Only 66% of Companies Are Prepared! The Risk of a Crisis Versus the Risk of Not Being Crisis Prepared
By Tony Jacques, Issue Outcomes
The best crisis management is to take steps to reduce the likelihood of a crisis happening in the first place. But many companies lack even the most basic elements to be ready for a crisis when it does happen.
The latest data from a survey of more than 750 investor relations professionals around the world shows only two thirds of companies have formal crisis planning in place. Moreover, only half of those with a plan conduct crisis simulation exercises.
The study for Investor Relations Insight reported the IR professionals interviewed placed corporate reputation as the top priority in a crisis, ahead of share price and shareholder retention. Yet 53% said their department did not take part in crisis simulations and another 7% didn’t know either way.
Similarly, an AON risk survey of over 500 major corporate and public sector organizations in Australia and New Zealand ranked damage to brand and image as the single most important risk concern for the fourth year in succession. However, there was little evidence that this concern gets translated into adequate crisis preparedness.
A good example was revealed in the immediate aftermath of September 11, 2001, when the American Management Association surveyed its members and customers and found that only 49% had a crisis management plan in place and only 39% had ever carried out a drill or simulation. While their follow-up survey a year after the disaster showed the number with a plan had increased to over 60%, it soon started to fall back again.
It’s clear top management understand the risk of a crisis. But the risk of not being prepared for a crisis is just as important. And the basic steps required are not complicated and don’t have to involve large-scale resources. Specifically:
- There must be a formally designated and trained Crisis Management Team. This is not simply the existing executive group with a different name. Membership is not decided by seniority and job title alone. The Crisis Management Team (CMT) needs to be a genuinely cross-functional group, comprising the right balance of people with authority to make decisions, and people with expert knowledge.
- The team must be trained as a group. Training simulations don’t have to be costly multi-agency extravaganzas. A well-managed desk-top exercise can be very powerful and cost-effective. But training should take place at least once a year – preferably every six months – and include designated deputies.
- Crisis communication planning is critical. While crisis management involves much more than communication, failed communication can easily over-shadow great operational intervention. Stakeholder communication must be the responsibility of the whole CMT rather than getting dumped onto the PR person.
- Crisis management is not just crisis response. Crisis prevention is essential and must be fully integrated into overall management activity. This should normally include – at a minimum – environmental scanning, issue management, risk assessment and strategic planning.
How can that be so difficult?
Dr Tony Jaques is an international authority on Issue and Crisis Management, and manages the Australian-based consultancy Issue Outcomes P/L which specialises in auditing systems against best practice. He writes the regular online issue and crisis newsletter Managing Outcomes (www.issueoutcomes.com.au)