Do you ever worry about a potential call from a reporter telling you something about your business that you didn’t know? Global companies are often caught in the spotlight, involved in catastrophic accidents, technological breakdowns, rogue traders, manufacturing malfunctions and product safety issues. What starts out as local can quickly affect global operations, especially if it is not addressed immediately.
The best way to manage a crisis is to avoid it. Proper planning goes a long way in avoiding crises and mitigating damage to reputation and legal liability when it occurs. Planning requires regular crisis audits and the development of a culture of risk identification and avoidance.
A thorough risk audit requires general counsel and/or outside lawyers, sometimes under attorney-client privilege, talking to each of the company’s units and work teams, particularly middle managers who are closest to potential issues. Companies often make the mistake of surveying only top managers, but full inclusion not only helps identify issues that are just starting to become a problem, it also creates a culture of risk identification and avoidance. For example, middle managers are most likely to hear rumours that several female employees have complained of inappropriate comments or actions by an employee, which could blow up into a lawsuit, or know about a continuing problem with a certain manufacturing facility meeting product safety standards. Conducting regular audits empowers these units and work teams to think daily about possible issues and address them as they arise.
It is also critical to look beyond the organisation and talk to key customers and outside counsel. Customers will identify areas of their concern. Outside counsel can help explore developments in the law, including those relating to regulatory compliance, that could present peril in some key areas.
In military exercises there is always a “red” team that acts as the enemy. Management needs to task key people with being the red team and thinking outside past experience. After the fact, many managers often say while they planned for the “usual” crisis, they had not even envisioned the catastrophic event that wreaked havoc. Engaging in thinking outside the box could help you plan for the worst, unexpected occurrence.
This brings us to the bottom line: Some risks are just so unlikely they don’t deserve a lot of time, attention or money. To calculate what a potential crisis is worth, put an expected value to the anticipated event by multiplying its dollar impact by the probability of it occurring. The most unlikely event, such as a bombing, with the same dollar impact as a more likely event, such as a gas explosion at a plant, would therefore be given a lower priority. Another determining factor is how much it may cost to avoid the risk. If extra security at each plant would not cost very much, but would help guard against terrorist infiltration, workplace violence or a fire, then the cost may be worth prioritising. Alternatively, assigning low priority to a low probability but extremely high impact event may be simply unacceptable if the event could mean complete disaster for the company.
Once you’ve identified those “Oh, sh!#” moments, the next step is avoiding them.
This is where counsel can be extremely helpful by brainstorming new policies and procedures, and strengthening compliance to lower the risk of harm to a company’s reputation and its legal exposure. As one of the United States’ first inventors, Benjamin Franklin, famously said, “An ounce of prevention is worth a pound of cure.”