Covid-19 black swan reminds accounting firms to consider crisis planning

“The crisis resilience of accountancy firms is being tested deeply and unforgivingly in real-time – not least with regard to issues such as tax transparency, gender equality and the future of audit,” says Peter Barrett, director and UK head of crisis and special situations at Infinite Global.

“It is a stark reminder of the need for every firm to undertake rigorous business continuity and crisis planning around a comprehensive range of risk scenarios, not least the high impact, low probability Black Swan events too often overlooked during risk mapping and mitigation.”

While accountancy firms should not underestimate the impact of eventual crises, the Covid-19 burden has been a learning curve for the industry.

“Longer term, the accountancy sector must embrace the learning opportunity. Leadership teams routinely fail to heed the lessons of crises and take appropriate steps to bolster risk resilience and mitigation measures, in order to prevent future mishandling of similar scenarios,” says Barrett.

Preparing for the eventuality of a black swan is essential to minimise risks, particularly as leadership teams can underrate the impact on businesses, according to Barret.

“We would always advise actively planning for the worst-case scenario. Even the most experienced leadership teams are prone to over-optimism in their assessment of probability and risk. Crisis and business continuity planning commonly focuses too narrowly on a relatively limited selection of potential outcomes and is often predicated on the ‘ideal’ crisis unfolding in an unrealistically predictable and linear fashion. They rarely do.”

When preparing ahead of crises such as Covid-19, firms must guarantee that each part of their infrastructure has a planned response.

“Covid-19 demonstrates the importance of ensuring that the entire infrastructure of an organisation’s crisis response – covering incident response plans, business continuity planning, crisis management and communications strategy, leadership decision-making and more – works smoothly as a collective whole, not as a series of siloed initiatives.”

Barrett also calls for management teams to acknowledge the social distancing effect caused by Covid-19, which could have a negative impact on accounting professionals.

“The key is to focus on core activities and the needs of your critical stakeholders: employees and customers while thinking laterally and long-term. Remote working is easy for some, but difficult for others. Firms should not underestimate the physical and emotional impact of social isolation and the heightened stress of crisis conditions,” he adds.

Once immediate dust has settled, Barrett warns that firms “perceived to be mishandling its crisis response” should foresee “tough questioning.”

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