Jonathan T. Marks CPA, CFF, CFE and NACD Board Fellow

Crisis Management – Lights, Camera, Action!

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Some of the biggest mistakes made when handling a crisis are not dealing with the problem head on, thoughtless or insincere comments, lack of communication with stakeholders, unprepared spokespeople, getting defensive after receiving backlash, or, sitting back and letting the problem grow. Domino’s, Sony, Samsung, BP, United Airlines, Equifax, KFC, are all good examples of companies who stumbled with crisis management.  Organizations should study these crises and learn from the mistakes!

Overview

In today’s environment, organizations of all types face a variety of threats to their operations. Some risks can be planned for, monitored, and mitigated; but other high-impact, hard-to-predict events are occurring more often.

I’ve been around some horrific corporate or organizational events and I will say that when the heat gets turned up, the executive leadership team sometimes “melts like butter in a hot pan“.

Crisis readiness has taken on increased importance and urgency for boards and management teams. The list of potential crises that organizations can find themselves
facing today looms large (see sample list below).

Thanks to social media, the speed with which news of a crisis, whether accurate or inaccurate, can spread is literally reduced to minutes, making the organization’s ability to respond quickly and effectively highly critical.

Root cause analysis of numerous crises have revealed that a boards involvement and oversight is often questioned when an organization’s response is deemed to have fallen short. This is particularly true in cases where early warning signs were ignored or the crisis was attributable to the organization’s culture or tone from the top.

While not every crises causes harm, an organization’s response can result in major business risks.

Boards

The key message or “truth cocktail” for boards is generally you are overconfident and underprepared.   In addition, many boards need to realize that crisis prevention (enterprise-wide risk assessment) is integral to crisis readiness and response.

Boards are generally not truly crisis-ready!

Crisis prevention goes hand-in-hand with risk management, as risk management involves identifying and anticipating the likelihood, impact and speed of onset of risk events that could become crises, and implementing programs and a system of controls to prevent and respond to to such risk events and mitigate their impact.

Risk assessments should be done at the speed or introduction of risks and the cadence of the organization. Not at a prescribed period!

Crisis Readiness and Response

A key role for the board is to work with management to develop and approve a robust crisis response plan tailored to the company’s specific risk profile, periodically engage in disaster rehearsal exercises, and test and refresh the response plan as appropriate. A pivotal component of any crisis response plan is the communication protocol, which should address the following questions at a minimum:

Just planning is not enough!

Even the best-prepared organizations will experience a crisis—and there’s rarely a
perfect response. The ability to avoid disaster—and to avoid mismanagement of
the situation—will largely be determined by the effectiveness of the organization’s crisis prevention efforts, crisis response plan, proper training of the crisis team, and leadership to effectively manage the crisis.

Suggested Solution

Practice, practice, practice…regularly conduct disaster rehearsal exercises or crisis management simulations that are impactful and help reveal blind spots that can be remediated and ultimately prepare you and your team for not if, but when something ugly happens.

Reach out and find out more how we can help you communicate trust when a triggering event occurs.

Copyright 2019    JT Marks

Some Triggering Events

Key Elements of a Crisis Plan

The key requirement is the process and tools must be easy to apply to the situation.

Closing

Realize and understand human behavior and that getting past denial and recognizing a crisis is usually the most challenging! Organizations often misclassify a problem, focusing on the technical aspects and ignoring the issue of perception, which we all know can become reality in a blink of an eye.

Don’t think of crisis management as a magic trick. The odds of pulling a rabbit out of hat when a crisis is in play are remote.

I welcome your thoughts and comments, but realize the awareness of risks or threats is not the same as being able to effectively deal with them!

If you want to reinforce your learning, then listen to the podcast on this topic by clicking here.

Best!

Jonathan T. Marks, CPA, CFE

Attribution
NACD
Paul Zikmund