To prevent a crisis from interfering with the continuity of your business, you must strategically plan to manage any potential risks. That means avoiding the classic mistakes routinely made by companies, and making the right decisions for proactive measures to minimize any dangers.
But how can you best manage risk?
Two premier consultants – each with rich backgrounds – provided valuable answers for these issues in a 2013 Los Angeles-area seminar: “Managing Risk: Business War-Gaming, Scenario Development, Crisis Planning, and Executive Action.”
From the seminar, here are their comprehensive solutions in response to perplexing issues:
Q: In ever-changing business environments, how do I know that the decisions I make are the right ones?
A – Mr. Mansfield: Scenario planning and testing is a critical element of management success. It’s especially important in today’s constantly-evolving business environment. The exercise is intended to frame various outcomes and, when facilitated properly, is an excellent tool for staging relevant contingencies and action plans as well as serving as a means of collective learning and organizational cross-training.
Executed properly and consistently, scenario planning can capture the depth and breadth of possibilities – forcing decision makers to consider changes they may otherwise ignore. With these considerations, ideas are organized into narratives that are easier to categorize and act upon, rather than simply plowing through volumes of data.
Q: What can scenario planning accomplish?
A – Mr. Mansfield: Scenario planning can be used to:
- Identify and establish early warning systems.
- Assess the robustness of core competencies and triage those efforts creating marginal results.
- Generate and rank strategic options and contingencies, in the key areas regarding markets, products/services, finance and business continuity planning.
- Evaluate the risk/return profile of each option in view of uncertainties, particularly the objective analysis of merger/divestiture plans – less than 30 percent of mergers are successful, so particular scrutiny is required in this area.
- Communicate messages within the organization to establish/reinforce management’s cultural imprint and support of values such as living with change and adversity, recognizing threats and opportunities, developing strategic alliances, etc.
Q: What core elements are involved in successful scenario planning?
A – Ms. Blaine: There are four core elements required for successful scenario planning. The Decision Point team has designed and facilitated these exercises for organizations throughout the world.
1. Third party facilitation to offset embedded biases, turf protection, over confidence, blind spots and generally the avoidance of simply generating a ‘checking the box’ exercise. Often unvarnished input is not provided if no safe territory is created within the cultural hierarchy/org chart.
2. Commitment from management and all participants to provide honest input. This can be tough, particularly if such input might challenge a ‘sacred cow’ or an individual’s position/credibility/livelihood.
To survive an inherently unknowable future, weaknesses must be isolated and addressed through a committed and institutionalized scenario planning process. The follow-on to this is that the resources must be made available to execute the plan of action as derived from the scenario planning exercise.
3. A sincere and ongoing effort to see what is real – in terms of both data as well as the associated scenarios and not defer to what one wants to see. At the end of the day, objectively, there are just three buckets:
– Facts: things we know we know
– Gaps: things we know we don’t know
– Black Holes: things we don’t know we don’t know
4. Testing through a business wargame, or a smaller red team/blue team exercise is important. A business wargame is a facilitated exercise where teams role play competitors, simulate market forces and the likely positioning of strategic channel partners. This process identifies weaknesses, opportunities, competitor’s likely responses, and potential market shifts/consolidations.
A red team/blue team exercise is enacted with the red team as an independent group that challenges an organization, while the blue team isolates flawed assumptions/responses and thereby proactively improves the team’s effectiveness. For significant strategic decisions and scenarios that imply dramatic changes, the next step is to test the scenario further before committing material resources.
This includes understanding the scenarios impact on key stakeholders, the likely response from the market, channels as well as likely responses from your direct and indirect competitors.
Q: What are the best and cost-effective tactics to use in a crisis?
A – Ms. Blaine: Openness with the press and honesty are the best practices. Sometimes issuing a “controlled statement” is the best way to proceed, especially when management needs to focus on resolving the problem rather than being available to the press 24/7. It also prevents the possibility of a “burnout moment” and guards against a response that is not empathetic…as we saw in a famous oil spill crisis. Absolutely never respond with “no comment.”
