportunity to continue to create competitive advantage and success for their organizations.

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