Wednesday, February 22, 2017

Readiness for global office crises

A crisis in another country often does not fit into any known framework.  The organisational response, therefore, has to deal with the problem of finding people to manage the problem at the same time as anticipating the escalation factor and providing support for the most exposed aspects of the business.

There is simply little time for planning, organising, equipping or training once the crisis is imminent. 

Importantly, the crisis management approach needs to ensure that the various operations and projects of an international operation are in a constant state of readiness and that crisis teams know what to do and how to do it.

Basically, the objectives of any plan should be to protect the company’s people and assets.

International operations crisis management objectives:

1.      Protect the life of employees and their families.
2.      Protect assets and earnings by restoring normal operations rapidly.
3.      Protect the local community and environment.
4.      Minimise damage to corporate reputation.
5.      Retain effective relationships with government of the country

Because international business management and employees could be cut off for long periods from the parent company by failure of communication lines, it is important that teams are trained in advance to follow prescribed guidelines in their crisis response. The way in which the crisis is tackled will depend on the quality of training and briefing for the crisis teams before the event. 

The plan needs to clearly establish authority and responsibilities at every level.  It is useful here to define mobilisation actions and list contact points with details about communication links and notification procedures.  

Interfacing with external agencies is an essential part of crisis planning in other countries because the crisis management response may well include support systems from embassies or law enforcement agencies. But this interface with expected support from your embassy or consulate may not be reliable and needs to be confirmed well in advance of an incident.  Setting these communication links up in advance is vital to the success of the plan.                 

The plan should contain details of the organisation's team roles and responsibilities, setting out the core action group at each location who are responsible for managing the problem.  It will be their responsibility to assess the situation and respond accordingly with the necessary resources required.  They will also need to contact and communicate other teams in the region and the necessary stakeholders affected, including Head Office in the home country.

In some cases, the crisis management team may only be one or two people. This is particularly the case for small offices, exploration, research or transport teams working in far distant locations.  It is still important that these teams have an understanding on how to pinpoint a crisis and what on-the-spot actions they have to achieve to protect life and ongoing operations.                   

Tuesday, December 20, 2016

How to Lead in a Crisis

In this borderless world, crisis events escalate within minutes and threaten the most complex companies and organisations. Whether it be an exploding phone, fraud at one of the world’s largest banks, a disaster in an amusement park or an act of international terrorism - high level management preparation, through a Crisis Management Plan, is vital, particularly for CEOs, corporate boards or government administrations. 

If crisis management is to be taken seriously and installed efficiently, it must come from and be part of the people who run the business.  After all, in the end, it is those people who will have to manage the crisis when it reaches its most ferocious point.

The corporate crisis plan has to be part of company good governance and policy and those who are involved in its creation, instalment, and ongoing delivery, need to have their accountability listed in their job description.

A crisis plan must be simple and easy-to-use.  People have less time and less attention span to be confused by long-winded, long-worded, jargon written instructions.  The plan needs common language that simply and easily identifies the goals and objectives, the methods of delivery and implementation, and the ongoing evaluation and continuity.  

Accountability is essential.  Senior management personnel must be given the time and the authority to be accountable for the ownership of this plan.  Once a senior manager is given the responsibility of validating a crisis management plan, he or she should be supported and assisted in the review by a dedicated, professional outside crisis management consultancy.  This should not be a PR or emergency management consultancy but more a provider focused on delivering a strategic process.

A crisis management budget needs to be set and approved.   Some organisations may prefer to link the crisis management budget with the legal or risk management function.  Others may associate it with good corporate governance and build it into the corporate affairs and public policy area.  Some may prefer it to be associated with company secretary or corporate finance. Manufacturing companies may link their crisis management plan with their marketing and product recall function. 

The crisis management plan must be capable of application at every office, branch, site, and location.  Just as Head Office has a role to play in managing corporate and business crises, so do divisional offices, branches, plants, and major sites in managing the same responsibility on the spot.  When a crisis happens, it must be handled quickly where it happens.  If the location or site is not given the authority to act, valuable time will be lost and ultimately the control and the agenda may move to another negative party.

