Monday, 26 October 2020 In this episode of the Take on Board podcast, Sophie Gibbons talks with Helga Svendsen about the current challenges facing boards in Australia. “We are in very unusual, uncertain and highly stressful times in the context of COVID-19 and boards really need to take appropriate action to ensure that their organisation's survive and really thrive going forward.” “One of the unique things about the current environment is that even organisations performing well, or at the very least holding the line from a performance perspective, are actually having to navigate a market that is stressed, and that changes things that are important for all boards. “ Commenting on the fact that, as of June 20, there were 47% lower formal insolvencies reported than in the same month last year, Sophie said: “We know there are a huge amount of organisations who really have artificial revenues keeping them alive at the moment and that's in the form of the stimulus packages that have been extended, relief from banks and other measures.” “What organisations are going to need to do, if they're in that set of circumstances, is something very drastically different to what they've done today.” Sophie continued, describing the role of boards in organisations facing financial distress as “agitators”. “More than ever, boards have cover, and in some ways, a level of community and shareholder permission to make big hard decisions in regards to the future of the organisation and the transformation that the organisation needs to go through, to make sure that they are in a position to survive, not just the 4-6 months, but potentially for the next 2-3 years and beyond.” “This concept of an agitator, and acting as a forcing function, becomes very important because the decisions or actions that organisations are going to need to take will likely be quite bold.” Expanding on the role of boards in organisations facing distress, Sophie commented: “Fundamentally, it is the board’s role to sit up and look across the horizon to the future. But what's also important is a laser focus on performance now, and getting that balance right between acting as a North Star and executing on governance accountabilities.” Reflecting on key lessons from working with boards in distress, Sophie continued: “One of the things that we do when working with organisations and boards in distress is to turn the lights on in the organisation in regards to performance.” “In a stressed environment with a lot of information and quick decisions required, often we see organisations and boards blindsided by what I would describe as headline performance metrics.” Emphasising the importance of looking beyond these headline metrics, Sophie suggests that “decisions need to me made on the full picture” and advises boards to “measure well” and “focus on insight rather than volume” When asked about sharper tools that directors may need to be considering Sophie introduces voluntary administration and debunks some myths: “The kind of solvent turnaround strategies that we've discussed are sometimes not going to be enough. If you as a board have six weeks, not six months, to improve performance, you might need to consider a broader range of tools. One of those tools is voluntary administration.” Although, as Sophie explains, this may not be easy for some organisations: “In the eye of the storm, it's pretty difficult to look to tomorrow. At the moment, it is almost impossible for distressed organisations to look to the next six months or the next year. But really, those that will survive and thrive are going to be the ones who look a little bit over the horizon and think and plan now.” Listen to the full podcast here.