COVID-19 is the sort of black swan event that causes us to sit back and reassess our crisis and business continuity plans. Some—but not all—of those plans included pandemics. Arguably though, no one was prepared for every challenge faced so far this year. So, it is now time to ask what we can learn from this, and previous crises, such as the banking Royal Commission, to identify early warning signs of a reputational crisis, and apply this to future challenges.

Spotting patterns and acting

Most crises are predictable and preventable. Improving our pattern-spotting means superannuation executives are now applying their newly sharpened crisis response capability to the next potential crisis. One looming threat some are calling out is to the social licence of super in its current form.

Seeing a pattern is one thing, but effective prevention or preparation requires action. That can be reactive, responsive, or pre-emptive. A pre-emptive approach requires more than good crisis or issues management. It requires, among other things, the ability to think long range—ten to thirty years—about the sort of reputational risks your fund, and the industry, might face. Then actively working to reduce risk, via pre-emptive action, particularly where your reputation might be more vulnerable. Longer duration planning allows for greater scope to intervene, to ‘make our own weather’ and predict so-called ‘black swan’ events.

Identifying early warning signs

There were plenty of signs, in retrospect, of both a looming global pandemic and the reputational damage from the Royal Commission. There were also long-lead time warning signs before the GFC that resulted in extreme market volatility, or before 9/11 rocked the world.

If you look at the COVID-19 response of a few asset managers, and global firms outside financial services with both world-class crisis management capability and sizeable Asian operations, you’ll see some acted early based on the trajectory of the virus, global media, and the data or on-the-ground experience they had access to. First to move, or prepare, were those well tapped into diverse industries, operating across geographies, and globally well-coordinated. Many had learned from SARS or similar. This mix of inbound information, local and global capability and diverse industry experience led them to synthesise the threat and choose an elevated response level far before most Australian organisations and governments acted.

Effective early warning systems sort important signals from noise. Sources might include global news, online reviews, large-scale sentiment research and former employees or detractors. Listening to them all then filtering and amplifying certain red or pink flags is good risk management and gives opportunities to move closer to your audiences and meet their needs as they change. Some funds were able to do this with excellent member insights and data analytics.

Whether it’s protecting the reputation of a fund or industry, data is useful, but it doesn’t give us complete immunity from paradigm blindness. If you’re prepared to “confront the brutal truth” there are some excellent lead indicators of crisis, such as: What do your stakeholders say when you’re not in the room? What do they find when they research you online?

Looking at the data so far, for instance on early release payments and member enquiries, as well as the number of reviews and inquiries into the system to date, the industry can pre-emptively prepare for future challenges to the system. The next step is to prepare for the crisis, and potentially change not just how you communicate, but the behaviour of your fund and the industry pre-emptively.

How superannuation funds can prepare for the next crisis

Super funds can start preparing for the next crisis by adopting three evidence-based strategies:

  1. Scenario planning

    COVID-19, and the Royal Commission beforehand, showed that being able to control outcomes is important at a fund level, but also for the entire industry. With boards, CEOs, marketing and PR leaders and their teams expected to reach an ever-receding horizon of community standards, having frameworks in place can help you unpack and reach these goals and be ready for future storms.

    Scenario planning includes creative planning for the worst possible scenario, then designing a response that works at that level as well as the scaled-down scenarios.

    • Crisis management and training
      Many board and leadership planning and risk management cycles now include crisis training. Larger funds are actively debriefing now, considering the frequency of training going forward and updating crisis management tools and playbooks.This might include simulating all (not one, or some) of the following happening simultaneously: market volatility, withdrawals, unprecedented inbound traffic, a critical supplier failure, system failure (overload, cyberattack, human error), losing a key person, a conduct issue and an ensuing reputational crisis with an escalating media and social media furore.

      Given much of that just happened, it’s only what wasn’t tested and proven that might need stress-testing now. Or you might need to re-run March to June 2020 with newly acquired skills, systems, and governance to debrief and refine your plans, ‘baking in’ the capability.

      Your crisis management team should also be tested. Team and individual ability to function under pressure drives the quality of business response and long-term reputation. Under pressure some people step up while others go to ‘flight or freeze’. This is good time to build skills so all function well.

    • Getting an ‘outsiders’ perspective
      Most leaders know the dangers of a close-knit team being oblivious to opposing—but often important—ideas and opinions. When a crisis hits, and remains urgent and important, high levels of team unity can eventually, insidiously, become a problem.Good sustained decision making is helped by analysis of external context, rotating team members to bring fresh thinking and skills, and ‘always on’, independent, reputational ‘red flag’ reports.

      Some funds and providers permanently or periodically introduce an ‘outsider’ to their crisis, management, and product decision teams. This can be an independent ‘scrutineer’ under a confidentiality agreement. It might be an empowered junior staff member, demographically different to the leadership, seeing different media and circulating in different groups.

  2. Effective crisis communication

    Careful and considered communication in a crisis is important but very low value if you’re silent when stakeholders need to hear from you.

    Members are more engaged now than during the GFC, and super funds are communicating accordingly. In the early stages of COVID-19, the stock market tumbled, taking nominal super balances with it. Some, but not all, super funds were quick to communicate to members to acknowledge market movements, and start to address logical fears. This included decisions on whether to shift into cash. But not all were so fast to speak to members.

    The timely communications spoke directly to worried members’ fears and built context about their super’s performance over the long term, and, later, the potential effect of the early release on their savings balance. On the other hand, some funds’ early silence created member angst, and some preventable but precipitous action…

    • Sending the right message
      Delaying communication to avoid making a mistake or fuel more panic is an understandable, but often flawed, decision. If a crisis is already high profile—such as early during COVID-19, ABC Business’s Alan Kohler led most funds’ member communications, with the lead story on the 7pm news about calamitous damage to superannuation account balances—it’s too late to avoid “mentioning the war”.Media reporting, including social media discussion, was alarmist and focused on ‘today’ not a working lifetime of investment.

      Once regular fact-based updates from members’ own funds and investment managers countered the daily news, this built confidence and helped fund members make good, considered choices. Many funds noted that member switches during COVID-19 market volatility were lower than the GFC, suggesting that fund communication worked to ensure better member outcomes.

      At the bigger picture level, the principle of controlling the narrative applies to whole industries.

      Arguably super should be one of those industries, now, uniting across traditional lines to overtly and openly acknowledge and address whole-of-industry criticisms.

      What if the banks and wealth managers had done this well over the last decade? Royal Commission, no Royal Commission, or a different Royal Commission?

  3. An honest debrief

    Even with recent increase in cases, many funds are able, now, to review their management of COVID-19. Debriefs help hone recently gained skills and process sharpness which might otherwise dull if not documented, practiced, and intentionally developed.

    How? Assess your performance honestly. Look for improvements, not just wins. Write or revise your crisis playbook, using rehearsals to update it annually.

    For funds, there is much valuable learning to be gleaned from COVID-19.

    Over time our searing memory of what didn’t work—and what did— will fade. There may not be another pandemic, but there will be another crisis. It’s just what happens if you live long enough.