Every crisis plan needs to have a maintenance process.   It must be acceptable to internal auditors, outside auditors, senior management and endorsed by the Board of Directors. 

Education of team members and support groups needs to be an ongoing process.  Once the Team Leader and core team members have been familiarised with their roles and responsibilities, it is necessary to test and review these functions regularly.  Most teams are tested at least one or two times a year with either a desk-top exercise or full-scale simulation. 

Every crisis team at every location will rely enormously on resources.  Control room facilities such as whiteboards, IT connections and telephones, are all part of the resource kit.  

At RCA, our professionals are recognised experts at installing, developing, and maintaining corporate crisis management teams. We are routinely asked to provide counsel on escalating issues and crises. 

Sunday, October 9, 2016

Debriefing after Real Crises. The Best Learning

Financial disaster, major accident, cyber attack, massive recall. No simulation or crisis management exercise can ever replace the real thing.  When a real crisis occurs, most aspects of the crisis management plan would be applied, but there will be many more critical issues and intricacies which will appear. 

It goes without saying that the strategy behind a solid crisis management plan is to protect the company’s operations and reputation by providing a secure response.  But the identification of gaps in the response plan can be best discovered after a review of a real crisis situation.

A crisis simulation or exercise concludes with an evaluation and critique where responses are examined and roles and responsibilities reviewed.  The aim of these crisis exercises is to improve the effectiveness of the teams in managing a crisis, at the same time as reviewing the crisis manual and the various human and technical resources that assist the process.

A real event, aside from its serious consequences, can offer greater learnings, particularly related to the complex issues of communication, interactiveness and stress.

Any post-crisis evaluation must be done relatively quickly after the event.  The real value of what has happened, and how crisis teams responded, can be only be learnt while memories are alert to the central issues of the response. 

The purpose of the post-crisis evaluation is not to investigate the cause of the incident nor items such as emergency response, product recall action or security performance, but more how the crisis management team performed in its role.  Was the crisis identified effectively?  Was the team called out efficiently?  Could the team respond immediately and was the response effective?

Post-crisis evaluation is about managing and controlling the corporate issues related to the future of the business.  The following items need to be addressed in the audit:

1.      A narrative of the actual event.  What happened, why and how and what caused the event?

2.      How was the response managed by the crisis management team?  How did the response relate to incident and operational response procedures?  What was the decision making process based on?

3.     Were human and technical resources adequate?  Where did they fail and how could they have been improved?

4.      Is the organisation still at threat from the problem or similar problems?

5.      What were the unintended consequences that came out of the original incident?

6.      Were there any barriers to communication?

7.      Were all stakeholders advised effectively?  If not, what were the problems?

8.      Was there sufficient co-operation with outside agencies (emergency services, government, etc.)?

9.      Were the plan, manual and procedures useful?  Where could they be improved?

10.    Were human resource issues and employee communication handled efficiently?

11.    Were there any barriers to crisis response from senior management?

12.    Were legal issues dealt with efficiently? 

13.    Was the spokesperson’s role effective?  Were messages continual and consistent?

14.    How was business continuity and recovery managed?  What were the problems?

15.   What has been put in place in the short term and the long term to prevent this crisis from happening again?

This post-evaluation needs to be carried out by either outside consultants or a senior management team and preferably not by the crisis management team.  It is designed to improve operations, decision making, plans, skills and to ensure the crisis management team has done its job effectively.  

The post-evaluation team needs to interview the crisis management team, management executives, employees and external personnel/contractors involved in the crisis response.   

A post-evaluation project is no easy task.  While it has to be done as soon as possible after the crisis has occurred, it needs time for investigation, review and context. The project team needs the support of the Chief Executive and senior management, and commitment has to be given to ensure that the learnings from across the business can be incorporated in the overall crisis managing planning process.  This process ensures continual improvement and further development of a best practice response.  

The learnings of the post-crisis evaluation of a real event should be made available for training and response reference to the crisis management team.                           

Wednesday, June 15, 2016


It is human nature to avoid the worst case scenario. so it comes as a painful shock when we are confronted by the real world that includes random elements of activity seemly devoid of social concern, motivated by fear, insecurity and often characterised by cruelty and violence. 

