Is your organization prepared for a crisis? Are you confident that your board members can react quickly and decisively when confronted by a curveball?
In a time of crisis—which, by its very nature, is devastating and presents a severe threat to an organization—board directors are more than ever expected to provide that strong, steady hand to guide management through the storm. This responsibility cannot be emphasized enough, which is why Deloitte commissioned Forbes Insights to conduct a survey on whether there is a gap between the real and perceived crisis readiness of board members.
The results are a bit worrisome.
The survey asked more than 300 board members around the world if they believed their companies would respond effectively should a crisis strike tomorrow. More than three-quarters—76 percent—said yes, they would. They were then asked if they had playbooks for likely crisis scenarios. Surprisingly, only 49 percent had one; 33 percent were not sure if they did.
Directors were also asked what crisis areas made them feel most vulnerable. The top three areas were reputation (73 percent of respondents acknowledged that this was a vulnerability), cyber-crime (70 percent) and rumors (68 percent), yet only 39 percent of respondents said they had a plan to address reputational risks. And then there was this additional finding: 70 percent of the experienced board members—i.e., those who had gone through a corporate crisis—said corporate reputation took anywhere from one to five years to recover from a crisis.
It’s safe to say that there’s a “vulnerability gap” between board members’ awareness of threats and their preparation to actually handle these threats—an alarming finding considering that for any organization, crisis is a matter of “when,” not “if.”
It is particularly important for board members to be crisis-ready since people look to them and the C-Suite executives to lead during times of uncertainty. There are even instances when the board is the only body that can act: consider a crisis where the CEO is forced to vacate his post or when management is the very reason the organization is in a crisis. If this happens, board members must be prepared to step in and run the company.
Based on the results of the Deloitte survey, here are a number of steps board members can take now in order to close this vulnerability gap.
Build crisis capabilities into the board
When searching for new directors, look for people who have been through a corporate crisis. Their first-hand experience will be invaluable as you develop capabilities and processes for handling crises.
Build crisis awareness into everyone’s job description
Every board member should look into developing special skills—such as PR, risk management, social media management—that will be useful in a crisis. Make time for joint planning committees and training that are specific to handling negative events.
When survey respondents were asked about the key elements of their response planning, only 32 percent said they did before-the-crisis simulation or “war-gaming.”
Define the crisis organization
The way your organization operates on a regular day may be vastly different from the way it needs to operate during a crisis. Define the chain of command for a crisis scenario; define roles—who should act in which instance?—and make sure responsible parties are aware of these roles. It may also help to define rules of escalation (if this happens, do this…) and “freedom of action,” i.e., what can be done and who should take charge in the absence of a superior.
Insist on specifics
The Deloitte survey found that fewer than half of respondents (49 percent) had engaged with management to understand what had been done to support crisis preparedness. As part of their oversight duties, board members should talk to management about the latter’s specific plans for handling each of the scenarios that might threaten their organizations and, as a further step, should participate in testing those specifics against what may happen and what the company is capable of.
Keep the lines open
Before a crisis even hits, make sure you have already communicated with people within your organization so that you all have a shared understanding of risks and responsibilities. Board members should also keep communication lines open with key influencers, stakeholders and customers so they have an outside-in perspective.
Embrace the board’s role as the guardian of reputation
An organization’s reputation, intangible as it is, is a priceless asset. Research by Simon Cole (“The Impact of Reputation on Market Value”, World Economics, September 2012) claims that a company’s reputation can account for as much as a quarter of its market capitalization. Safeguarding this reputation, therefore, is a high-level commitment and board members have the responsibility to set the tone at the top so that this commitment is taken seriously by everyone within the organization.
The Deloitte survey was conducted in the last quarter of 2015 and respondents represented companies from every major industry and geographic region, with annual revenues ranging from $500 million to more than $20 billion. You can read the complete survey report, “A crisis of confidence,” at this link: http://www2.deloitte.com/global/en/pages/risk/articles/a-crisis-of-confidence.html.
The author is the Reputation & Risk Leader of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd., a member firm of Deloitte Touche Tohmatsu Limited comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.