How to create a resilient economic environment post COVID crisis. Some insights from Italy.

Time has run out (San Paolo Apostol letter to Corinthians).

We really need to act now if we want to reshape the society and economy of our European countries and prepare a more resilient and sustainable economic environment for our future generations. “This crisis could be an historic opportunity to rethink and develop new business models in the Italian economy”, said Enrico Giovannini, Professor of Economic Statistics and Sustainable Development at the University of Rome and Co-founder and Director of @AsviS Italian Alliance for Sustainable Development. Giovannini was a keynote speaker at MetricStream’s GRC Summit 2020 in May.

“Italy has demonstrated an incredible resilience during this crisis. We can learn from this experience and prepare ourselves to bounce forward instead of bouncing back. The European Commission has been extremely forward looking, having proposed a plan for building a more resilient and sustainable Europe, embracing all dimensions: economic, social and environmental.” This unfortunate crisis, if we act quickly, could be the engine to transform our countries and policies. The future is going to be difficult and shocks will be repeated as different countries experience crises at different times, but we can learn from the current situation to prepare companies, public government and infrastructures to face future uncertainty.

“This is a crisis without parallel in recent history and it is putting the organization and resilience of the economy and society under severe strain. The risks of instability have greatly increased,” said Ignazio Visco, the Governor of Bank of Italy, in his 2020 concluding remarks at the summit back in May.

To provide some evidence of the crisis size in Europe, according to the European Commission’s estimates, the fall in production in Europe will be close to eight percent.

The recession and the measures adopted to mitigate its consequences are having a strong impact on public finances. For 2020, the government’s macroeconomic outlook for Italy forecasts a deficit of 10.4 percent of GDP and an increase of 21 percentage points in the debt-to-GDP ratio. “Such a burdensome debt legacy requires full awareness of the scale of the challenges ahead. Italy’s economy must find the strength to break free from the inertia of the past and to restore a capacity for growth that has been stunted for too long. Despite the deep wounds inflicted by this crisis and the lingering effects of the previous ones that have yet to be absorbed, there will be no shortage of opportunities in the future and Italy has the means to exploit them,” continued the Governor.

If we consider the 17 Sustainable Development Goals established by the UN’s 2030 Agenda for Sustainable Development, they seek to build on the Millennium Development Goals and complete what these did not achieve; they seek to realize the human rights of all and to achieve gender equality and the empowerment of all women and girls. Finally, they are integrated and indivisible and balance the three dimensions of sustainable development: economic, social and environmental.

The European Union is an impressive resource for its citizens. The painful experience of the pandemic today strengthens the case for staying together, and not just from an economic point of view, but focusing on the social impact of measures taken to face the crisis. This has been clearly proven by the show of solidarity by the highest representatives of the European institutions, by the leaders and by the people of the European nations toward the countries most effected by the pandemic.

Giovannini pointed out during the GRC Summit that, “With the European Commission, we proposed a framework that reclassifies economic social environmental policies according to five main aims: policies that protect, promote, prevent, prepare and policies that transform. The decisions that we have to make now are to cover all these five dimensions” (in order to be sure to address the economic, social and environmental dimension of our lives).

I would like to consider the suggestions of the Governor of Bank of Italy: “There are many areas that could benefit from technological innovation: service distribution, customer credit worthiness assessment, and monitoring and regulatory compliance processes.”

All the above points stress the relevance of being able to adopt changing policies, ensure the extended observation of these policies, assess and prevent potential risks and maintain our capability to monitor the unpredictable situation in order to adapt quickly to the new requirements. In other words, we have to ensure a stronger governance, risk monitoring and control of our companies’ processes.

For these reasons, I think it’s important now to implement, with executive sponsorship, in all leading companies, a cross-functional program that will allow:
 

• To properly assess risks and keep a continuing monitoring on their status
• To implement the right procedures to face crisis situations and test them frequently
• To embrace a resilient operational model that will guarantee the business continuity

To close with Visco, the Governor of Bank of Italy, and his remarks: “This is an important opportunity to prepare a common response which, alongside the monetary measures, is proportionate to the seriousness of the crisis. In such an integrated area (Europe) as ours, the difficulties of each country inevitably have repercussions on all the others. Only strong, united and coordinated action will enable us to protect and relaunch productive capacity and employment throughout Europe’s economy.”