I was anticipating increased M&A activity in Q3 since the Covid-19 lockdown began, but as spring turned to summer and we remained On-Pause, I realized that more industries than I originally thought would be significantly, if not permanently, disrupted as a result of the pandemic.
The way businesses confront new and different problems is undergoing a revolution due to the “black swan” event A/K/A the Coronavirus.
Governance – Going forward, should boards of directors provide more regular oversight? Do they need to meet more often than quarterly? Perhaps boards need to be more engaged with management in real time.
Internal Audit Controls – Are members of the current management team the “right” people to manage the business through a crisis? Are they able to make good financial decisions on the fly? How is cash flow being managed during this crisis?
Litigation Exposure – This “black swan” event is shifting litigation exposure, such as: (i) how to manage public company disclosure in our rapidly changing world; (ii) new challenges relating to human capital management and keeping employees safe; and (iii) human rights issues in supply chains. The market needs information as to how companies handle these key issues in order to make appropriate capital allocation decisions.
Communication – Communication is more important now than ever before. Are companies effectively communicating their objectives and purpose to their employees and the public? Are these objectives sustainable in the pandemic era?
It may be too soon to know what fundamental changes to a company’s business model will be permanent. Without a doubt, the near-term and medium-term strategies of many companies had to change in order to keep individuals safe during the Covid-19 crisis. Whether a company survives will depend on how adeptly they respond to “black swan” events, such as a 100-year pandemic. Think of Covid-19 as a Darwinian natural selection of the traditional corporate structure.
Can the role that corporations play in society shift over the long term? Can corporations do anything “good” for the public interest besides maximize shareholder value? As we move through this crisis, we can expect to see a renewed interest and corporate focus on ESG (Environmental Society and Governance). Maybe corporate responsibility will become an integral core value of most corporations going forward.
After 7 months of this unprecedented year, it’s high time to be thinking about innovation, rather than resuming business as usual, if we intend to survive and thrive in the post-Covid world.
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