It is better to say “we are aware of the situation and we are looking into it,” which gives no more information yet sounds caring, concerned, involved, active and responsive rather than evasive. Ideally the management team will brainstorm what they believe could go wrong in the business and then bring in a professional risk manager and crisis public relations firm to brainstorm with them.
A walk through the facility will also identify other potential trigger points, i.e., doors that are left open and provide access to the company’s computer server, to other sensitive data, to products where quality control is essential, etc.
Q: What proactive measures can I take to minimize the impact of a crisis before it occurs?
A – Ms. Blaine:
First step – preparation
As Warren Buffett said, “It takes 20 years to build a reputation and five minutes to ruin it.” We’ve all seen what happens when people are not prepared. Herman Cain was a perfect example. And he had a 10-day heads up prior to the Politico article coming out!
Most people don’t have that advantage. Even with a crisis plan, there are important financial considerations.
And, when a crisis ends up being well managed despite the lack of advance preparation, managing the situation is needlessly more costly than it would have been had plans been made in advance. The quality of the response may also suffer.
Everyone believes that it will “not happen to me,” but it can…and does…even to extremely small businesses such as the company that imported all of the wheat gluten from China that was used in every recalled pet food product a few years back.
Had they had a crisis plan prepared that identified the vendors needed to mitigate risk, i.e., FDA attorney, crisis public relations firm, other legal counsel, etc., before they needed all of the above on an emergency basis, they would have paid a small consulting fee in advance and been ready rather than retaining all of the above on a last-moment, already-into-the-crisis emergency basis at top billing rates.
The keys to crisis management include:
- Knowing what the potential crises could be
- Planning and preparing in case the unthinkable should occur
- Knowing who does what
- Ensuring that the “chain of command” is known and adhered to in their office
- Having a trained spokesperson (preferably two) who will address the media
- Knowing what media to outreach to so that you are proactive rather than reactive
- Ideally, having an ongoing positive media campaign in place, based on the theory that the best defense is a strong offense… if your business is viewed as a good corporate/community citizen, a crisis will harm the business less, and perhaps not at all.
Q: How can I prepare my team to manage a crisis?
A – Ms. Blaine: In an ideal world, your management team will work with a crisis planning team such as that which The Blaine Group offers with its reputational risk management solution product and avail itself of the opportunity to have key management roll up its sleeves and “play” a board game where a crisis is enacted and everyone plays out their role.
The Blaine Group recommends this be done on a quarterly basis to ensure that everyone stays fresh. It is also a good idea for your spokespeople to be trained and for there to be “refresher” sessions every few months.
Q: What are some of the classic mistakes companies make?
A – Ms. Blaine: Conducting business in a prudent fashion is always the best way to prevent a crisis, however, there are issues beyond your control that can go awry, i.e., buying product from a manufacturer that operates with less than optimum ethics, importing toys that are decorated in China with paint that is toxic to humans, etc.,…unless you have control over each part of the process, there’s room for error.
Visiting your vendor before doing business with them can help to control this but does not 100 percent ensure that you’ll not encounter a problem later.
Q: Why are there so many crises in the news today?
A – Ms. Blaine: Crises are newsworthy. People tune in to listen (and talk and Tweet about them). And, it’s easier to capture everything with photos and video on today’s smart phones.
From the Coach’s Corner: Here are two more articles featuring the expertise of Ms. Blaine:
Public Relations Expert Provides Crisis Management Tips — Appearances count. But universities, presidential candidates and businesses have all demonstrated a lack of awareness about good public relations.
Secret to Success in a Weak Economy: Expand Marketing — Authoritative research continues to show businesses are self-destructing when they cut back on marketing in downturns.
“The crisis of today is the joke of tomorrow.”