Does your organization have a plan to avoid a crisis?
A customer calls the manufacturer of a blow dryer to complain: sparks shoot out whenever she tries to dry her hair. How does the friendly call centre empl.ayee respond? The answer, says Lawrence E. Ritchie, could have huge implications.
That faulty blow dryer might simply be an aberration, says Ritchie, a partner at law firm Osler, Hoskin & Harcourt ll.P, "or it might signal a systematic manufacturing defect that could cause a fire leading to property damage. personal injury, or even a death."' Further, the manufacturer's failure to adequately disclose and address the defect threatens the sustainability of the business, and the reputations of its leaders and employees.
In a world of increasing regulation, of aggressive class action litigation and shareholder activism, and of negative social media campaigns broad.casting on a 24/7 news cycle. it's more important than ever for organizations to develop proactive crisis preparedness strategies in order to mitigate risk and avoid having problems escalate. Today's businesses, says Ritchie, "have a strong mandate to identify problems, alert appropriate decision makers, and assemble a multidisciplinary team of experts to assess the situation and decide how to respond."
And yet, many businesses lack systems and protocols for properly identifying systemic patterns, not to mention reporting complaints, problems, or other irregularities to the appropriate decision makers, observes Ritchie, who chairs Osler's Risk Management and Crisis Response team. uA lot of organizations get into trouble because, instead of analyzing and reporting a problem when it arises, they just try to deal with it themselves. An otherwise competent manager too often handles potentially explosive issues within the silo of his or her division, and expects that will be the end of it"
Take that wonky blow dryer. "If the manufacturer had an information system by which every customer complaint was automatically logged into a central database, and that central database was regularly monitored and analyzed. then they could start to notice a pattern of complaints about that particular unit."
Ideally, says Ritchie, the manufacturer would have a clearly understood procedure to facilitate proper reporting of irregular patterns to the responsible person or office. From there, it would effectively investigate the source of the problem and decide on a course of action, such as a public recall. With automated systems in place and understood at every level of the organization, he says, there's less likelihood of managers "just dealing with" potenti.ally company-wide problems at a one-off level. Instead, problems can be spotted and appropriately handled before they escalate into full-blown crises.
Because the problems that lead to corporate crises tend to be multidisciplinary, a company's crisis management team must also be multidisciplinary, with different subject matter experts working collaboratively with risk managers, compliance officers, in-house and external counsel, and chief executives. "An effective crisis management team is very personality driven." says Ritchie, whose team at Osler draws on its vast experience to advise corporate clients on assembling and implementing proactive crisis management plans, as well as on how to handle an escalating situation or a full-blown crisis. "You need people with knowledge across all areas of the business, as well as the legal and regulatory environment, who are extremely collaborative and open-minded, and who can recognize when they don't have all the answers but know where to go to get those answers. The team must be able to properly and calmly assess the problem. consider its business, legal, regulatory, reputational, and other consequences, and identify any potential fixes. Then, it needs to be able to enable and deliver the appropriate 'reset' for the company and affected employees, shareholders, potential investors, suppliers, lenders, customers and other stakeholders, regulators, and other government officials -and of course, members of the general public."
Unfortunately, businesses don't like to spend time thinking about avoiding problems that they can't readily identify, says Ritchie. "'t's a distraction from what businesses do best, which is build and sell things, provide services, and generally add value for investors and stakeholders." The challenge for general counsel and risk management and compliance executives, he sa:ys, is to shift that mindset- partly by making clear the benefits of having a plan inplace (or the drawbacks of not having one), and partly by automating the system so that it doesn't become onerous or rely on individuals to become whistle-blowers.
Developing an effective crisis management plan. Ritchie acknowledges, is no easy task. But it's more than worth it. "Developing and implementing a preventative risk-identification and management program helps businesses save costs, reduce aggravation, and limit exposure, resulting in enhanced value for shareholders and other stakeholders. It also enables businesses to properly. effectively and safely respond before a problem becomes a crisis."