AUGUST 15, 2018
Navigating a Crisis
By Mark Loehrke, Editor, Financial Managers Society
It may not exactly be hot off the presses, but a recent survey on crisis management from earlier this summer highlights several issues for organizations that can almost be considered evergreen. While global in nature – with respondents from 20 countries – the 2018 Crisis Management Survey from Deloitte nevertheless holds many universal truths for companies of all sizes, disciplines and geographic locations, including banks and credit unions.
"Crisis management shouldn't start with a crisis – at this point it may already be too late," notes Peter Dent, Deloitte Global crisis management leader. "With the rapid pace of change facing companies worldwide, and with crises on the rise, it is critical for organizations to be ready to respond with skilled leadership and plans that have been tested and rehearsed."
Here are some the key findings from the survey for institutions to consider:
Crises are on the rise
Nearly 60% of survey respondents believe their organizations face more crises than they did ten years ago (many of the cyber variety), and 80% note that their companies have had to mobilize their crisis management teams at least once in the past two years.
Experience is a great teacher
Undergoing a crisis tends to galvanize an organization, inspiring leadership to prioritize detecting and preventing crises in addition to managing them. For example, nearly 90% of organizations surveyed have conducted reviews following a crisis, and while these companies did not always foresee the crises in question, they did recognize that they might have been averted. As a result, they are now more likely to take action to forestall future crises.
Leaders need more development for crisis management
Helping leaders display their full range of competencies under the extreme pressures of a crisis can support effective decision-making and communication when they are most needed. Organizations should establish a leadership structure for a crisis to help define roles and responsibilities, and training should be provided – particularly when it comes to communicating with stakeholders. Companies should also identify the leadership styles of particular executives and managers, and work out who would be best placed to deal with certain aspects of the crisis response.
Confidence isn’t everything
A company’s confidence in its crisis management capabilities is not always in line with its level of preparedness. Even as 86% of survey respondents report feeling fairly or very mature in their crisis preparedness, most of those admit they haven’t yet had that belief tested by an actual or even a simulated crisis. For example, while nearly 90% of respondents are confident in their organization's ability to deal with a corporate scandal, only 17% have tested that assumption through a simulation exercise.
Readiness rules – and leadership needs to be all-in
Being at the ready can significantly reduce the negative impact of a crisis – especially if senior management and board members have been involved in creating a crisis plan and participating in crisis simulations. But nearly a quarter of respondents cite the effectiveness of leadership and decision-making as one of the greatest crisis management challenges their organizations face. In fact, leadership commitment (or lack thereof) was deemed to be the primary challenge for respondents, followed by the effectiveness of teamwork, familiarity with the crisis structure/response process and clarity of roles and responsibilities.
The role of third parties
While Deloitte's research found that many crises emanate from the actions of third parties, those third parties themselves often play an important role in helping to manage and mitigate the problems. The key is to extend the partnership to include crisis preparedness – 59% of respondents say that they participate in crisis exercises with third parties, examine third parties' crisis plans or both.
In summarizing these findings, Deloitte’s Dent notes: "Crises aren't inevitable. Many of them are avoidable, which is why smart business leaders invest in crisis management capabilities. These strengths can help their organizations avoid costly, and sometimes irreparable, damage to finances, employee morale, brand and reputation."