Bracing for change: Be ever ready for crisis

These plans and procedures are put in place to equip organisations with the best responses in emergencies or other unforeseen incidents so that they can quickly recover and resume business operations. This may include procedures for employee evacuation – what to do in case of a natural disaster – or even supplier mishaps, the inability to deliver materials because of a factory accident.

Most organisations recognise the need to develop response plans. These procedures are also necessary because it makes them think about their critical activities and what the risks to these activities are. Unfortunately, most organisations get a false sense of security with their current plans that generally deal with issues only at an operational level.

When a major incident occurs, the focus is usually on fixing the incident rather than addressing the strategic impacts such as reputation, share price, litigation, regulatory sanction, or the company’s very existence. However, situations like these are corporate crises and require remediation beyond an operational level.

Crisis situations may arise from a variety of sources such as:

lDeliberate acts such as cyberattacks, identity theft, or product tampering;

lFraud or other criminal activity;

lFinancial failures that threaten a company’s very existence;

lFailures of complex systems, either through accident, mismanagement, or sabotage;

lLegal, commercial, geopolitical or military conflicts;

lNatural disasters that disrupt almost everything.

The distinction between an operational issue and a corporate crisis is not always clear, and an operational issue might quickly become a corporate crisis if it is not handled properly. Organisations need to be on the alert for strategic-level impacts that may result from any incident.

According to the Institute for Crisis Management, almost 50 per cent of all organisations do not have plans on how to deal with corporate crises. Not having a plan and the appropriate people trained in crisis management may greatly hamper and delay an organisation’s response to the crisis.

As you look into improving your crisis management plans, here are some lessons to take note of.

1. Be ever ready: Monitoring, preparation, and rehearsal are the most effective ways to get ready for a crisis event. Organisations that can plan and rehearse potential crisis scenarios will be better positioned to respond effectively when a crisis actually hits.

2. Get the right people involved: When dealing with strategic impacts of a disaster, you need people who can see beyond the operational fixes and address strategic areas such as brand, stakeholder relationships, and trust. These may include the C-suite, general counsel, and members of the board.

3. The effect on stakeholder value: Any decision made during a major crisis can have a positive or negative impact on stakeholders. Reputational risks destroy brand value more quickly than operational risks.

4. The importance of quick response: Response times should be measured in minutes. Teams on the ground need to take control, lead with flexibility, make decisions with less-than-perfect information, communicate well internally and externally, and inspire confidence.

5. The road to recovery: Remediation work goes on long after the crisis is over. The way you capture and manage data, log decisions, manage finances, handle insurance claims, and meet legal requirements can determine how strongly you recover for the future of your business.

Responding to a crisis also creates opportunities for companies to rebound. Organisations should learn to identify and take advantage of these opportunities. Although it is not possible to anticipate every possible crisis scenario, having a crisis-management plan and preparing for how to respond to potential crisis scenarios will go a long way should an actual crisis occur.

Parichart Jiravachara is a Deloitte partner, enterprise risk services.