Top Ten Tips on How to Manage a Company Crisis
“Planning is everything, the plan is nothing.” Dwight Eisenhower
Are you ready as counsel to manage your client’s company crisis? Advising and managing a company crisis as counsel is both rewarding and challenging. In addition to finding adequate support and expertise for the specific crisis, you’ll need a comprehensive crisis management plan and the leadership to implement it. Regardless of the crisis, planning for the inevitable crisis is the key.
This article is the final summary and the culmination of a 13-week series on the top ten tips on how to manage a company crisis. Material for this series was taken from a MSBA Legal Summit Series Webinar moderated by Marisa Trasatti, General Counsel of Sciton, Inc. and partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP. During the program, Top 10 Tips on How to Manage a Crisis, Trasatti and a panel of experts consisting of lawyers, a CEO, an expert on public relations and an insurance professional resoundingly proved how planning for a crisis is a must for all organizations. An overview of all ten tips to manage a company crisis may be found here.
First and foremost, understand your client is not immune from crises. Weather events, product recalls, data breaches, regulatory violations, and lawsuits are all too common in the business environment. It is not a question of “if,” but when your client will be faced with a crisis. But, as Robert Scott, partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP stated, “planning is everything, the plan is nothing.” (quoting Dwight Eisenhower) You need to ensure your client is ready when the crisis hits.
Before we discuss the particulars of the top ten tips on how to manage a company crisis, it is critical to recognize myths of company crises. Trasatti identified the seven common myths of a crisis: (1) a crisis is always negative to business; (2) the crisis management manual should always be followed; (3) a crisis for a competitor is good for my business; (4) silence with the media neither hurts nor helps; (5) you cannot trust anyone in a crisis; 6) crisis occurs during working hours; and (7) you can rely on the government for help. Sound familiar? Trasatti and the panel of crisis professionals demonstrated how each of these myths can be detrimental to your organization and gave practical suggestions on how to remedy each myth.
You may watch Ms. Trasatti discuss the 7 myths of a crisis here.
Top Ten Tips on How to Manage a Company Crisis
- Determine what activates the crisis management plan.
Have a crisis management plan and ensure the plan specifically defines how and when the plan becomes activated. Define terms within the plan including whether the crisis is limited, issue-driven or major. Identify the different levels of crisis, e.g., levels one, two, or three; and how each level affects the company so that the corresponding response is commiserate with the overall risks.
You may watch the experts discuss determining what activates the crisis management plan here.
- Formulate a crisis management team.
Determine who needs to be on the crisis management team (“SWAT” Team) and select a leader for the team. Obviously, the leader should be someone who is extremely organized and has the gravitas to coordinate management of the crisis. Consider both an internal and external team. Because so many crises are in the form of weather events, consideration for an emergency management team should also be discussed. The main function of the crisis management team is to manage the crisis, minimize risks and monitor all communications.
You may watch the experts discuss formulating a crisis management team here.
- Assess the crisis.
Pre-planning is essential for this step. Assess the risk in advance of the event by asking the what, why, when, and who for each potential type of crisis. This step takes considerable research. Among others, factors for consideration include short- and long-term financial effects on the company, supply chain and sales pipeline outcomes, and optics of the crisis to employees, shareholders, customers and the public. “Understanding your potential hazards and risks ahead of time and then buying insurance that is applicable is key,” said Sam Terzich, Director of Gallagher Bassett.
You may watch the experts discuss assessing the crisis here.
- Initial response.
How should the crisis management team initially respond to a crisis? It is important to ensure all communications, internal and external, are first reviewed by the team to determine if the communication should be disseminated. Sometimes it is not feasible to simply give a “no comment” to the crisis. Customers and shareholders will want answers. The team will need to address questions, internal and external, and ensure everyone in the company is on the same page.
You may watch the experts discuss the initial response here.
- Insurance coverage.
Find your company’s policies, read the policies, and determine what your exclusions and endorsements cover. Assess what your limits and deductibles are and pay close attention to any notice requirements. Contact your company’s insurance carrier to determine if the company’s insurance covers the crisis. Take advantage of the insurance company’s resources such as remediation, and forensic experts. Don’t forget to look for cost sharing opportunities if your company has multiple coverages and examine the different duties to defend.
You may watch the experts discuss insurance coverage here.
- Manage the external appearance with public relations.
The panel highly recommended hiring a public relations firm to help manage the crisis especially because public relations’ firms are third parties for privilege purposes. However, remember privilege can be waived when a privileged document is shared with third parties (public relations’ firm, forensic experts, etc.) so it is important to hire an outside firm to employ the third party in order to protect the privileges. The team should conduct daily “sweeps” of social media to measure the public’s perception of the crisis, but also to ensure employees are not disclosing confidential company communications. Communication with customers is vital and your team should form a consistent message to address their concerns.
You may watch the experts discuss managing the external appearance with public relations here.
- Managing internal appearances by advising employees and communicating with key opinion leaders.
