Crisis management in a digital world

Cor­po­rate risk man­age­ment has always been based on the care­ful cal­cu­la­tion of threats and oppor­tu­ni­ties under con­di­tions of uncer­tain­ty, but the events of the last 18 months rep­re­sent some­thing of a quan­tum leap in the evo­lu­tion of risk pro­files in com­pa­nies. The unprece­dent­ed shock of Covid-19, com­bined with the con­sid­er­able impact of the Black Lives Mat­ter move­ment and oth­ers, have left an indeli­ble mark on cri­sis and rep­u­ta­tion man­age­ment for all busi­ness­es. 

The ‘issue load’ fac­ing boards has mul­ti­plied as the dig­i­tal econ­o­my, and the new risks it entails, has been met by a rise in stake­hold­er cap­i­tal­ism which is chal­leng­ing busi­ness­es to con­sid­er busi­ness val­ue beyond the tra­di­tion­al met­rics of rev­enue, prof­it and loss. In this new, com­plex land­scape, cri­sis man­age­ment is more impor­tant than ever, as just one error of judge­ment could very quick­ly spi­ral out of con­trol through social media, caus­ing per­ma­nent dam­age to a brand. 

The tra­di­tion­al risk man­age­ment approach is being con­front­ed by the need to be more informed, sce­nario-test­ed and capa­ble of deal­ing with emerg­ing risks which move faster in the dig­i­tal age. Board capa­bil­i­ties and knowl­edge in risk man­age­ment, stake­hold­er com­mu­ni­ca­tions, com­mer­cial aware­ness and deal­ing with dig­i­tal-led change are now essen­tial. This requires a com­bi­na­tion of tech­ni­cal and soft­er skill sets as well as a strong lev­el of board­room diver­si­ty to chal­lenge tra­di­tion­al ways of work­ing and think­ing and dri­ve for­ward new ideas and inno­va­tion.

“Boards and busi­ness lead­ers must think cau­tious­ly about how they man­age their cor­po­rate nar­ra­tive in a way that min­imis­es rep­u­ta­tion­al risk expo­sure,” says Ryan McShar­ry, head of cri­sis man­age­ment at com­mu­ni­ca­tions firm Infi­nite Glob­al. “This is par­tic­u­lar­ly true in sec­tors already bat­tling longer-term dif­fi­cul­ties and dip­ping demand before Covid-19. Media appetite remains high for any hint of com­mer­cial dif­fi­cul­ty, lead­er­ship mis­steps or indi­vid­ual wrong­do­ing.

“Lead­er­ship teams must also engage in reflec­tion and reori­en­ta­tion around the extent to which stake­hold­er expec­ta­tions have shift­ed. The pan­dem­ic has changed the rules of the game and organ­i­sa­tions need to adapt their think­ing accord­ing­ly. It has inten­si­fied crit­i­cal ques­tions around the role of busi­ness in soci­ety and the nature of good cor­po­rate cit­i­zen­ship. Now more than ever, a moral com­pass should be regard­ed as an essen­tial tool in cor­po­rate deci­sion-mak­ing.”

While busi­ness­es have faced grow­ing rep­u­ta­tion­al risk due to the Covid-19 cri­sis, includ­ing tough deci­sions around stalling rev­enues and restruc­tur­ing, the pan­dem­ic has also cre­at­ed a sig­nif­i­cant oppor­tu­ni­ty to build bet­ter busi­ness resilience by inves­ti­gat­ing and uncov­er­age rep­u­ta­tion­al land­mines. The more proac­tive com­pa­nies have act­ed to get their house in order.

Almost overnight, busi­ness and gov­er­nance lead­ers, like every­body else, had to adapt to new ways of work, includ­ing the use of video tech­nol­o­gy soft­ware, col­lab­o­ra­tion tools and agile work­ing. As they emerge from the pan­dem­ic, many com­pa­nies are plan­ning to con­tin­ue embrac­ing flex­i­ble work­ing with­in a new hybrid mod­el which encour­ages a bet­ter work-life bal­ance for employ­ees. This does, how­ev­er, present new areas of con­sid­er­a­tion and risk.

