Crisis management 101

Winston Churchill is widely credited with the advice “Never let a good crisis go to waste”. While the attribution is quite possibly apocryphal, it is nonetheless advice that is worth taking on board – especially as the insurance industry takes stock of how it dealt with Covid-19-related business interruption (BI) claims.

Crisis management is a service many insurers offers their clients alongside specialist covers, including product recall, kidnap and ransom and cyber insurance. The industry prides itself on its ability to work with insureds to resolve an incident, knowing that a quick, effective crisis response can mitigate overall losses and reputational fallout.

But are insurers as up-to-speed when it comes to their own crisis management? Recent events, including the negative attention over how some carriers handled BI claims during the pandemic, would suggest there is still some way to go.

These insurers underestimated the collective will of thousands of small businesses, led by an angry communications agency, which was quick to mobilise and also to rack up column inches. And they did so at their peril.

Upon launching its test case in July, the UK’s Financial Conduct Authority (FCA) accused insurers of "adopting an unduly narrow approach" and said they were "misguided" in how they assessed whether or not claims were valid. The Hiscox Action Group, along with six insurers and the FCA, are currently appealing some parts of the ruling made by the UK’s High Court in September.

Hindsight is a wonderful thing. With its benefit, perhaps Gerald Ratner – CEO of a successful high street jewellery chain - would not have described his company's merchandise as 'crap' when making a speech at the Institute of Directors in 1991. Perhaps former BP chief executive Tony Hayward would not have complained, "I'd like my life back", after the Deepwater Horizon disaster of 2010.

And maybe, just maybe, companies across the (re)insurance market would have done more to reform cultures that, judging by allegations in recent years against Aon, Marsh, Guy Carpenter, Tokio Marine Kiln, Lloyd's and AJ Gallagher to name but a few, have allowed abusive and discriminatory behaviour to continue.

We are operating in an age where bad news travels fast, with social media fuelling its momentum. Corporate brands can find themselves on the wrong side of a story if they fail to react appropriately or if their company culture is found wanting.

Social movements, including Black Lives Matter and #MeToo, have shaped public and stakeholder opinions. And the type of corporate behaviour that society is prepared to tolerate has similarly come under the microscope.

In the case of Nike, for instance, it was a hostile culture that deliberately ignored gender discrimination and inequality that was the brand's undoing.

According to PwC's Global Crisis Survey 2019, no one is immune. And not even PwC as it happens. The company faced a media backlash in 2016 when a receptionist was told to go home because she was not wearing high heels.

Nearly seven in ten business leaders have experienced at least one corporate crisis in the last five years, according to the accountancy firm's study, with the average number being three.

The research shows that crises can erupt in a number of ways and that it is not always possible to predict what lies around the corner - a global pandemic for instance.

"If you think of the UK government's response to Covid - the fact they got rid of loads of PPE and their pandemic planning had fallen by the wayside in austerity times - look where it got us," observes Cordy Griffiths, CEO of PR firm Ballou.

"In a way, that's a lesson for all companies. You ignore crisis planning at your peril because if you're not prepared, you're going to really pay for it," she continues.

"In sunny, happy, positive times you might think, we'll deal with our crisis management plan next week. But it's something you need to keep refreshing and updating because you'll never know when you'll need it."

Over half of the respondents to PwC's study said at least one crisis they had experienced was operational in nature, while over a third pointed to cyber and technology-related incidents. Organisations with 5,000 or more employees are most likely to experience crises related specifically to cyber crime (26%), natural disaster (22%), leadership (17%) or ethical misconduct (16%), including fraud, corruption, and corporate malfeasance.

As crises become ever more complex and harder to contain, the more crisis preparedness will offer a competitive advantage, says PwC.

The PwC research compared companies that self-identified as having emerged stronger from a crisis with those that confessed they had struggled, and found the 'winners' shared some common approaches.

Based on this, it advises firms to "assume everybody is always watching" and conduct their business accordingly.

A tested response plan and crisis team with the freedom to make decisions is therefore an essential tool. And, wherever possible, organisations should try to learn from the crises they experience, improving their resilience in the process.

Remote working has added an extra layer of complexity, according to Griffiths. "Pre-Covid, where people were physically in an office and could dive into a meeting room and pull together a plan, it was more straightforward. It's even more important than ever right now to have clear lines of communication."

For Damian Beeley, a partner at PR firm Haggie with over 20 years' experience in PR consultancy, dealing with a crisis effectively is all in the preparation and planning.

"Larger organisations will have a crisis response team, and the smaller the better," he says. "It will involve senior management, HR, legal and communications, and that team should rehearse and review their scenario plans regularly, because the landscape changes all the time."

Scenario planning is one way of attempting to assert control over an increasingly uncertain world, by considering what has happened in the past, making assumptions about the future and considering how your organisation might respond.

"Look at the potential events that could constitute a crisis and ask what you can to prevent or reduce the chance of that happening," says Beeley. "And then in the event it does happen - because some things are unavoidable - plan your response."

"If you are very planned and rehearsed there's a good chance that an event won't become a crisis, because you're ready for it," he adds. "There are some issues I've worked on that were resolved so well, so quickly and so efficiently that no one ever knew there was a crisis (and I'm not taking all the credit for that)."

Speed of response is critical, but not at the expense of accuracy. Beeley gives the example of a fight which broke out between two men on the Central Line platform at Oxford Circus tube station in November 2017. The altercation caused panic and overreaction, with shoppers fleeing as misinformation spread on social media.

It was a time that Londoners were feeling particularly vulnerable to the terrorist threat, and "it had people charging into shops and locking the doors, because the information was incorrect," says Beeley. "It's a rather extreme example of the need for both clarity and speed."

"When something happens that involves you as a business, you need to communicate with your staff and stakeholders - and if necessary with the wider public - as quickly as possible to say what has happened and what you're doing about it. But you need to use fact-based honesty. If you don't know, don't speculate," he advises.

One of the biggest challenges in managing a crisis can be the internal clash between what the crisis management team wants to convey and the more cautious stance held by the firm's legal counsel. There is a fear that the organisation and its directors may be held legally liable if certain information is released.

This is why the crisis management team needs the mandate and freedom to act, thinks Beeley. "Which is worse: clarity of communications that doesn't necessarily concede responsibility or a lack of clarity of communications that can create more damage further down the line?" he asks. "What the victims of a crisis want is honesty, reassurance and remedial action."

Most of all, they want to hear it from the horse's mouth, he says.

"It's very easy to issue a statement in the name of a spokesperson, but in the best companies, it is done personally by the most senior officer in that business."