The tragic Orlando shooting with 49 deaths and many critically injured is the worst case scenario. And clearly asks us the question "Is our work place, favourite cinema, nightclub or sporting ground safe?".
The fact is it may not be but globally there is a higher than ever law enforcement and security watch in place than ever before. Importantly it is not just the tactical response to these events that is vital. behind every emergency and incident response there must be a strategic crisis response that provides an orderly and efficient transition from normal to emergency conditions and leaves those in charge free to manage the strategic specifics of an escalating incident.

Organisations that know what to do, who is going to do it and in what sequence are more effective when a crisis happens. This whole process begins with a clear identification of security, threats and vulnerabilities. Some of the possible threats identified in a recent counter-terrorist vulnerability analysis were:
  • Airport attack
  • Armed intrusion
  • Arson
  • Biological attack
  • Bomb explosion
  • Chemical weapons
  • Contamination
  • Extortion
  • Hijacking
  • Hostage taking
  • Industrial espionage
  • International terrorist attack
  • Kidnapping
  • Murder
  • Nuclear attack
  • Sabotage
  • Utilities attack
Identifying vulnerabilities involves analysing who will be affected, how they will be affected and what will be needed in response.  Once threats are anticipated, crisis, incident and emergency teams can rehearse appropriate scenarios for managing the situation. 
Such plans need to include procedures for alternative evacuation in the case of chemical spills or attacks, for communicating with both employees and the community, and for interfacing with external emergency services.

As with any crisis, the key elements in an organisation’s defence strategy against terrorism are prevention and control. While we don’t often hear about such tactics, there are numerous cases of law enforcement agencies pre-empting acts of terrorism. 
To control serious effects of terrorist attacks, training the general public, employees and communities to be alert to possible attacks is a fundamental requirement. In cities such as Jerusalem, where terrorist attacks are all too frequent, people go about their daily lives with a naturally heightened awareness. Many have learnt from experience, but most have been trained to be the eyes and ears of the security and law enforcement agencies, on the lookout for unusual circumstances.

Wednesday, March 2, 2016

Stakeholder Control in a Crisis

When a crisis team meets in the first 90 minutes of managing a critical incident, one of the essential priority actions has to be identifying key stakeholders. There is no doubt that a stakeholder checklist can be prepared by crisis managers before an event happens but many of these stakeholders can only be identified on the day.

This proactivity is about getting ahead of your key audience agendas.  It doesn’t take long to call and tell a politician, a senior police officer, a journalist, a regulator, a stockbroker, a banker or indeed your own executive and managers about your emerging problem and how you are dealing with it.  They become a credible source in understanding and communicating your response. It’s not a time to bury your head in the sand and say nothing.  The bunker mentality may feel good for a few hours but it’s the fastest way to lose the high ground and encourage the rumour mill.

The court of public opinion wants to know what happened from you and social media plays a large part in early news transmission. Very quickly they will form opinions as to whether you are guilty or not guilty.  If your stakeholders understand that you are on top of the situation making every effort to fix it, they will be an asset to your response.

Commercial Union, one of Britain’s largest insurance companies, had their offices blown apart in London in the 1990s as a result of a terrorist bombing.  Much of the incident and emergency management was handled by the London Metropolitan Police in a very efficient manner, however the company played its part in dealing with a large group of audiences of its stakeholders.  The CEO and crisis Team Leader showed strong leadership and split the business management team into two, one to deal with the day-to-day running of the business and the other to deal with the crisis.  

This explosion killed three people and injured 30.   Four hundred tons of glass and debris were spread across the street and the city of London was brought to a virtual standstill.   The Commercial Union premises were totally inoperable.  The management team went straight to their crisis plan which outlined management teams and established priorities. 

As part of their damage limitation, assessment and action planning, they were quickly able to audit their employees to identify injured personnel and make contact with families.  They had procedures for effective liaison with emergency services. 

Plans were in place to make their building safe and secure, particularly related to the company's information and communication capability. 

