Post on 26-Apr-2020
A General Counsel’s Guide to Maintaining Ethics and Compliance in
Crisis Management THOMSON REUTERS RISK, ETHICS & COMPLIANCE FORUM
NOVEMBER 2, 2016
The Panel Moderator
Eve Costopoulos, Esq., General Counsel, Turing Pharmaceuticals (formerly Chief Compliance Officer, Eisai Inc.)
Panelists
Jacqueline Brevard, Esq., Senior Advisor, GEC Risk Advisory LLC (formerly Chief Ethics & Compliance Officer, Merck & Co.)
Louise Harris, President, Iron Petal Communications (formerly Chief Global Strategist, Ruder Finn)
The Basics: What is a Crisis? Threatens or could threaten harm to people or property, seriously interrupt business, damage reputation and/or negatively impact share value. Usually: materializes unexpectedly
is seized upon by the media
requires short response time and urgent decision-making
creates a sense of loss of control Routine business operations become increasingly difficult to maintain
reinforces a need for a change
requires specific and focused communications Communications may become difficult to manage
invites public/shareholder/government scrutiny Can impact operational and financial stability
can create short term and long term reputational damage
fosters a need to blame
Most Crisis Prone Industries - 2015 Food
Energy
Automotive Manufacturing
Transportation
Banking, Insurance & Financial Services
Education
Government Agencies
Pharmaceuticals
Health Care
Retail
Source: Institute for Crisis Management – 2015 Annual Crisis Report, issued March 2016
2015 Crisis Categories
Source: Institute for Crisis Management – 2015 Annual Crisis Report, issued March 2016
Examples Volkswagen
General Motors
Toyota
(mismanagement)
Brazil/Petrobras (bribery)
Penn State (mismanagement/criminal conduct)
Amazon (mismanagement/degrading/demean
ing culture)
Hyatt; Hilton; Jeep; Experian; Scottrade
(cybercrime/data breaches)
Starbucks (consumer activism)
Subway (mismanagement/criminal conduct)
Chipotle (mismanagement)
FEMA/Hurricane Katrina
(gross mismanagement/execution failure)
Tylenol (product tampering)
What is Crisis Management? How an organization deals with a crisis. Includes: Plans, process and methods used to respond to both the reality and perception of crises
Metrics that define what constitute a crisis and necessary response mechanisms
Communications that occur within the response phase of crises and beyond
Who should be part of Crisis Management Team?
C-Suite Executives
Operations
Legal/HR
Compliance
Communi-cations
Investor Relations/
Public Affairs
Finance/
Accounting
Security/
EHT
Information
Technology
External Support
Risk Manage-
ment
How to Measure Success
How soon was situation addressed and business operations restored?
Were losses minimized?
Were changes in practices and policy made?
What were lessons learned?
Role of Crisis Management Team (during a crisis) Define issue Assign roles and responsibilities for each team member Identify a spokesperson
Assess risks and business interruption impact Prioritize actions and respond in a timely fashion Speed and efficiency in response time are critical
Retain control Develop a proactive communication plan that shows the company is under control, knows what is happening, and
can resolve the situation Identify appropriate media avenues Communicate accurate information Mobilize third party allies Ensure planning process includes long term effects of decisions
Minimize loss Create atmosphere of “normalcy”
Role of Crisis Management Team (proactive) Preparation is key – an organization’s credibility and reputation is heavily influenced by the audience’s perception of their responses during crisis situations Promote crisis ready culture – develop management support and a highly flexible and functional team Assess risks, likelihood and business interruption impact account for low probability/high consequence situations
Publish plans and conduct training predictable and quantifiable events unexpected and unwelcome events
Test, review, and practice responses create draft communications that can be tailored for specific situations monitor social media for “actionable intelligence”
Establish decision makers and accountability Minimize impact of crisis and resume normal operations Review lessons learned and incorporate into ongoing operations to prevent reoccurrence
Communication Planning Social media has dramatically changed how companies respond to a crisis
Responses on Social Media are a must (Facebook, Twitter, blogs, etc.)
Identify and train spokespersons (preferably in advance of crisis)
Know your audiences
Establish corporate strategy for managing communications notification systems to reach internal and external stakeholders Monitoring systems to track intelligence and feedback from stakeholders
Get well-crafted messages out quickly to establish trust Immediacy is key
Identify those communication platforms that will be used as a primary source of information
Use data analytics to track and predict threats
Maintaining the Corporate Culture (Compliance and Ethics) Critical to have a comprehensive compliance and ethics foundation that is integrated into the day-to-day business and reinforced on a regular basis Tone at the Top
Written guidelines and examples of appropriate behaviors are key
Behavioral expectations defined
Employee behavior and decisions are assessed and monitored
“Safe to Speak Up”
Build management capacity to handle crises and weather the storm
Let everyone know that integrity cannot be compromised
Communicate frequently to reinforce messages
Use the Board and senior executives to convey the right kind of actions and attitude required to get through a crisis
Common Mistakes
Inadequate planning and processes
Failure to bring business into the planning and testing of efforts
Failure to gain support from senior level managers
Failing to identify lessons learned
Failure of leadership: “It can’t happen to us”
Strong leadership is key in a crisis
“The only way Samsung will be able to learn from this experience is to have strong leaders address shortcomings found within the company’s culture and processes. Without proper leadership, Samsung risks having this crisis begin to impact other parts of its business and jeopardize its long term relationship with the general public”. Neil Cybart, Analyst, Fast Company 10.12.16
Strong leadership is key in a crisis
“I went straight to Mojave Desert, where the accident had taken place, which I think anybody who’s running a company must do if there’s an incident. I was able to talk to the engineers, talk to all the wonderful inventors there, and say ‘this was nothing to do with you, it’s not your fault and, if you want, I’ll continue to support the venture and, I think with one voice, they said they wanted to continue.” Richard Branson
Impact of Apologies
Are often limited due to legal and regulatory concerns In these days of social media and reputational concerns, public opinion can trump legal response
Are effective when: Acknowledge what happened
Allow for criticism
Accept responsibility
Explain why it happened
Offer compensation and policy improvements1
1 Adapted from “The Role of Apologizing in Crisis Situations, Organizational Preparedness for Reputational Crises, and How an Apology Might Have Affected Australia’s AWB Controversy,” Peter M. Sandman, 2005.
When apologies work…
“Senior executives from Texaco will visit every major company location in the U.S. to meet with our people. Their mission will be to apologize to them for the embarrassment and humiliation this has created. We want them to understand both our personal embarrassment and our firm resolve to ensure that nothing like this ever happens again at Texaco.” Peter Biljar, CEO, Texaco
…and when they don’t
“Nobody is more sorry than me. I want my life back!” Tony Hayward, CEO, BP
How to Measure Success
How soon was situation addressed and business operations restored?
Were losses minimized?
Were changes in practices and policy made?
What were lessons learned?
How do these companies measure up?
Are You Prepared for What May Come?