By Alexandra Wrage, President, TRACE
Following a years-long pandemic and Russia’s invasion of Ukraine, black swan events are—perhaps more than ever before—top of mind for risk and compliance leaders at multinational companies. No longer distant hypotheticals, catastrophes like nuclear war or the invasion of Taiwan require pragmatic contingency planning. While the future is unpredictable, risk and compliance teams should do everything reasonably possible to prepare.
Game it out. Similar to wargaming exercises the public sector periodically engages in, facilitating scenario-based tabletop games with C-suite executives can reveal gaps in preparedness, policies and procedures. Scenarios can be based on hypothetical future incidents, such as an environmental disaster in a key region of the company’s value chain or China invading Taiwan. Consider also leveraging past incidents, but with variables: What if, for example, Russia had succeeded in its invasion of Ukraine and taken Kyiv within a few days? It’s a good idea to weigh how general or specific the design of each scenario should be to maximize utility to your team.
Review policies and procedures. Does your company have a dawn raid policy? What happens if a mission-critical country in your supply chain is upended by a military coup? What if a company in your value chain is taken over by an autocratic government? While you may not be able to anticipate every scenario, it’s worth assessing and updating policies and procedures to ensure the company has a starting point in the event of the unexpected.
Proactively train your value chain. Those administering compliance training are tasked with balancing the delivery of adequate information with the potential for training fatigue. Preparing for the unknown may mean requiring high-level training on topics such as health and safety, sanctions, environmental disasters, forced labor and more—even if not immediately applicable to employees’ day-to-day responsibilities. Building a shared knowledge base among your value chain will better position your company for black swan events.
Rely on your ethics ambassadors. Many multinational companies with employees across regions have successfully cultivated networks of compliance champions. Leveraging these networks bolsters a robust culture of ethics and compliance and they can be activated at a moment’s notice in the event of a crisis. Ethics ambassadors should be read in on crisis plans and workflows to maximize their contribution.
Design crisis workflows. While developing a plan for every scenario isn’t realistic, mapping out workflows for approvals, decisions and other key functions will make crisis management much easier from a compliance perspective. Consider how critical information is shared between departments, how communication flows within the company and to other key parts of the value chain, and which parties make the final call on various tiers of decisions.
If the past several years were any indication, the next black swan event may not be far off. Risk and compliance teams—and the company as a whole—will be better prepared if they lay the groundwork for crisis management now.