All businesses, no matter what size are likely to experience a crisis situation; it is a matter of ‘when’ rather than ‘if’. This could be an operational incident that escalates or an external event that impacts the business. Crises can impact operations, damage reputation and the bottom line. A badly handled crisis can destroy a business. In the middle of dealing with the unexpected it is really important there is structure that can guide the company, ensure notifications and decisions are made in a timely and well structured way .
A crisis could involve a virus, a contamination or pollution, an accident or natural disaster. A gas pipeline could explode cutting off energy, a factory fire or cybersecurity incident could destroy your capabilities, a war overseas could decimate your supply chain, quality issues or a contamination could give rise to a massive product recall. It is crucial there is a tailored and well revised plan in place so when everything else is going to hell in a handcart and you’ve got that gut-wrenching sinking feeling, there will be the reassurance of a structure and a plan to help you.
Key Crisis Management Requirements
- A crisis management plan should be individually tailored to your business, kept up to date, listing key decision makers, experts and responsibilities. This should be regularly reviewed/tested and any recommendations implemented
- Allocate clear roles and responsibilities – all key areas should have a designated decision maker and a deputy if they are not available. Full contact details should be available and up to date. Key stakeholders such as legal specialists, insurers, enforcement agencies, relevant consultants and test houses should be listed with contact details. Relevant suppliers and customer details should be available. Additional information such as the profile of likely consumers, key contract terms and sales history should be available to feed into any investigation, risk assessment or eventual withdrawal/recall.
- An escalation process to the relevant decision-making team should be set out and who will decide on the risk factor provided for the crisis/potential crisis. A standard report form and process should ensure that relevant facts are collated so strategic decisions can be made. A process for each decision should be structured. Reference to any required or recommended notifications provided. Legal will be able to provide advice on the regulatory position and assist in due diligence. Legal advice or litigation privilege will mean that confidential documents kept within a small team would not be discloseable to enforcement authorities. Therefore, investigations may be kept confidential up until a decision is made.
- Clarity of communication will be vital, with details of how a decision will be made and by whom, alongside the input of legal, regulatory, operations and sales. There should be formats of standard communications for differing recipients ie letters to customers and suppliers, there should be an agreed point of liaison with enforcement authorities and media enquiries. Communication should be authentic and prioritise safety at all times; must be aligned with brand values, and tailored to the various stakeholders.
- The communications strategy should incorporate a clear understanding of its objective and should be via one channel only to avoid contradiction. Legal should be a key part of this to avoid inadvertent admissions on liability or voiding certain contracts/insurance etc.
- All likely hazards should be considered in advance - A full Hazard Analysis Critical Control Point (HACCP) plan should incorporate all major risks and seek to protect against them at vulnerable points within not only the supply chain but all the business activities.
- The crisis management plan should be linked to a business continuity plan. Are there alternative production facilities or suppliers? Alternative storage? Alternative fuel source?
- Check insurance policies and terms, check notification obligations, recall coverage and obligations, check excess.
- Check contractual terms of supply and distribution agreements; are there any penalty clauses? Terms of business interruption and force majeure, who keeps deposits and on what terms are items payable? What are termination clauses?
- Health and safety legislation obliges employers to provide a safe as reasonably practicable environment for staff and visitors; suitable risk assessments for employees and other persons affected by the work activities should be carried out and all reasonable precautionary measures implemented.
- Keep abreast of new developments – legal, scientific and medical that may affect your product / assist you in protecting against risks and so protecting your customers, consumers and employees
- Review – Crisis management plans should be living things, adapting and evolving to changing circumstances and being kept updated. They should not be kept on a dusty shelf but rather the people involved in executing the plan should be trained and the process tested with real life potential scenarios involving cross sections of teams that may affect your business and your brand. Is the plan still relevant, are there any gaps, keep it updated.
- Recommendations – Whether it’s a training exercise or a real-life crisis, when the dust has settled don’t leave things there. What did or may have caused the crisis? Is there anything that can be done to reduce the likelihood of that happening/happening again? How can the business respond more effectively in the future? Can anything be improved?
Most importantly, when recommendations are made, don’t just leave them on a list as evidence that you have fallen short of your own requirements, but rather make sure they are actually implemented.
If events occur in the future that had happened before/you had envisaged but not actively worked against there is the potential for criminal negligence, voiding of insurance and reputation damage. A strong leadership will have the understanding and agility to put in place measures for responsibility and this will help to ensure that employees and third parties will similarly be empowered to take responsibility and learn lessons.
Whilst some businesses come out of crises stronger, having used them as an opportunity to force positive change, it is far better to stress-test each component part ahead of a crisis. You will know your vulnerabilities and how to protect them best. But also, think about the businesses’ values and priorities, have these help provide the underlying objectives for any plan.
Please let our specialist team know if you would like Mills & Reeve to be part of your crisis management; we can provide a sounding board on the decisions, legal advice and privilege for confidential documents as well as regulatory and risk assessment input. We can also review crisis management plans and provide training.
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