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IR BLOG: Crisis Management Always a HOT topic – PART 1)

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By Simona D’Agostino Reuter 

Crisis Management Always a HOT topic

“It Can’t Happen To Us” –  The last word  

 

No one likes crises, though we cannot deny that they happen. When a healthy organization’s CEO or CFO evaluate the cost of preparing a crisis communication plan, it is tempting to think and say: “it can’t happen to us”.

Every organization is vulnerable to crises. This is what we know by now. And for some reasons, they tend to happen when a company is less prepared…during the summer holidays or Christmas breaks for instance.

Unfortunately the recent tragic events occurred in Italy and related to the listed blue chip Atlantia are a clear example of it.

We would like to believe organizations worldwide are finally “getting it” about crisis preparedness, whether we’re talking about crisis communications, disaster response or business continuity. Certainly, client demand for advance preparation has increased dramatically in the past decade.

According to Jonathan Bernstein – Crisis PR Communications expert“The days of burying your head in the sand and hoping the problem goes away are gone. You can try, but your stakeholders will not be understanding or forgiving because they’ve watched what happened with Volkswagen, Chipotle, FIFA, Costa Crociere, Lance Armstrong”..

 

Experience demonstrates that organizational leadership often does not understand that in the absence of adequate internal and external communications:

  1. Operational response can break down
  2. The length of time required to bring full resolution to the issue is extended
  3. Stakeholders will not know what is happening and quickly become confused, upset, and negatively reactive
  4. The impact to the financial and reputational bottom line can also be more severe
  5. The organization will be perceived as inept, at best, and criminally negligent, at worst

What is a Crisis?

There several definitions of a Crisis, this is the one I would use the most: “Crisis refers to a sequence of unwanted events at the workplace and outside which lead to disturbances and major unrest amongst the individuals or/and institutions”.

Crisis generally arises on a short notice and triggers a feeling of threat and fear in the employees.

And what is a Crisis Response?

We can say “It’s an approach to dealing with an event in a professional manner that addresses the critical needs of the time. The focus is on surviving the crisis in progress and easing the effects of the crisis as much as possible.”

We think a crisis can create three related threats: (1) public safety, (2) financial loss, and (3) reputation loss. And more recently, two distinct categories have been created, operational crises and reputational crises (Sohn & Lariscy, 2014), we believe a crisis can affect both but one of the two factors can dominate a crisis.

 

Investor Relations in periods of crises

In a moment of a crisis, Investor Relations Officers have to be firm and communicate effectively their company strategy, despite market conditions. Too easy to say! IRO’s must do their best to influence the process and control the messaging around how the market turbulence is or isn’t impacting their company, without forgetting that investors, in the meanwhile, will reach their own conclusions on how the market may impact. It is commonly agreed that planning both short and long term communications goals is especially important during times of crisis.

Here below are a few key questions to ponder when formulating a communication plan:

  1. How long is the event expected to last?
  2. How will the event impact the business, also relative to your peers?
  3. Why (or why not) the short and long term business strategy need to be changed because of this event? In many macro events and crises, a company’s strategy may not change at all, yet investors become more wary of a company’s performance. It is crucial during times of crisis to clearly reaffirm the company’s strategy and why it has or has not transformed from the last time shareholders were updated.
  4. How are IROs communicating answers to the above to all the shareholders? While certain crises are worthy of a special shareholder update press release or conference call, bigger macro events may not justify this level of communication. So how else are you going to get your messaging into the hands of your investors? Might it be an opportunity to try new ways of communicating to demonstrate your desire to be as transparent as possible during precarious times?

Bear in mind, all stakeholders, internal and external, are just as capable of misunderstanding or misinterpreting information about your organization as the media. It’s IROs along with Top Management responsibility to minimize the chance of that happening. Spokesperson training teaches to be prepared, to be ready to respond in a way that optimizes the response of all stakeholders.

At HEAR-ir, we help clients put the nightmare of a crisis behind them and begin once again, by executing a strategy that combines: (1) Skilful crisis communications, (2) Total commitment to ethical behaviour, and (3) Organizing an effective crisis management team.

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