All meetings were documented as were all discussions.  They moved immediately into recovery mode to restore communication links and it wasn’t long before they had established alternative premises and replacement of their main switchboard and computer information facilities. They established a temporary communications centre while they were moving into their new building and they were able to follow a plan of where to go, what to do and who does it.

In terms of communication, they made themselves available and distributed information to their staff, the public, media, customers, shareholders, brokers and the insurance industry.  Commercial Union particularly honed in on immediate and longer term plans for staff to encourage morale, goodwill and enthusiasm.

Admittedly, Commercial Union were the victims of a terrorist bomb that blew up outside their 23-storey building.  They certainly had the support and understanding of the British population behind them.  However, regardless of this support, they had to ensure company, corporate and brand survival at the same time as showing that they were able to manage the situation.  They ensured continuity of operations and control of the situation. 

Thursday, December 3, 2015

Paris Terrorism Crisis

Terrorist attack!  It comes as a painful shock when confronted by the real world, a world that includes random elements of activity devoid of social concerns, motivated by fear, insecurity and greed, and often characterised by incredible cruelty and violence.

The coordinated Paris terrorism attacks on Stade de France, Rue Bichat, The Bataclan and La Belle Equipe, like the terror attacks in Mumbai, Bali, London and 9/11, are a dreadful reminder of the need for crisis planning, not just at the emergency response level but also the strategic organisational level.

Can any crisis plan provide acceptable solutions to unpredictable large-scale events?  The fact is that the impact of any crisis can be reduced with the establishment of a contingency plan. Above all, the executive teams of organisations - business, government, infrastructure - need to know what has to be done immediately when they are faced by the unpredictable.

What is the likelihood of a terrorist threat in your city, at your workplace, in your community? Certainly prevention and prediction capability has increased but it is also vital for organisations to be kept informed of the nature and extent of possible security threats. 

Identifying vulnerabilities involves analysing who will be affected in your organisation, how they will be affected and what will be needed in response.  Once threats are anticipated, emergency and security teams can rehearse appropriate scenarios for managing the situation

Some of the possible threats identified in a recent counter-terrorist vulnerability analysis were:

Ø      Airport attack
Ø      Armed intrusion
Ø      Arson
Ø      Biological attack
Ø      Bomb explosion
Ø      Chemical weapons
Ø      Contamination
Ø      Data Theft
Ø      Extortion
Ø      Hijacking
Ø      Hostage taking
Ø      Industrial espionage
Ø      International terrorist attack
Ø      Kidnapping
Ø      Murder
Ø      Nuclear attack
Ø      Sabotage
Ø      Utilities attack

As with any crisis, the key elements in an organisation’s defence strategy against terrorism are immediate response and control.

To control serious effects of terrorist attacks on organisations, training CEOs, senior management and Boards of Directors to be alert to the response to possible attacks is a fundamental requirement. 

Organisations must be able to see crisis response to an act of terrorism as part of their corporate responsibility. Authority levels must be recognised and accepted.  Time should not be spent legitimising response, but rather doing it. A single-minded sense of purpose, organisational cohesion and absence of role conflicts, signals an organisation that is ready to respond to, and control, a critical incident whether it be within the organisation or part of an attack on a business district, suburb, town, city or country.

Monday, October 5, 2015

Volkswagen’s Emission Crisis

The recent allegations that VW engaged in corporate fraud to deliberately manipulate emissions data and deceive environmental regulators has been met with global shock.

The ire of the US and German Governments in particular, as well as the United Nations, was quickly forthcoming; Barack Obama and Angela Merkel weighed in to demand answers and swift resolution. Then, the dismay of its loyal customers and workforce who have been faithful to the brand became overwhelming.

The level of scrutiny and outrage that the world’s largest auto manufacturer is now subjected to is enormous.

What has been witnessed since the scandal broke is sure to fit anyone’s definition of crisis; a black swan event with company destroying potential. It is simply one of the largest corporate crises this decade and, in the annals of history, will likely sit alongside Enron, Tesco, Barings Bank and News Corp’s similarly shocking scandals.