Your employees will be faced with a barrage of questions from customers. Advise employees on what they can and cannot say to customers. Prepare a consistent message for your sales representatives to share and instruct your employees to refrain from responding to questions until they receive approval from the crisis management team. Find experts, if possible, who will be helpful to the company and discuss their thoughts. They may be able to provide valuable information to help manage the crisis and strategically minimize risks.
You may watch the experts discuss managing internal appearances by advising employees and communicating with key opinion leaders here.
- Adjust promotional materials and sales practices.
It may be necessary to adjust the company’s promotional and sales practices. The crisis management team should first determine if the materials and practices need to be adjusted. Next, advise all employees who need to know of any modifications, develop a plan to modify as necessary and enforce implementation of the modifications. Be mindful of all brochures, slide presentations, websites, social media accounts, etc. that may need to be adjusted.
You may watch the experts discuss adjustments to promotional and sales practices here.
- Response to law enforcement/regulatory agency.
Crafting a sound response to law enforcement or a regulatory agency may require hiring outside experts with sufficient expertise to assist. Don’t lose sight of the deadline to respond. Tailor your response to the specific subject matter at issue paying close attention to exactly what they will consider and the focus of the agency heads. Appropriate research into law enforcement and regulatory agency inquiries with competitors may be a key resource in drafting a response. The crisis management team should review all pertinent documentation and evidence on the subject matter to ensure a thorough response.
You may watch the experts discuss responses to law enforcement or regulatory agencies here.
- Concluding the Plan.
Continue monitoring the crisis for a minimum of several months. A press release may be a great way to communicate to customers, shareholders, and the general public that the crisis is concluded and to announce preventative measures taken by the company to ward off future events. Announcements must be truthful and honest to avoid future litigation and/or further law enforcement/regulatory action.
You may watch the experts discuss concluding the plan here.
Linda Lenrow Lopez, Director of Operations, Risk Alternatives, L3 Management Innovations, LLC and a public relations’ expert stated the important thing to remember in managing a crisis is to “plan in advance, assess your risks in advance, follow your plan, . . . and put privilege in place.” Scott agreed, indicating a company should get ahead of the curve and “plan for the unexpected.” Be flexible with your crisis management plan because things may change, and a company should not implement the plan “rote-wise, that will miss the big picture,” he said.
On a final note, Trasatti indicated these top ten tips are consonant with Environmental, Social, and Governance (ESG) criteria that are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Criteria considered includes how a company performs as a steward of nature, how it manages relationships with employees, suppliers, customers, and the communities where it operates. Other criteria considered deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. “ESG criteria helps investors avoid companies that might pose a greater financial risk due to their environmental or other practices,” said Trasatti. Following these top ten tips to manage a company crisis will assist counsel, as problem solver, “to handle a crisis situation” and be a valuable member of the corporate team.
This is the final article in a 13-week part series that discussed how counsel can help their clients create a crisis management strategy and manage a company crisis. Some of the materials for this article and series were taken from “Top Ten Steps in Managing a Company Crisis,” by Marisa A. Trasatti, Zachary A. Miller and Sean M. Fox published in the In-House Defense Quarterly, Winter (2020). The MSBA wishes to express sincere gratitude to the professional panelists, without whom it would not be possible to offer this series.
Aaron C. Burton, CEO of Sciton, Inc. Sciton, Inc. is the largest privately held dermatological and medical device laser manufacturer. Aaron shared his experience as CEO and especially the crisis that developed at Sciton during his first year. Aaron also generously shared how Sciton handled and endured the COVID crisis.
Linda Lenrow Lopez, Director of Operations, Risk Alternatives, L3 Management Innovations, LLC. Linda has more than 25 years of experience in private and non-private sector risk management. Linda shared her experience as a project manager and Director of Operations at Bechtel Corporation. Other roles Linda served at Bechtel include corporate risk manager for a global business unit and project risk manager. Linda currently works at L3 Management Innovations and draws upon her years of professional experience in this area to share with the group.
Robert E. Scott, Jr., partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP. Robert handles litigation on insurance coverage, drug and medical devices and many other areas. Robert shared his expertise on crisis management and his insights on planning ahead to control future crises.
Sam Terzich, Gallagher Bassett. Sam is a current director of the company and manages specialty claims including product liability, cyber, environmental, pollution and product recall. Sam has been in the claims industry for 25 years and will address the insurance issues that arise during a company crisis.
Marisa Trasatti, Esquire, partner at Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, and also General Counsel to Sciton, Inc. Marisa is the moderator of the Top Ten Tips to Manage a Crisis. Marisa shares her unique experiences of managing a crisis as General Counsel for Sciton along with valuable lessons learned as counsel for an organization in the midst of a crisis. Marisa’s practice focuses primarily on civil litigation, with an emphasis on product liability litigation, including cases involving drugs and medical devices. She is a past president of Maryland Defense Counsel and served as the DRI Maryland State Representative.