WHAT IS A CRISIS?
A crisis can happen to anyone at any time, the key is to be prepared. A crisis is often defined as a situation beyond the scope of everyday business which threatens the reputation, continued operation or safety of any individual, company or organisation. These can be catastrophic incidents which suddenly erupt or they can be "slow burners". In the mining and minerals sector these could range from catastrophes affecting the environment or human life to interventions by a number of different regulatory authorities. Even key supplier failure or industrial action can represent a major crisis. During such incidents, natural reactions can lead to confusion and fear. If mishandled the consequences can be devastating including sustained negative media coverage and brand damage, the loss of customer and investor confidence as well as the potential for criminal charges against senior management and massive fines.
The preparation of a crisis management plan and its implementation by trained and rehearsed individuals will help to prevent such damage.
HOW EXPOSED ARE COMPANIES?
Many surveys including one undertaken for DLA Piper of 250 leading European firms confirm that businesses are failing to manage risk effectively. In that survey over half of the companies had no crisis management plan at all whilst those that did were not comprehensive enough to deal with the wide range of risks that businesses now face.
IS YOUR BUSINESS PREPARED?
Questions you should consider to confirm whether your business is prepared to deal with a crisis situation include the following:
- What types of crisis might we face?
- Do we have a comprehensive crisis management plan in place to manage these risks?
- When was the plan last updated?
- Do we have a crisis management team with the right people on it?
- Are all team members trained as necessary including media training?
- When was the plan last stress tested?
THE CRISIS MANAGEMENT TEAM
A crisis management team must be appointed to respond to the crisis. The organisation within the team will need to be clearly defined and each member should be fully aware of their individual and collective roles and responsibilities. It is crucial to ensure that the right people are involved in preparing any crisis management plan with representation from every part of the business including corporate affairs, environmental, human resources, operations, finance and legal but you should make sure that the team is small enough to allow effective and expedient decisions to be made.
The crisis management team will be expected to deal with the immediate crisis which may include dealing with the regulators. They will also need to deal with the media, shareholders, key suppliers, customers and the general public whilst at the same time seeking to ensure the operational integrity of the business. If your business does not have the relevant expertise in-house, make sure you know which external advisors you can turn to when you need them.
WHAT SHOULD THE CRISIS MANAGEMENT PLAN COVER?
The crisis management plan should as a minimum address the following key areas:
- the crisis management team and their roles/ responsibilities;
- communication lines both internally and externally to the media, regulators and public at large, emergency services and external advisors;
- reporting structures and mechanisms;
- corporate communications/public affairs policies;
- levels of control and authorisation limits;
- infrastructure and logistics in relation to the crisis management control centre;
- the role of external advisors including legal, technical, insurance and media professionals.
Think about what resources the crisis management team will need. Where will they be based, how will they communicate, what about if you are forced off-site? Try and accommodate a plan B within your crisis management plan so that the team can start to function immediately.
STRESS TESTING IS A NECESSITY
Only through testing and rehearsing will any gaps in a crisis management plan be identified and any problems be addressed - in the immediate aftermath of a crisis even the best prepared plans will be subjected to significant stresses and that is not the time to find out that a plan has simple but fundamental flaws. Consider taking your plan and then imagining a scenario which would preclude the full operation of it e.g. key team members on holiday or IT failure - how would you deal with this?
TRAINING AND IMPLEMENTATION
The majority of businesses will require some assistance in preparing their plans or ensuring the relevant personnel are correctly trained and strategies are in place to minimise damage to the organisation. The business and individuals will need to be aware of their legal rights during any crisis, whether these relate to the powers of regulators or legal duties to consumers and other third parties. Training should range from regulators' powers and how to react to any particular crisis to media training and the creation of an agreed media strategy to seek to protect corporate reputation and brand equity.
Aside from ensuring the effective management of a crisis to protect the business' reputation there are a number of upfront benefits from having crisis management systems in place. These include improved safety and communications in the organisation, enhanced reputation with suppliers, customers and regulators and a reduced risk of regulatory action and litigation.
© DLA Piper
This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.
DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com