Fly High, Land Safely
If the authorities decide to make an unannounced inspection – is your company ready? Crisis management plans are important. They may save you your company and your career.
There have been striking examples in Finland of how directors’ careers have come crashing down after a crisis at their company.
The reputational damage caused by unforeseen negative events at businesses have prevented directors from re-entering the marketplace and finding a comparable position even though they were acquitted from all charges.
The many other examples of tarnished reputations serve as a stark reminder that complacency about compliance should not be allowed to creep in at the management level. When a crisis strikes, members of the senior management, regardless of their actual level of knowledge and culpability, are often inextricably linked with the company concerned and its image.
Every business has its own risk factors and no one is safe from a potential crisis. Today, we’re more conscious of the risks and recognize that various kinds of internal or external conflicts may threaten our operations. Whether it’s a serious accident, disruption in production, reputational risk, an accusation raised by a whistle blower or an investigation by the authorities, the more prepared your company is, the easier it is to manage the situation.
Why is crisis management important? Each exceptional situation – let alone crisis – threatens business continuity. Warren Buffet famously once said that “it takes twenty years to build a reputation and only five minutes to ruin it.”
In the worst-case scenario, all the brand value you’ve worked hard to develop over decades can be lost in minutes. To manage exceptional situations, you need to take preventive measures, prepare your organization and consider how to minimize recovery time.
When a crisis occurs, management’s focus is naturally on taking charge of the situation as well as communication. The first press release or media communication may be crucial for your reputation, but also for any subsequent investigations or eventual criminal procedures.
You want to ensure that you have planned how to obtain immediate media and legal advice in the event of a crisis. In your press releases make sure that you handle the issue proactively, and do not complicate any possible future legal process.
In addition to managing communication with the media, you should also make sure that each and every employee in your organization understands your company’s action plan for crisis situations. Consider how to communicate internally and how to make your employees work together to resolve the situation. Crises can be learning opportunities and these lessons should be stored in your business’ institutional memory.
There are two key components to being in the best possible position when a crisis strikes. First: have a compliance program in place, implemented, trained and monitored to ensure that your organization knows how to proceed. So-called dormant policies won’t save you – your program must be actively implemented.
Secondly, you need a crisis management plan. Few of us can proceed effectively and objectively in the time of a crisis without a management plan in place. You probably have a couple of hours or maybe just a few minutes to get the situation under control. The value of communicating precisely, timely and legally constructively cannot be overstated.
If your compliance program is regularly updated, trained and implementation is well planned and organized, you have already taken concrete steps to reduce the risk of a crisis. If things go wrong, you know that you did all you could and your company’s defense in eventual investigations and legal proceeding will be more straightforward. It might even save your future career.
By Hanna Laakso, Counsel, Borenius Attorneys Ltd