How the pandemic has impacted attitudes to risk and decision making
The past 12 months have reiterated that risk is fast-moving and unpredictable. As the UK begins to emerge from the pandemic, organisations need to use the lessons learned to rethink their approach to risk and seek opportunities to quickly maximise value. However, there will likely have been a profound change in the way they evaluate risk and make decisions.
Even under the best of circumstances, decision-making in organisations is challenging: Who should provide input? What risks do we need to consider? What are the best sources of information? How long should deliberations take? And who has the final say? During the pandemic, everything about the process became more complicated, urgent and emotional.
As we emerge from this period of crisis, the challenge for business leaders is to understand how the pandemic has impacted the way they look at risk, make decisions, and to what extent these changes are permanent.
COVID-19’s impact on risk and decision making
People tend to hold on to previous beliefs, even when circumstances show those are incorrect. They’re also inclined to pay greater attention to the messages they’ve heard most recently over previous ones whether or not they are more accurate or relevant. And people vary in their comfort with ambiguity. People with a high ‘need for closure’ prefer order and predictability – in difficult situations, they might not feel comfortable making decisions, as they do not feel they are fully informed on the outcomes or consequences generated.
Under stress, team dynamics can become amplified – for better or for worse. Teams might slide into groupthink, not fully weighing all the risks and options. Or they become too risk averse and can end up avoiding making decisions entirely, continually seeking information to base decisions on, despite that information not being forthcoming.
At the organisational level, it can be easy to underestimate potential threats. For example, of all the corporate executives polled in PwC’s Global Crisis Survey 2019, 0% expected to one day face a global health pandemic.
It’s likely most organisations will have experienced some of these issues during the pandemic. But they will also have implemented new processes for measuring risk and making decisions – our 24th Annual CEO Survey found that 89% of organisations are reassessing their tolerance for risk as a result of the COVID-19 crisis. Some of these measures will be short-term fixes to help the organisation deal more effectively with the pandemic, but others will be fundamental shifts in the way they approach risk.
89% of organisations are reassessing their tolerance for risk as a result of the COVID-19 crisis
How organisations have responded
In an interview for our CEO Survey, British Athletics CEO Joanna Coates said her organisation has become more risk averse and has had to forge a decision making process that’s faster and more collaborative to deal with the evolving situation.
“Short-term risks were previously very manageable and it was really the horizon scanning and long-term planning that was less easy to manage. It’s absolutely flipped on its head,”
Similarly, M&S CEO Steve Rowe told us that he had made his organisation more agile by reducing the number of people involved in critical business decisions. Organisations across all sectors have had to restructure how decisions are made, and by whom, to address risks.
What are the keys to effective decision making?
There are a number of factors that enable organisations to take an efficient and proactive approach to decision making in response to acute threats. As they emerge from the COVID-19 pandemic and look to learn the lessons from the experience, organisations should challenge their existing approach and prepare for what comes next.
- 1. Enable individuals to recover physically and emotionally
- 2. Own the data, own the risk
- 3. Establish clear structures and limits
- 4. Stay focused on values
- 5. Think strategically and conduct regular rapid reviews
1. Enable individuals to recover physically and emotionally
Crises can quickly compound health problems and stress, creating complications when challenges are already overwhelming. This is also an issue we discussed in an article on demonstrating leadership during a cyber attack. Many business leaders will have experienced this during the COVID-19 pandemic, either personally or in their teams, so organisations need to give them support to recover from the stresses of the past 12 months.
This is important for their own wellbeing and will also ensure the organisation is ready to take on new challenges and make bold, proactive decisions.
2. Own the data, own the risk
During the pandemic, we have all experienced information overload and the need to be selective about sources of information, focus on what is known, and clearly identify any assumptions about unknowns. For a sustained period, organisations have needed to shift course as new facts emerge, and recognise what they can control and influence, and what they can’t. Some may have had periods of feeling hopeless or helpless.
Moving forward, some decision makers will prioritise having a single, data-driven view of the risks across their organisation. This requires collaboration between risk functions and business operations to connect metrics, with the data presented with contextual, actionable insights.
3. Establish clear structures and limits
With uncertainty remaining, as businesses reopen groups should create boundaries to help rebuild a sense of safety. Keep team sizes manageable, too: real-world groups work best with no more than seven to 12 people, while virtual groups are most effective with four or five decision makers who are supported by relevant subject-matter experts.
4. Stay focused on values
Our research finds that organisations that act with integrity in a crisis are more likely to be in ‘a better place’ afterwards compared to others. And many organisations have found a renewed sense of purpose during the COVID-19 pandemic. In our CEO Survey, 41% of respondents said they are planning to change their organisation's purpose to better reflect the role it plays in society.
For example, Mark Reynolds, CEO of Mace Group, says the pandemic has created an opportunity for organisations to "press the reset button" and reimagine their behaviours and culture. He developed a new business strategy by asking employees for their views on the construction firm’s purpose, so everyone could buy into what the business is trying to achieve. The result was an ambitious purpose-driven strategy, which aims to drive sustainable growth for Mace.
“People don’t care what you do, they care why you do it. It isn’t about trying to sell you something, it’s about trying to solve a problem for you.”
5. Think strategically and conduct regular rapid reviews
As organisations reflect on the learnings of the last year and look to the future, it’s important to set aside time to assess what worked and what didn’t. Any lessons learnt can then be embedded into the organisation’s culture to help build resilience and ensure it’s better prepared for whatever comes next.
By understanding the way the COVID-19 pandemic has impacted decision making, business leaders can ensure they emerge stronger. This is about being prepared to adopt a bold approach to risk and take the decisions that make the difference for their organisation.
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Crisis Management Specialist, PwC United Kingdom
Tel: +44 (0)7525 283080
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