Crisis Management: Is Your Company Ready?

Inevitably, even the best companies do, from time-to-time, suffer a catastrophic event that can change not only the course of the company, but also its very survivability. Unfortunately, many companies do not have a Crisis Action Plan. This lack of a plan can have profoundly negative affects on the business when a disaster strikes.

Possible crises include fire, a harmful product or service, a financial crisis, service interruption of some kind, indictments against key personnel, an environmental incident, and labor unrest, especially a violent strike. The point is that these crises, though we all seek to avoid them, do occur, even to the most well-meaning companies and individuals. For this reason, a Crisis Action Plan is a must.

Some Plan Components

The following are some examples of subjects that could be addressed in your plan:

  • Legal Issues
  • Media Relations
  • Employee Relations
  • Customer Relations
  • Financial Issues
  • Lender Relations
  • Shareholder Relations
  • Supplier Relations

The above list is certainly not all inclusive. But, these are key areas that could be affected when some sort of disaster strikes your company. The main thing is that you should identify the areas that can have an impact on your company and have a plan of action for each area.

Immediate Response Is Critical

The manner in which you handle the first day or two of an incident can have an enormous impact on your organization. Your Crisis Action Plan should have specific provisions detailing your short-term response, thereby eliminating the need to develop a response in the middle of a crisis. Here are some immediate responses that should be among those provisions:

  • Immediately gather your senior management and fully describe to them the problem and how you intend to address it. Of course, it is an absolute must that you remain composed and project a calm, in-control image to your senior staff. Be sure to stress to them the importance of projecting a calm image to all involved, including your employees.
  • Contact your attorneys and make them aware of exactly what is going on. Do not try to “sugar coat” the circumstances. They must know the full extent of the problem.
  • Decide how you will communicate the problem to the public, your customers, suppliers, shareholders, and others. It is essential that you be proactive and communicate with all constituencies. It is absolutely critical for you to talk with the press. Your side of the story must be portrayed to them as well as everyone else involved.
  • Contact other interested parties such as lenders, regulators, and organizations/associations that represent your industry. Again, be as clear and accurate as you possibly can be with the details. In some cases, your attorney will guide you through what and how much you should tell people.

Intermediate and Long-Term Response

The plan components that I mention above such as media relations, legal issues, etc., all have long-term as well as short-term elements. For example, your legal issues usually won’t go away soon after the crisis erupts. In fact, they are more likely to be compounded and protracted as time goes on. Therefore, you must break your Crisis Action Plan down into time-sensitive components.

Show what has to be done in the short term. Then, taking the same elements from your short-term plan, draw up a similar list but with different actions that have to be taken over time.

For example, the legal issues component of your plan should include some things to address immediately such as which attorney you should call based upon what type of crisis you are planning for. The long-term component might have different scenarios as to what, if any, types of settlement you would agree to and the dollar amount for such settlements. Your attorney should be helpful in guiding you through this part of the plan.

How to Handle the Press

Not everyone is in agreement as to how inquiries from the press should be handled. Some, but not many, public relations firms suggest that you should have no contact with the press. They feel that anything you say to the press can only hurt you.

My feelings are quite different. Because I have owned so many companies in the past, the inevitable happened to me when one of my companies was faced with a crisis. Based on my experience, I am absolutely convinced that the only way to deal with the press is to deal with the press.

A “no comment” can only hurt your cause. It will be printed as such, and readers will inevitably think that you have something to hide. The press should be faced in a very proactive manner. All calls from the press should be either answered immediately, assuming that you have thoroughly thought out your answer, or delayed for a short period of time until you can respond in a way that will not hurt you or your company.

Also, it is absolutely essential that you be totally truthful when dealing with the press. A misstatement or an outright lie will only come back to haunt you. Certainly, depending on the circumstances, consult your attorney as to an answer that might have legal implications.

A close friend of mine is the CEO of a good-sized company. He has always avoided the press, no matter how innocuous their inquiries may be. It has hurt him and his company more than it has helped them. A reporter once wrote an article that contained a significant error in describing the stockholder base of one of his companies. Instead of talking to the reporter when she called, he refused to speak with her. Without the correct information, she wrote a totally inaccurate story.

You don’t have to be like Donald Trump who is always courting the press. He is a master at using them and turning them and their stories to his advantage. On the other hand, don’t avoid the press. Be proactive with them, and make sure that they hear your story and your facts about you and your company. They will at least be obliged to print some of what you tell them.

Sound crisis management means being prepared for a possible disaster. If you are prepared, you’ll be surprised at how smoothly you can work your way through it and, maybe, turn something that is negative into something that is positive for you and your company.

Good Luck!

Theodore F. di Stefano is a founder and managing partner at Capital Source Partners, which deals in bringing small-cap companies public. He also is a frequent speaker on the subject of financial advice for small businesses as well as the IPO process. He can be contacted at [email protected].

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