Managing Reputational Risk


Our Insurance Services team have recently launched a Restructuring, Risk and Insurance LinkedIn Group. The first guest post in this group is below.

Pre-planning is the most effective risk management tool for handling a crisis that could damage your business, says Richard Elsen.

In the summer of 2011 riots across the country shook the nation as millions of pounds-worth of damage to property was inflicted, compromising many businesses through major disruption and lost sales. The preparedness businesses to deal with this catastrophic and destructive emergency was severely tested and in many cases they were found wanting.

Businesses with proper crisis planning measures and effective protocols in place fared better than others, having the resources to act quickly and decisively in response to events. Many of those affected were small companies with no plans in place designed to deal with major business disruption, and those were also the businesses that suffered the most.

Protecting your brand reputation

As a result, these companies found that the time taken to return to some semblance of normality was much longer than they would have liked. However, dealing with challenging situations is not just about lost sales and quantifiable monetary loss, which can be mitigated through insurance. More importantly, an ineffective response to a major incident, particularly in communications terms, can severely damage a company’s brand reputation in the longer term.

It is a common misconception that only big corporations need to invest in crisis planning. Even if your business employs just a handful of staff, you should have a crisis communications plan in place. All too frequently, businesses and brands recognise the real value of risk assessment and crisis management systems and processes only after the event. Fortunately, creating an effective plan can be a relatively straightforward process; it is well worth committing the necessary time, resource and level of engagement that such an important task warrants.

A communications policy

The first step is to define an overarching communications policy for your organisation. At the very minimum this policy should contain the following four key elements:

  • Openness and accessibility
  • Truthfulness
  • Responsiveness
  • No secrets

For your organisation to successfully maintain and preserve on-going and positive relationships with its key stakeholders (including employees, shareholders, suppliers, the local community, clients and customers) your communications must meet their expectations. The four key elements cited above form the cornerstones of building strong relationships and must be in place. At a time of major crisis they will go some way towards protecting the reputation of your business if they have become established as an integral part of your culture.

Once this communications policy has been established, you can start to put your crisis plans in place. The best place to start is to conduct a thorough risk assessment of your organisation. Carefully think through all the possible risks to your business, including those that seem very unlikely.

They might include an accident happening to an employee at work, a fire in the building, a natural disaster, a dispute with a supplier, a change in legislation or even, as recent events have shown, damage and theft caused by social unrest and vandalism. Imagining and thinking through every situation, then identifying how best to respond to them, will ensure your business is as ready as possible should a crisis occur.

Setting the priorities

You will need to establish communications priorities which identify with whom you should communicate, when and how. When a corporate crisis hits, speed is of the essence and setting priorities in advance will pay dividends as well as giving you a structure enabling you to better deal with the situation. You should take four main priorities into account:

  • Those people most affected
  • Employees
  • Those indirectly affected
  • The media

In an emergency situation it may be that communications across the four priority groups require almost simultaneous activity. But the order of priority is important because it provides channels of communication which come into effect at different times. This means that those higher up the priority list receive “undiluted” information ahead of others, which has not been distorted by possibly emotional third parties or by those such as the media who might sometimes be prone to misreporting the facts.

With your communications policy in place and priorities identified for each situation, you will be well-placed to start addressing the issues at hand. While each scenario will be different there are common approaches that you should adopt in line with your policy.

The business should speak with one voice, usually through an appropriate senior figure. If the media needs to be informed (when the event is of a suitably serious nature) the company should do so quickly, so as to set the record straight and ensure that the facts are correct. You should cooperate with journalists, communicating clearly in an open manner so as to avoid any wrongful suspicion of cover up or secrecy.

Keep it simple

Leadership, which is competent and engaged early, is also very important. A crisis situation can quickly become very fluid and so prompt action based on solid decision making is invaluable. Stick to simple messages which are easily understood and in line with the communications policy of openness, truthfulness and responsiveness.

As many businesses recently learned, events that are out of your control can pose serious threats. While dealing with crises will always be difficult, preparation and pre-planning can make the return to “business as usual” easier and will reduce the risk of long term damage often associated with poor or “comatose” handling of a situation.

In Short

  • Businesses with crisis-planning procedures in place recover faster than those without
  • Be open and accessible, truthful and responsive in your dealings with all audiences
  • Prioritise your audiences to decide whom to address with the greatest urgency
  • Ensure that your business speaks consistently, with one voice

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Written by: Richard Roe on Tuesday 15/07/2014