Worst-Case Planning: 10 Steps to Effective Crisis Response

 
 

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When disaster strikes, how a company responds—and how the public perceives its reaction—can have a lasting effect. A poor response can ruin a reputation, alienate customers, affect sales and even spur a push for new regulation. On the other hand, a convincing response can actually enhance the company’s reputation.

Two trends make disaster planning more crucial—and more complex—than ever: the growth of foreign investment and the explosion of social media. Over the last 25 years, the value of U.S. overseas investments has risen more than fifteen-fold, reaching $4.1 trillion in 2011. While the operations driving this increase may be distant in geographical terms, in the virtual world, they are right next door.

When a catastrophe occurs, the global reach of social media means that news and pictures can spread around the world in seconds. A salacious photo sent from an iPhone in Cairo can appear on television and websites in New York minutes later. A company that is not ready for the media onslaught may find itself unable to repair the damage done by rumors and misleading information spread through social media.

Think about a food company whose pancake batter is found to contain contaminated ingredients. An inept response would incite a drumbeat of negative media attention that will only get louder if graver details come to light. And with the 24/7 onslaught of modern media, by the time the issue fades from the news cycle, the damage may be irreparable.

Or, what if a violent incident occurs at a store, and the owners have to handle both the incident and address the public safety concerns? If the community isn’t satisfied with the answers and customers avoid the location, that will clearly have an impact on business going forward.

By contrast, a response that engages the public and highlights the company’s efforts to help the victims can add some positivity to a negative story. When a group of miners was trapped in a collapsed Chilean mine in 2010, for example, underground video footage showed that the men were safe. Attention turned to the innovative—and ultimately successful—plan to rescue the workers.

While companies cannot predict when or where a catastrophe will happen, they can prepare for such a scenario ahead of time. Should a disaster occur, a proactive company can put a crisis management plan into action to handle the incident and manage the media coverage. The basics are easy: monitor trends, develop protocols and practice, practice, practice.

Following certain key steps steps will help any company weather a catastrophe with its reputation intact.

1. Get Everyone on the Same Page

When disaster strikes, executives, managers and employees in every location need to follow the same playbook. Companies should develop a communications infrastructure and ensure everyone learns the crisis response plan.

Whether the incident involves a food-borne illness, a stadium collapse or an oil-rig explosion, everyone across the organization should know what to say and what to do to conform to the disaster management plan. A well-thought-out plan will have a much higher likelihood of success than one made up on the spot.

2. Build a Response Team

Managers on site will have to deal with the disaster when it happens, but they will quickly need reinforcements. That includes people to manage the catastrophe response and the media. In overseas locations, companies should make the best use of local and international staff. Employees with the requisite language skills, for example, should be trained to work with local residents, government and media.

Because a crisis may last for weeks, it is crucial to designate back-up teams and develop transition plans so that the hand-off goes smoothly. It is already too late if the team waits until a disaster happens: experts may be unavailable or may charge far more for their services than they otherwise would.

Line up the appropriate vendors ahead of time and make sure their contracts are up to date. Outside experts should also be included in the planning process to develop the most effective response. During a crisis, companies should be prepared to monitor vendor billing and to track invoices and financial records for insured expenses, even if it means filing receipts in a shoebox in a pinch.

3. Designate Facilities 

A crucial part of planning is finding and securing facilities, such as a command or media center or housing for victims and their families. In cases involving large numbers of claims, the company will want to make sure it has the facilities, personnel and equipment available. And ensure that the insurer can handle the high volume of claims. The speed and efficiency of the claims-handling process will have a significant impact on the public perception.

4. Develop a Public Relations Plan

A crisis communications plan should be developed with the help of specialized public relations professionals. To avoid delays when minutes matter, the legal team should review the communications plan ahead of time. Press kits in local languages that provide a clear and consistent message should be prepared for every region in which the company operates.

5. Provide Media Training

The best communication plans include media training for executives. Even seasoned execs may stumble in front of the press if they are unaware of the impact of their words or do not recognize the risks of off-the-cuff remarks to reporters.

Media training should include mock press conferences to prepare company leaders to handle a flurry of questions under the spotlight. Because regional and site managers may also be called upon to speak to the press or local officials, they should also receive training. Communication best practices should include developing and conveying consistent messages, cooperating with the media and local officials, providing regular, fact-based updates and avoiding simply saying “no comment.”

6. Engage Social Media

Because rumors and misinformation about a disaster are likely to spread over social media along with the news, the company should be prepared to communicate its messages in real time. Those messages should be developed and approved by the legal team in advance, so that the company can respond quickly when information about a crisis starts spreading. The company should monitor social media to gauge public opinion and correct misinformation or rumors.

7. Manage Costs

Because the expenses of responding to a catastrophe are likely to be far higher than anticipated, companies should make sure that their insurance coverage responds to any extra costs. The expenses are likely to include public relations consulting fees; travel for executives; emergency third-party costs such as psychological counseling for victims and their families; temporary living quarters for families if the victims are hospitalized; and emergency medical evacuation and repatriation if adequate medical care isn’t available locally.

Then there are industry-specific costs. Companies entangled in a food-borne illness crisis, for example, may want to hire an independent laboratory to run tests on their behalf. If a high-profile group stays at a hotel and contracts a food-related illness, the hotel will want to determine who is responsible for the incident right away so they can take the appropriate actions to contain the situation and prevent any other customers from getting sick.

8. Watch for “Neon Swans”

Companies need to continually monitor loss trends to predict catastrophes. But, they also need to leave their forecast comfort zones. So-called “black swan” events may be highly difficult to predict, but risk managers need to take them into account.

Risk managers also need to consider events that common wisdom says shouldn’t happen but still do: what Jason Zweig of the Wall Street Journal calls “neon swans,” events that are “unthinkably rare, immensely important and blindingly obvious.”

9. Practice Drills 

It’s not enough to prepare. Companies must practice. Every organization should run regular global preparedness drills where appropriate. Because a facility may be more vulnerable during a crisis, the company should consider frequent drills to test the plan.

10. Debrief

After a disaster, it is crucial to hold a frank and honest discussion about the root causes of the catastrophe and how all aspects of the response were handled. The ultimate goal for an organization will always be to avoid a future catastrophe, but that may not be possible.

Companies must determine how the crisis could have been handled better—and how the next one will be. By surviving the storm, the company and its staff will have learned valuable lessons. If these lessons are not used to enhance the disaster response and crisis communications plans, it will be a missed opportunity.

 

 

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About the Author

Lori Brassell-Cicchini, CPCU, ARM, is vice president, ESIS Catastrophe Services, where she oversees the U.S.-based catastrophe-services program.

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About the Author

Carol Laufer is executive vice president at ACE Excess Casualty in New York.

 
 

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