“The need for improved resilience has grown in response to new reg­u­la­to­ry shifts – from a pru­den­tial approach to a cus­tomer harm/conduct approach,” says David Long, a for­mer senior exec­u­tive at Cred­it Suisse and now head of non-finan­cial risk at Delta Capi­ta. “As a result, boards have need­ed to effec­tive­ly iden­ti­fy crit­i­cal busi­ness ser­vices, define impact tol­er­ances and thor­ough­ly test them­selves against cri­sis sce­nar­ios. Well­be­ing has also become a key focus as com­pa­nies look to min­imise the pandemic’s impact on the men­tal health of their staff.”

Of all the issues fac­ing boards today, how­ev­er, none pose such an imme­di­ate colos­sal risk to organ­i­sa­tions as cyber­crime – and that risk has grown fur­ther dur­ing the pan­dem­ic as bad actors have sought to take advan­tage of the accel­er­at­ed pen­e­tra­tion of dig­i­tal chan­nels. Telling­ly, cri­sis sim­u­la­tion train­ing firm Polpeo runs more cyber­crime cri­sis exer­cis­es than any oth­er. Being vic­tim to a major cyber­at­tack comes with not only severe finan­cial and oper­a­tional con­se­quences but long-term rep­u­ta­tion­al risk if cus­tomers no longer trust them with their data.

Longer-term, organ­i­sa­tions are hav­ing to con­sid­er the impact of cli­mate change and envi­ron­men­tal dam­age on their busi­ness­es, and how they can cre­ate more sus­tain­able and dig­i­tal busi­ness mod­els and sup­ply chains. The speed of tech­no­log­i­cal change rep­re­sents a huge oppor­tu­ni­ty to those keep­ing up with it, but a huge risk to those that aren’t. The struc­ture and make­up of organ­i­sa­tions will fun­da­men­tal­ly change as tech­nolo­gies like AI evolve. The most suc­cess­ful busi­ness­es will be led by peo­ple who embrace this change and pre­pare for it. 

“Board mem­bers need a clear under­stand­ing of the envi­ron­men­tal, soci­etal and tech­no­log­i­cal risks to their busi­ness,” says Kate Hart­ley, co-founder of Polpeo and author of Com­mu­ni­cate in a Cri­sis: Under­stand, Engage and Influ­ence Con­sumer Behav­iour to Max­i­mize Brand Trust. “It’s not enough to just know your own indus­try. You now have to under­stand tech­nol­o­gy, cli­mate change, soci­etal dri­vers. Organ­i­sa­tions are becom­ing more polit­i­cal. Con­sumers expect them to take a stand on issues such as human rights, cli­mate change, equal­i­ty, diver­si­ty and inclu­sion.” 

She adds: “That’s lead­ing to new ways of com­mu­ni­cat­ing – and hav­ing to deal with polit­i­cal divi­sion and back­lash against their stance. Organ­i­sa­tions are being held to account on their actions, not just their words. They need a clear­ly defined pur­pose, val­ues and beliefs, and be pre­pared to stand up for them. Cri­sis man­age­ment has to be open and trans­par­ent. Com­pa­nies must address how their behav­iour impacts not only cus­tomers and work­ers but wider soci­ety and the envi­ron­ment.”

That means hav­ing open and often dif­fi­cult con­ver­sa­tions, and then tak­ing real action towards a more sus­tain­able, dig­i­tal future. Such con­ver­sa­tions used to hap­pen behind closed doors but busi­ness­es are increas­ing­ly being held account­able by the inten­si­fy­ing glare of reg­u­la­tors, not to men­tion the court of pub­lic opin­ion. Amidst flu­id, evolv­ing con­di­tions, sit­u­a­tion­al aware­ness and strong col­lab­o­ra­tion between the board and lead­er­ship, sup­port­ed by tech­nol­o­gy, are essen­tial.