At first glance, the coronavirus pandemic threatening populations around the world appears to fit the textbook definition of a "black swan" event. But looks can be deceiving.
The term black swan describes an event that can't be foreseen but can have serious consequences. Europeans couldn't imagine an actual black swan until they first arrived in Australia and New Zealand, where black swans are quite common. The term has been used with increasing regularity over the years — sometimes appropriately and sometimes not. Some are referring to this year's coronavirus outbreak, and the COVID-19 disease it spawned, as a black swan. However, pandemics are hardly unforeseeable or unimaginable. Human history is replete with pandemics even more devastating than COVID-19. In recent years, both former U.S. President Obama and Microsoft founder Bill Gates spoke in predictive terms about the threat of a pandemic.
So, while COVID-19 may not be a true black swan, its consequences are much greater than one could have imagined from a pandemic in the 21st century. I, for one, could not have foreseen how a single event could entangle itself into so many facets of business and life, and could have such a profound effect on the world's population of 8 billion people. As a CEO, if you had told me a year ago we would have a pandemic in 2020, I would have anticipated a disruption similar to other global catastrophes, such as the 9/11 attacks or the Great Recession of 2007–2009. This, clearly, has eclipsed those events by orders of magnitude.
It has pushed us to the precipice of another global recession and devastated financial markets. It has shut down entire industries and thrown millions out of work. It has temporarily changed how we interact as societies, creating armies of teleworkers and turning once vibrant urban centers into virtual ghost towns. It has imprisoned us within the relative safety of our homes and turned computer monitors into our windows to the world.
This multifaceted, evolving, and insidious test of our good will, fortitude, and patience is not a black swan whose feathers are all the same color. This swan is in Technicolor.
Indeed, the pandemic is not just an unwelcome and damaging pause in our lives that could stretch through most of 2020. Its long-term impact promises to permanently change how we do business and how we interact with each other.
One thing the pandemic has made crystal clear is just how globally interconnected and interdependent our lives and economies have become. The reliable, just-in-time delivery of materials to operate our businesses has virtually ground to a halt. Sources of dependable and affordable labor have been cut off. Businesses and industries that provide and depend on unfettered and convenient travel, hospitality, and entertainment have shut down. Ironically, the only thing that is thriving in isolation is the critical strategy for fighting the spread of the disease.
As internal auditors, we must not only make sense of how COVID-19 is impacting our personal and professional lives; we must take in the overwhelming deluge of risks associated with the pandemic and help our organizations make sense of it. I see this happening in four important steps:
- Be a part of the team. We must temporarily set aside the relative safety of being objective third-party assurance providers and lend support in any way we can. We can protect our independence and objectivity while providing critical advice and support. It is easy to use independence and objectivity as excuses to stay out of the fray, but it is not the way to become trusted partners to our stakeholders.
- Be an inquisitive and informed partner. Internal auditors by nature seek out information and assess it with a critical eye. This skill is invaluable as our organizations wade through a tsunami of information about the pandemic and its impacts. Be a source of truth for your organization by applying critical thinking skills and healthy skepticism. Be that all-important filter that offers objective and informed assessments to help your organization craft the proper strategies and take the right steps to navigate through the pandemic.
- Provide foresight and encourage long-term thinking. This may be the most challenging, yet most valuable, service that internal audit can provide. In the short term, executive management and the board are focusing on weathering the storm. They may not have the luxury of stepping back and assessing the bigger picture. With its broader perspective and ability to identify conditions and causes, internal audit is positioned to see beyond the current crisis.
Speak truth to power. Don't hesitate to speak up if you see mistakes or incorrect assumptions being made. Remember, no one in your C-suite has ever seen a Technicolor swan, either. I have been a CEO for more than 11 years, yet I wake up every morning surprised by how unprecedented the circumstances are. I assure you that I am not the only CEO who feels that way.
The pandemic is the first significant test of how internal audit will shape its future in the coming decade. How we perform now, and how we are able to demonstrate our value to our organizations, will be crucial — not just for our prosperity, but perhaps for our very survival.
A final thought: I believe the pandemic is pulling back the curtain to show us a glimpse of the future. It has put on display the amazing speed of emerging risks; the global interconnectedness of business, industry, and society; and how we react to adversity as a global community. As practitioners in a profession that is risk-centric, we should glean as many lessons as possible from this trial.
As always, I look forward to your comments.