The Immediate Effects

From a strategically focused corporate crisis management perspective, an almost irreparable amount of damage has been done, which, at a glance, is immense:
  • The Global CEO, Marin Winterkorn, delivered an unreserved apology prior to resigning.
  • The President and CEO of VW Group America, Michael Horn offered a blunt apology acknowledging “we totally screwed up”.
  • Senior Research and Development staff have been stood down pending investigations.
  • VW faces financial liabilities of up to US$18B, based on 11 million cars worldwide that may be affected. Already, VW has set aside US$7.3B from the third quarter; an indication of how serious they suspect this could be.
  • VW’s value has shed approximately 30% in the immediate days after the scandal broke.
  • The crisis contributed to the European market slumping 3% immediately after the announcement.
  • Many rival auto manufacturers saw sympathetic price drops as wary investors avoided the auto sector for fear of how the crisis could deepen and spread. Even Nissan, who do not manufacture diesel cars for the US market, saw a price hit.
  • The United States Department of Justice has launched a criminal investigation into VW. The Environmental Protection Agency has also launched investigations as have similar branches within governments from countries including Germany, France, Italy, United Kingdom and South Korea.
  • In addition to criminal investigations by the US and German Governments, there are, at the time of writing, 34 class action law suits filed in the US alone. Canada has also filed a handful of law suits as have Investors and Superannuation funds. Understanding how far the legal liabilities extend will be a gargantuan task requiring nothing short of a small army of lawyers.

  The cost of lost reputation

The costs of VW’s goodwill is where one of the biggest hits will likely be felt. Goodwill, the value of the brand which also includes intellectual property and patents, measures the company’s value beyond the assets it owns. It can also include future growth, brand value and human capital.

Interestingly, VW’s goodwill was estimated at around US$67B (before the crisis), or 16% of its total assets. Compared to Daimler (4%) and BMW (3%), some may conclude that VW’s ‘goodwill’ is overvalued.  Already, some estimates put VW’s loss of brand value at around $US10B.

What is certain though is that their brand has taken a seismic hit. If their goodwill is potentially overvalued (by comparison of other major auto makers) there may still be massive write downs of their valuation to come. If their brand value was brought into alignment with their competitors then the quantitative drop could be huge.

The Broader Strategic Issues

The effects of VW’s crisis are severely threatening the auto manufacturer’s long term viability. Given that it employs over 600,000 people worldwide, 270,000 of whom work in Germany alone, this is very concerning. The German Government has a vested interest in keeping the wheels of the beleaguered auto company turning, from both a financial and social stand point.

At a time when Germany is baring the large brunt of the humanitarian crisis affecting Europe, it needs  VW to remain a viable integral cog in German industry. While the crisis has a course to run, German Government involvement to keep VW alive is likely and we can expect to see continued diplomatic efforts and involvement by Angela Merkel to ensure transparency and complicity with US Authorities.

From a reputational perspective, VW has suffered a near knockout blow. Similarly, the overarching reputation of any item that has earned “Made in Germany” status has been affected. The global psyche has always associated German engineering as being amongst the best on the world; it is a shame to have seen that engineering prowess focused into deception over innovation in their attempts to break the back of the key US auto market.

Beyond Germany’s interplay within this burgeoning crisis, the global automotive industry has been reshaped, particularly the philosophy of diesel powered cars. Certainly, in the US, VW has likely delivered a significant set-back for diesel technology take-up compared with its gasoline competition. VW’s future revenues associated with the US market are likely to have suffered greatly as a result.

When the United Nations weighed in on the issue in the days following, it did so in the knowledge that it needs the automotive sector on-side to meet its own agenda related to climate change. The mere notion of diesel possibly not being as green as they were led to believe, may have consequences for other industries related to how the UN advocates for meeting climate change objectives.

In some respects, VW’s future being so intertwined with Germany’s strategic direction is in the auto manufacturer’s favour. It would be catastrophic for Germany if VW went under and, bemusement and anger aside, it would be a global travesty too.

Where to from here for VW?

VW have replaced outgoing CEO, Martin Winterkorn, with Matthias Müller the former head of its subsidiary, Porsche. This move has generally been received well in terms of providing clear leadership focused on resolution and recovery.

