‘Hand-me-down’ ideas on crisis handling not enough

“Risk Issues and Crisis Management”
By Michael Regester and Judy Larkin
Kogan Page Limited, 2002 (Second Edition)



What is the price of a ruined reputation? For an individual, where reputation equals honor, a tarnished reputation is a “forever thing.” For a corporation, it means the end of “forever” – meaning, cutting short a corporate existence keyed toward perpetuity.

More to the point, damage to corporate image due to a failure in risk management or a mishandling of a crisis runs into hundreds of millions and billions of pesos or dollars. Exxon lost $13 billion due to the oil spill of Exxon Valdez. Union Carbide’s “reputational damage” was estimated at $527 billion due to the Bhopal incident in India. The collapse of the Barings Bank due to a failure in issues management cost $900 million.

These figures represent clean up costs, days of lost production, product boycotts, product recalls, falling markets and share prices, escalating compensation and brand reputational damage.

“There is a growing litany of corporate and government mismanagement of issues which pose a threat to that most important of all assets – reputation.” Thus point out the authors of the book “Risk Issues and Crisis Management.” Are the authors exaggerating? No. They cite a survey made by the Association of Insurance and Risk Managers in 2000 -- among the top 250 companies in the United Kingdom – and thus conclude that “damage to reputation was the biggest business risk they faced.”

The book looks at the organization in the 21st century and tells us that it is vulnerable to many pressures. It must, therefore, “understand and respond to our rapidly shifting values, rising expectations, demands for public consultation and an increasingly intrusive news media.”

What the authors say are not alien to us here in this country. The issue of purchased power adjustment (PPA), for example, has presented a “risk issue” to both the state power firm and the largest electric power distributor in the country.

Have their respective reputations been hurt? For one, there is a brewing boycott of their services. Second, embedded resentment has re-surfaced. And news media have picked it up due to its populist appeal, getting a little help from a “populist” President earning brownie points from the “masa.”

Years before, a multinational softdrink company was plunged into widespread protests because of a failed numbers promo. After arrests, prolonged bad publicity, organized protest actions and numerous courts cases – the company suffered a shrinking market share due to reputational damage.

Companies do not have to be helpless when crisis strikes or a controversial issue against them hogs the headlines. There are strategies for “preparedness.”

This book provides analysis and advice in two main parts: Risk Issues Management and Crisis Management. Sounds simple enough?

Yes, but not simplistic. The authors, drawing from a rich experience in these fields begin with definitions (to make sure authors and readers are on the same wave length), bring us in major parts of the world for up-to-date cases, and provide analysis. The last part is the most valuable contribution of this book.

Since this book is written by English public relations and advocacy practitioners, it somehow introduces us to European thinking – and thus makes for a refreshing change. It also results in greater confidence among practitioners that they are in touch with the world’s best practices.

This one does not read like a textbook. It sounds like practitioners “talking shop” over a cup of steaming coffee – exchanging ideas, trading experiences, sharing statistics. Then you come away wiser – and readier to tackle issue-related and crisis-in-the-making problems.

The discussion on the “issue lifecycle” is instructive. American experts call it the “path of a controversial issue.” Reality-based tips on handling a crisis – from sparing the CEO to avoiding legal pitfalls; from expressing regrets to making “ex-gratia payments”; and avoiding blind faith in lawyers to having a gut-feel – are generously given in the book.

In these parts, issues management and crisis handling tactics and strategies have been cut-and-dried and tired (not tried) and tested. But the diversity of problems and the complexity of 21st century society require from practitioners – and clients – a larger or newer “frame” that enable them to identify potential or real problems – and come up with new – because target-specific – strategies.

Hand-me-down ideas from older hands don’t suffice. The old experts lived in a different era. You need books like this one – which is equivalent to attending a refresher course on preserving and expanding your “reputational capital” in Europe. Then, after reading it, test it in the real world – with a newfound confidence.