Protecting Your Reputation During a Crisis WHITE paper Risk Management Series

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1 Protecting Your Reputation During a Crisis WHITE paper Risk Management Series

2 WHITE paper Risk Management Series Contents Protecting Your Reputation During a Crisis...2 Yes, It Can Happen...2 Preemptive Strike...3 Plan It Out...3 Tips for Communicating During a Crisis...4 Learning From Experience...4 Conclusion...5 Visit therightbank.com to download other white papers in the Risk Management Series: The People Part of the Business Equation Protecting Small Business from Financial Risk Managing Risk within Nonprofit Organizations

3 Protecting Your Reputation During a Crisis Crisis. A word business leaders dread. Think BP s oil spill or Toyota s sticking gas pedal. These events, and the subsequent response, have led to a precipitous drop in profit and an extremely negative impact on their respective images. In each instance, when communications could have played an assistive role in how the corporations were perceived in the public eye, both corporations downplayed the issues and withheld vital information. Much can be learned from these serious mistakes. dealt with. Their employees are trustworthy, the financials look good, and the economy is strong, so what could possibly go wrong? Unfortunately, plenty. Here are just a few examples: Physical harm to a customer Employee theft Illness outbreak Loss of a major client Workplace violence Natural disaster Lawsuit Economic downturn Compromised customer data Yes, It Can Happen At some point in time, most businesses will experience some type of crisis. When handled correctly, a business can emerge stronger and even garner respect. But if handled poorly, a crisis can cause serious, sometimes irreparable damage to an organization. While most organizations are not as large as Toyota or BP, and the situations may not be as far-reaching or critical, smaller companies can still suffer the consequences if something goes wrong and is not addressed appropriately. On the other hand, when addressed well, organizations can be viewed as being responsive and helpful, even as the crisis persists. A company s reputation is predicated on the trust built between the company and its customers, as well as the public. Often, organizations operate under the false assumption that crises will not happen to them or that a negative situation can be minimized and easily Organizations should also be prepared for involvement in crises that begin with another organization but can have a direct impact on theirs. For example: A vendor supplies a faulty part A board member gets sued by an employee of his or her company A partner company is accused of misappropriating funds Be aware that ancillary involvement or even a remote connection to an organization or person in crisis can draw your company into a crisis, too, whether it be logical or not. These types of situations have the potential to tarnish an organization s reputation very quickly, particularly with social media and online news avenues that promote rapid-fire information dissemination. A company s reputation is predicated on the trust built between the company and its customers, as well as the public. If you betray these audiences, trust will likely be lost. 2

4 Moreover, businesses that don t plan appropriately will likely experience costs in terms of personnel time, including the time spent working to address the crisis and potential lost revenue because distracted employees productivity suffers. Preemptive Strike Standard business practice calls for companies to consistently nurture their brand and reputation. Building ongoing relationships with your target audiences and cultivating a positive perception of the company can enhance success. Likewise, companies with strong reputations are more likely to successfully navigate a crisis situation. It is imperative, though, to ensure that the reputation is rooted in authentic practices and delivers on the brand promise. A solid reputation will not play in your favor if that reputation was deceptively gained. For example, Enron earned a reputation as an exceptional example of corporate achievement. The company was well-respected and held up as a model for other companies to emulate. Regrettably, Enron s crisis spoke directly to whether that reputation was valid, which it wasn t, leading the corporation into dissolution. Crisis communications plans are living documents that should be revisited regularly, about every six months. The next step is the development of a crisis communications plan, which will guide you through communicating about the crisis in a proactive manner. When a crisis occurs, people want answers and they want them quickly. They also must be able to trust the messenger. According to a study conducted by the International Association of Business Communicators, one in three companies does not have a formal crisis communications plan. Of those that do have a plan in place, almost 70 percent report developing plans in response to a prior crisis. Whether a crisis is large or small, a crisis communications plan will help guide the organization as it shares with its audiences how it is dealing with the problem. Without a crisis communications plan, a significant amount of resources may be invested in trying to understand and respond to the crisis. A crisis communications plan should include: Chain of command Contact information Roles and responsibilities But, companies with strong reputations that experience a crisis situation not specific to its reputation operate from a better position than those that fly under the radar, or worse those that have negative reputations to begin with. If your reputation is threatened by a negative situation, stakeholders are more likely to trust and believe your response if your reputation was already strong. Plan It Out In previous white papers, we have discussed the importance of crisis planning to handle and mitigate damage caused by the actual event or occurrence. Generic company talking points/messaging Target audiences, including employees Various crisis scenarios (cross reference with risk management plan) and responses Vehicles for information distribution by audience Relevant vendor contact information Crisis communications plans are living documents that should be revisited regularly, about every six months, to ensure accuracy and relevance. Make updates to the plan as you learn about 3

