Preparing for and leading your company through a crisis

Jun 02, 2020
Suzanne Folsom and Robert Garretson explain what to do – and what not to do – to help your company successfully negotiate disruptive events such as the Covid-19 pandemic

Organizations competing in the dynamic global economy inevitably encounter incidents of disruptive and unexpected strategic risk or crisis, which threaten to compromise their legal, financial or reputational standing – and necessitate real-time engagement.

Such incidents of disruption and crisis across every industry and business are happening more frequently and cutting more deeply than ever before, with Covid-19 being the latest – and perhaps most profound – example. It has placed an unprecedented strain on governments, companies and organizations around the world, inflicting economic mayhem and having profound human consequences.

A corporate crisis is generally defined as a critical event or point of decision that, if not appropriately handled in a judicious manner, can develop into a catastrophe that likely will result in harm to people and/or property, serious interruption or cessation of business operations, damage to the organization’s reputation with its key stakeholders, financial losses and/or loss of market share to competitors.

The coronavirus pandemic is revealing a ‘new normal’ for organizations, one in which they are struggling with a wide range of regulatory, operational, business continuity and employee health and safety issues. No matter the origin of the threat, C-suite leaders and their boards must have established robust and effective plans to avert and mitigate risks and prepare for, respond to and recover from consequential incidents.

How an organization prepares for, responds to and manages a crisis may have as great an – if not a greater – impact on the organization’s reputation and bottom line as the challenge itself. Leaders of high-performing organizations seeking to establish a robust crisis-management plan and execute a successful crisis response when needed must ask themselves: are we currently structured for success when responding to a crisis? And if not, how can we make that happen? At the same time, they must ask: are there things we must avoid doing?

A checklist approach is highly recommended to identify an optimal crisis-management structure and appropriate response to crisis for your corporation or organization. Its key components are summarized below.

BEST PRACTICES

Planning and preparation before a crisis

  • Conduct a candid risk assessment to identify the universe of risks your business or organization may experience. Regularly reassess your risk profile.
     
  • Proactively establish internal controls, plans and programs to mitigate or control risks:
    - Establish or refresh an enterprise risk-management team
    - Institute a formal risk-management action plan
    - Establish or enhance and operationalize a corporate ethics and compliance program to address conformance with laws, rules and regulations based on your organization’s operating conditions, legal environs and industry history.
     
  • Conduct stakeholder analysis and mapping to identify individuals/groups that can affect or be affected by your organization’s actions, objectives and policies during a crisis.
     
  • Develop plans for crisis management (including an employee and customer health component) and crisis communications (taking into account all identified stakeholders) to manage and respond to a myriad of potential crises and industry-ending threats. Share the plans with your board of directors.
     
  • Pressure-test the crisis plan and protocols, and train your employees on appropriate crisis response through drills and/or tabletop exercises that simulate the pace, multiplicity of issues and potential landmines you may encounter in a crisis. Adjust the plan based on the results of the pressure tests.

Leading the strategic response to a crisis

  • Empower people to make decisions. Designate a small group of key personnel to function as the organization’s crisis incident-response management team that will provide the oversight and rapid response necessary to manage a crisis. Follow both the crisis-management plan and the crisis-communications plan, making adjustments where necessary.
     
  • Lead through the crisis. Leadership is people-centric. Adopt a ‘mission first, people always’ approach. Crisis impacts people in many different ways; be sure to take the time to focus on the safety, welfare and health of your people and key stakeholders.
     
  • Communicate, communicate, communicate. Be upfront and transparent in letting people know about key information, corporate actions and decisions. Regularly communicate appropriate information with each stakeholder group.
     
  • Proactively engage with federal, state and local policymakers and regulators to help them understand the nature of the threats to your business or organization, and to advocate for potential government-supplied assistance and key regulatory relief as appropriate.
     
  • Following the crisis, conduct a real-time and post-event evaluation and review. Incorporate lessons learned and address any demonstrated gaps in the crisis plan to drive continuous improvement of the process, planning and materials to ensure readiness for the next crisis.

     

WHAT NOT TO DO

  • Do not stick your head in the sand or expect it all to blow over. Accepting the reality that a crisis may occur and rejecting the oft-repeated ‘We’ll handle it when it happens’ or ‘There’s nothing we can do now as we don’t know enough’ is the critical first step in creating a durable, strategic, crisis preparation and response protocol.
     
  • Do not ignore red flags. Recognize and acknowledge these indicators of problems and/or crisis, and act with intention. Organizations that ignore the warnings and try to play crisis catch-up often suffer most.
     
  • Do not neglect training. Remember the saying: ‘You fight like you train.’ Ensure you have developed a concentrated training curriculum that will educate staff and mitigate risks.
     
  • Do not panic. Poor decisions often occur as the result of fear or unpreparedness. If you’ve done the proper planning and preparation, there should be no need to panic.
     
  • Do not be passive, and do not quit. To be effective, leaders will need to take action in the midst of chaos. If you catch serious issues in their infancy, you have a greater likelihood of effectively addressing them before they become unmanageable.
     
  • Do not become one-dimensional in crisis communications. Communicate up and down the chain. Regularly report status to the executive leadership team and the board of directors as well as the workforce. Ensure your organization regularly addresses external stakeholders, including customers, suppliers, press, regulators and public policymakers.
     
  • Do not blame. Leading during times of crisis can be exceptionally difficult. Even the most trustworthy and stalwart employees may make mistakes during the crisis response. Figuring out who is at fault when in crisis mode is not nearly as important as determining what actions are required next. It is essential to recognize that people learn significant lessons from errors, and to the extent an organization has failed to accomplish a task, there is probably a lesson there.
     
  • Do not refuse assistance, or fail to ask for it. There is no shame in accepting the assistance of others – whether legal, public policy, public relations or other advisers – who possess an embedded understanding of how to proceed and successfully understand the agendas of other stakeholders involved in strategic crisis response.
     

TIME IS THE ENEMY
Time is the enemy for any business, organization or leader during a crisis. As response windows continue to shrink, organizations and their leaders must be able to quickly assess their state of preparedness and ensure they sidestep potential pitfalls.

The most effective crisis-management plans will map needed actions to the attendant risks, put in place a strategy to mitigate each one and then execute the resulting multi-part program via engagement with the full breadth of internal and external stakeholders. Through the use of straightforward strategic response crisis management checklists, organizations can gain a new measure of control during a crisis and positively impact their reputation and bottom line during this critical time and beyond.

Suzanne Folsom is a partner in and co-chair of Manatt Phelps & Phillips’ investigations, compliance and strategic response group, and the former general counsel and chief compliance officer at United States Steel.

Rob Garretson is a managing director in Manatt Phelps & Phillips’ investigations, compliance and strategic response group.

 

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