Governance in the time of Covid

Part of my lockdown reading has been Marquez’s famous novel Love in the Time of Cholera. Whilst I won’t claim to grasp all the literary meanings of the novel, one theme is clear – love does not cease during a plague. And whilst love is a very different thing from governance, governance does not cease either. Indeed, good governance is more important than ever.

The Covid-19 pandemic has put a sharp spotlight on governance at all levels of society. Many key governance issues have been starkly highlighted, particularly those around decision-making by those invested with the power to make decisions that affect us all. Just some of the issues that have arisen:

• The need for clarity around those who have the power to make decisions and are thus accountable, and those who advise, bringing expertise from one particular area
• The need for decision-makers to take all relevant matters into account, thus obtaining a wide range of expert advice
• The need for decision-making structures sufficiently flexible and nimble to move swiftly in times that call for urgent action whilst ensuring that important checks and balances are still maintained in the system
• The critical importance of accurate data that covers the entire spectrum of relevant factors, and models whose assumptions and limitations are clearly appreciated.

All of these issues clearly translate to our world of pensions governance. Decision-making authority often rests with trustee boards, with their powers and responsibilities governed by the Trust Deed and Rules and any overarching legislation and guidance. Whilst good advice that covers the range of relevant matters should certainly be sought, those who are ultimately accountable must be comfortable that their decision is the right course of action and that decision-making discussions contain an appropriate balance between the board and any expert input sought.

A sufficiently nimble governance structure with clear protocols in place to support urgent decision-making is essential in the time of Covid, as is clear business continuity planning that includes succession and mitigation of key person risk. When decisions are rushed with insufficient controls in place, risk is increased, so being prepared in advance is the key to successful navigation.

Accurate data and modelling are also very important and will underly all quality actuarial and investment advice, and administration reporting, to trustee boards. Sufficient time should be taken however to ensure that the decision-makers appreciate the sensitivity of models to different data inputs or assumptions.

A pandemic helps to demonstrate how crucial having all of the above is in place. But if governance is not in good shape, it is quickly exposed during times of pressure with member outcomes potentially at risk. There is no time like the present to get one’s governance house in order. Good governance in the time of Covid is more important than ever.