5 them, including changes in personnel and contact information. And ensure that all interested parties have the most updated versions of the plan. Tips for Communicating During a Crisis Strategic communications planning can set businesses in crisis on the right path in terms of communicating to their publics. Planning helps to reduce the frenetic scrambling to ascertain what has happened and what the response will be. Although planning can save the business time and energy, there will be a need for ongoing strategizing and message development as the situation unfolds. Assess the situation: Before making any comments, gather as much information as possible as quickly as possible. Determine what occurred and why, if anyone was injured, and whether the situation is under control or ongoing. Prepare your messaging: Assemble your team of advisors, including your communications executive(s), public relations counsel, leadership and attorney to discuss appropriate messaging. Develop talking points and sample Q&As to prepare for potentially difficult questions. Be sure that messaging is developed for each target audience. Determine the vehicles: Consider how best to communicate with your stakeholders, from social media, press conferences, media statements, etc., or a combination. Express empathy but not necessarily fault: A crisis situation is not a time to be flip, defensive or aloof. People need to see genuine care and concern, but that does not necessarily mean an admission of fault. Keep it coming: A one-time announcement is not enough. Depending on the situation, it is important to make ongoing contact with your audience. Strategic communications planning can set businesses in crisis on the right path in terms of communicating to their publics. Learning From Experience Despite the fact that most companies have experienced or will experience a crisis, many that have don t believe it will happen again. A Price-Waterhouse study found that 50 percent of executives surveyed reported a major crisis occurring in the previous three-year period, but only 25 percent expected another major occurrence within the next three years. Being unprepared can have dire consequences which can impact profits, employees livelihoods and the organization s public image. Even if you do have a plan in place, it is recommended that after a crisis, organizational leadership convene a committee to evaluate how well (or poorly) the crisis was handled. Questions to consider include: Did the plan effectively assist in addressing the situation? Was anything missing from the plan? How did the spokesperson handle media inquiries? Provide assurance: While it may not be appropriate to convey that all is well, it is important to assure the public that the situation is being addressed and that information will continually be provided to them. Was the messaging appropriate? What was the audience s response? What kind of backlash occurred, if any? What should be done differently? 4

6 A few years ago, Seattle was hit with a major windstorm that knocked out power to 700,000 Puget Sound Energy (PSE) customers. It took the company several days to restore power, and the utility was understandably overwhelmed by the situation, resulting in less than stellar communications efforts. After the crisis, PSE hired a consulting firm to assess its response to the windstorm. The agency also surveyed customers and employees to gauge their perception of the situation. Based on the outcomes of this effort, PSE has stepped up its disaster communications efforts, including aligning with agencies and communities for better coordination and focusing more on pre-disaster-season public outreach. Conclusion These days, information about crises spreads at light speed. Organizations must be adequately prepared to address crisis situations quickly and strategically to preserve their reputation. Shying away from the occurrence is not an option, but communicating ineffectively can cause more harm than good. Pacific Continental Bank has a comprehensive crisis plan which includes monthly testing and updating at least twice per year. To mitigate a crisis as much as possible, prepare for a variety of scenarios and determine the response to each. Involve key personnel, including leadership and executives, in the planning and decision making process to ensure support at multiple levels. And finally, do not let the plan sit on a shelf to gather dust. Treat it as an important guide in navigating rough waters with the goal of safeguarding one of the company s most important assets its reputation. 5

7 Sources: IABC Survey: Only 67 Percent of Companies Prepared for the Next Crisis, International Association of Business Communicators, 2006 Preparing for Organizational Crisis Readiness: Perspectives and Pathways toward a Pathway to Preparedness, New York University, 2008 Crisis Management: Where Risk Management and Public Relations Meet, riskvue, 2006 Public Relations Risk Management, Nancy Germond, AllBusiness.com, 2008 Windstorm Response: Lessons learned from December 2006 windstorm, Puget Sound Energy, 2007

8 About Pacific Continental Bank Call us at: Greater Eugene Area Greater Portland Area Greater Seattle Area For more than 35 years, Pacific Continental Bank has served the Pacific Northwest with a focus on building long-term business-banking relationships. And along the way, we have forged a strong reputation as a proven business resource and proud civic partner. Pacific Continental Bank s strength lies in our extensive expertise in banking community-based businesses, professional service providers, and the nonprofit sector. This expertise means we can help clients tackle the financial issues specific to their enterprise. What s more, clients have access to local bankers who have the authority to make decisions for them on the spot. Pacific Continental Bank maintains a strong connection to the communities where we operate. The bank empowers its employees to actively engage in fostering an environment where all community members can flourish. We endeavor to work with local nonprofit organizations and community-based businesses, ensuring more dollars stay close to home. The bank supports hundreds of nonprofit organizations in achieving their missions both philanthropically and through direct participation. Visit us online at: therightbank.com us at: banking@therightbank.com Find us on Facebook This document is not designed or intended to provide authoritative financial, accounting, legal, investment or other professional advice. If expert assistance is required, the services of a qualified professional should be sought. Reference in this document to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not constitute an endorsement, a recommendation or a favoring by Pacific Continental Bank. Please see full disclosure for more information available at September 2010