At the start of any discussion about crisis management, it is important to first define what crisis means. Crisis events are generally understood to have long-term potential to change the way an organization operates, sometimes threatening its survival, or fundamentally changing its internal or external stakeholder relationships. To best prepare for eventualities such as these, companies must have a crisis management plan that brings together many different competencies: communications, legal, security, forensic, and often political among others. Most companies appropriately recognize the importance of devoting resources to compliance, preventing compliance misses from happening in the first place. But the reality, even for companies with the best compliance programs, is that certain events are unforeseeable (e.g., “black swans”), or unstoppable (“gray rhinos”). The answer is not simply to reactively deal with these events when they come, but instead to implement a plan that can save important time and provide a semblance of order when the next crisis happens.
The Crisis Management Plan Imperative
Gone are the days when crises were limited to emergencies and disasters that left a physical impact on a company. Given the current COVID-19 pandemic, the urgency of managing those types of events is more important than it ever has been. However, the discourse about crises now also includes so-called “soft” or “man-made” crises that may not result in physical damage but nonetheless have a lasting impact on a company’s brand, reputation, and employee morale. Consider the impact of problems like these if they happened at your company:
- A whistleblower reports that your longtime Chief Executive Officer, who has presided over a dramatic turnaround at your company but also massive layoffs, worked with your CHRO to underreport the CEO’s compensation in securities filings and eventually flees not only the company but the city after he is arrested. Subsequent reports surface that the CEO misappropriated other large amounts of funds, too.
- For the last few years, your company has struggled with certain regulatory inspections, receiving negative grades in several areas. Your company wanted to improve, so it recruited and hired employees who worked for the regulator and instituted a financial incentive system that awarded bonuses to employee teams who found a way to improve the company’s grades. Naturally, your company’s inspection grades subsequently improved. Years later, it is discovered that the employees your company recruited copied guides and manuals from the regulator, as well as a list of areas at the company that the regulator planned to inspect.
- Your company’s industry is highly regulated and its process for promoting middle managers to senior managers into customer safety-sensitive positions requires the successful completion of an extensive exam. One of your employees—the Senior VP to whom those senior managers will report—decides to share copies of the exam with certain middle managers she wants to promote before they take the exam. This is discovered after promotions are decided and announced throughout the company. Disappointed applicants for the promotions sue the company and the applicants’ lawyers go to the press, citing rampant favoritism among other problems.
