Crisis Management: What to do when things go wrong
Jan 06, 2020 02:50PM
By Dustin Waters
While expecting the worst may not make you a hit at parties, a little pessimism can go a long way in business.
Crucial to every company that hopes to remain successful is the creation of a formal enterprise risk management strategy. That means you’ve sat down and mapped every possible crisis scenario that your business may face—and outlined a strategy to avoid or mitigate those risks.
“The reality of it is for every business there will be a time of crisis. Many people liken managing a business to simply moving from crisis to crisis,” says Robert Hartwig, director of the Center for Risk and Uncertainty Management at the Darla Moore School of Business. “Most small-business and medium-size business owners will probably agree on this fact. The idea is that you're going to have a solution in hand or at least a headstart on a solution before the crisis occurs.”
Some crises, such as a natural disaster, are somewhat foreseeable. Other risks are perhaps less obvious and often less easy to face. Let’s say your product is poisoning customers or someone is injured or killed on business property. How do you protect your firm?
The first problem to address is the financial consequence. For these cases, businesses should have adequate liability insurance already in place. In addition to financial coverage, insurers will direct the defense in cases where litigation is brought against your company.
Relatively new and increasingly more common in the world of threats to businesses are malicious cyber attacks that can paralyze a company. Fortunately, there is an added layer of protection available. According to Hartwig, cyber insurance is very robust and comprehensive, not only covering costs incurred through loss of business, but also providing inspections of a company’s cyber defenses. That just leaves the human component of all businesses.
“There are other scandals that happen in businesses nowadays, such as accusations of sexual harassment or discrimination, that are increasingly commonplace. This is part of your enterprise risk management,” says Hartwig. “You identify the fact that it is it possible that your company could have a claim made against it for discrimination or harassment. What is your plan? Well, the plan should be to immediately and vigorously investigate the claims and to have in place, for instance, a zero-tolerance policy in the event that individuals are found to be culpable in engaging in such activities.”
Another component of a business’s enterprise risk management strategy that Hartwig points out are purely operational risks. For instance, he says, many businesses in South Carolina are currently faced with suddenly higher costs for inputs as a result of tariffs against Chinese imports. In cases such as this, you’ll need to know if your supplies can be affordably sourced from an alternate country or produced domestically. If an American vendor can meet your needs, you’ll need to have an idea of the price and the lead time needed.
“A business might be forgiven for not having a plan in place three or four years ago, but now any business that depends substantially on imports for its productive process, as part of its risk management plan, has to have alternatives for sourcing,” says Hartwig.
In the current era of social media, poor online reviews can multiply, rumors can spread like wildfire, and a tone-deaf response can go viral in all the worst ways for a company. Hartwig suggests publicly apologizing to customers online and offering a discount or some other enticement to regain their business and win them over once again. As the old adage goes, a reputation takes a lifetime to build and a moment to lose.
That’s why for the team at NP Strategy — the public relations firm with offices in Columbia, Charlotte, Charleston, Greensboro, Greenville, Hilton Head, Myrtle Beach, and Raleigh—time is of the essence when it comes to crisis management.
“There are a lot of proactive items that companies can do to be effective when a crisis may occur. You never want to need help when you are in the middle of a crisis,” says Amanda Loveday, associate director at NP Strategy. “It tends to be more expensive. It tends to be more all-consuming. You're better off planning and having a strategy when or if those situations were to occur.”
Loveday encourages a holistic approach to crisis management for businesses. A big part of crafting a message is knowing that there are multiple different groups looking for answers when things go wrong. Employees need to know if they still have a job. Customers need to know if they can still rely on your business. Investors need reassurance that their finances are safe. And in a world where an unfortunate tweet can prove detrimental to a business, you’ll want to have a solid plan in place before reporters start calling for a comment.
“We tell people all the time you are better off being prepared, even over-prepared at times in these types of situations, than you are having to look backwards and fight whatever the situation may be in a reactive manner,” says Loveday. “You always want to be proactive. You never want to be reactive.”