Crisis Management Plans

     When it comes to headlines, companies either love or hate the publicity.  There is no middle ground. 

Companies face a number of risks which can easily turn into a “crisis.”  When they occur, a company needs to turn its attention to the crisis.  A comprehensive crisis management plan is a must have in order to navigate the risks and potential harm to the company.

A major risk which materializes creates a “crisis.”  A crisis can develop from a variety of events, including: (1) launch of a major federal investigation or Congressional investigation; (2) an environmental disaster; (3) public disclosure of a whistleblower complaint; (4) a cyber attack; (5) industrial espionage; (6) labor strikes; (7) shareholder organization and litigation; and (8) a significant fall in earnings.

Crisis management is needed to respond to serious risks.  The objective is to minimize potential financial losses and litigation.  Crisis management requires a cross-disciplinary plan and defined roles and responsibilities for offices. 

A first step in drafting a crisis management plan is to prepare a checklist of issues which need to be addressed, including: (1) public relations and communications; (2) role of the corporate board; (3) assessment of political, regulatory, enforcement and reputational factors; (4) legal strategy for dealing with federal, state and regulatory agencies, including need for internal investigation; (5) role of management; (6) employee response; and (7) customers and vendors.

A strategy for each of these crisis elements has to be drafted.  Each element has to be coordinated with the other elements.  Specific responsibilities and assignments have to be defined and described.  Companies have to make sure that elements communicate among each other and coordinate all actions.  In response to a crisis, a company should create a supervisory Board committee consisting of key representatives inside the company.

In the initial response to the crisis, the Board and senior management have to obtain as much information as possible. A public relations and legal strategy has to be designed and implemented.  A short delay can be devastating.  The goal is to get on top of the issues as quickly as possible.  The first public response can be the most risky – a blunder in the initial stages can be cause devastating damage to the company.

Traditional public relations strategies for responding to a crisis are no longer relevant.  Social media often inflames a crisis, or can even create a crisis, for a company.  It is important for the company to monitor social media and relevant blogs to make sure that the company responds to significant factual allegations. 

A crisis management plan has to include a rapid response to initial allegations in order to ensure that the company stays “in front” of the issues.  The Board and senior management have to establish a rapid response team and prepare for such an event in advance.  Outside attorneys and advisers should be brought in, as needed, so long as they are familiar with the company and can provide a value-add to the rapid response team.      

After the initial response is implemented, further communications efforts should follow a communications plan which is directed to all stakeholders including employees, customers, and regulators.  Communications must be accurate and open.  A loss of credibility for the company would be devastating.