Apologies by the former CEO, Winterkorn, and President and CEO of VW Group America, Michael Horn, have been delivered. There has been no ambiguity in taking responsibility for the scandal and both pledged the transparency demanded by global stakeholders.

As a company, VW is complying with authorities, Governments and clients, which bodes well for repairing many of the bridges that have been broken. The test for VW is maintaining this solidarity in the face of mounting conflict; particularly with increasing lawsuits.

Broadly there need to be displays of strong leadership, rapid action to control the event, effective two-way communication and sensitivity to stakeholder concerns. So far these attributes have been displayed, signposting how the company intends to continue responding.

VW’s stakeholder concerns have been given strong attention and there is likely to be an acute awareness of the social impact this crisis has had on its customers, workforce, suppliers and contractors, government and global audiences. All these stakeholders are key to VW succeeding at rebuilding its reputation and re-earning trust on the back of undoing much of the 55 years it has spent building its image.

In parallel, VW must demonstrate a drastic departure from the behaviours which landed it in this scandal. Their culture, transparency and risk-management processes must be robust to ensure this type of crisis can never occur again.

Indeed, holding those responsible or involved to account will deliver a twofold outcome: It will satisfy the insatiable desire of the public for those responsible to be dealt with appropriately but also demonstrate that VW intends to abolish the seeds of the toxic culture which caused this scandal. 

This all needs to be done carefully to confirm to employees that it is not a witch-hunt but a lesson in accountability and ensuring a new culture founded on moral integrity is formed. There is a need to protect those hardworking, honest and intelligent employees who are the life blood of the world’s largest auto manufacturer. VW will likely be focused on retaining as much of its workforce as it can. It simply cannot afford to lose the good people who remain in the company. If it does it will be that much harder to rebrand itself as an innovative car manufacturer making high quality products.

In an ironic way, it is usually these high impact, low frequency events which drive the most notable change-for-good in companies and industries. Whilst the current saga for VW is undeniably damaging, the company has a real opportunity to rebuild, rebrand and reshape itself.

Many of the processes that have contributed to this crisis will be exposed and eradicated. Internal structures that were difficult to change prior to the crisis will be modified; from moving, removing and elevating individuals through to the removal of inefficient corporate systems that create slow-burn issues. All of this change will be scrutinised under the microscope of public, Government and regulatory attention.  And, importantly, if investors like what they see in the future direction of VW, they will re-invest their capital.

The Lessons

In the same way that Nick Leeson brought down Barings Bank, a group of high powered individuals operating with a lack of oversight has inflicted major strategic damage to VW. The actions and inactions of a relative few have threatened one of the world’s largest companies, tarnished the reputation of diesel technology and the hard won reputation of German industry, threatened the careers and livelihoods of a largely innocent workforce and added risk to the financial and social stability of a nation. Certainly, white collar crime must remain high on the corporate threat agenda.

Disproportionate power divisions are always going to be present. It therefore underpins the critical role that Boards must play in the Governance of companies and ensuring they remain objectively aware of strategic corporate risk. The independence of Boards is one key element that makes them strong and gives them the positioning to take a helicopter view of the company so that they can ensure the company remains appropriately led, managed and governed.

More practically, the VW crisis underscores the need for all companies to have robust procedures in place to quickly respond, manage and recover from high impact low probability events. Processes must be endorsed and championed from the top, be implemented with a strategic focus and regularly rehearsed.

Crisis Management Teams must be able to interface with the board, understand each group’s role and control the strategic threats emanating from any major event. It should not matter whether the event is physical, non-physical, acute or slow-burn in nature. What needs to be continually assessed is how bad a situation could get and understanding the worst case scenario.

Companies that establish high level frameworks of corporate crisis management, with defined links between the Board and the executive crisis management team, respond quicker and more thoroughly to events with company destroying potential. Their response is governed by an understanding of how to rapidly control the strategic exposures occurring across communications, human-resources, legal, financial, risk, operations and recovery.

VW has responded effectively so far but a long path to recovery remains. There are many strategic threats that still need to be addressed. But it is not beyond them and there are opportunities to prosper and recover strongly through strategically focused crisis management and recovery.