A How-To on Crisis Management for Boards

by Suzanne Hopgood for The Conference Board – Governance Center Blog, March 2nd, 2011.

While we’re all focused on the new SEC Whistleblower Bounty Program regulations, that is probably not what constitutes the greatest risk to a company.

It remains highly unlikely that an employee who is supporting a family will risk disclosure and his or her job to alert authorities to wrong-doing in the organization.  Secondly, there is a much greater incentive to contact the SEC if the wrong-doing is substantial, resulting in a meaningful award.  If it is substantial, it generally means that it has been in process for a long time. However, companies really want to be aware of wrong-doing long before it reaches that level of materiality and that speaks to a culture within the company of sharing concerns and being rewarded for sharing those concerns.  That requires building trust and a culture of integrity over many years.

If that strategy has failed and the company is faced with an SEC investigation, in today’s environment of transparency and enhanced communication it has become even more important for boards to embrace a crisis plan that includes an efficient and immediate communication system. Not being prepared increasingly means making the company’s reputation vulnerable to reports by the mainstream media and  the growing number of social media sites. The latter group can easily take over instant communications to the outside world, resulting in the spread of false, biased, and /or inaccurate information about the company. The negative impact this trend can have on a firm’s reputation with consumers, shareholders, vendors, and employees should be reason enough for a company to review their communication strategy as part of its crisis plan.

A crisis plan is a strategy to address any crisis.  The crisis will probably never be what the plan entailed, but it will provide the blueprint for the team to act quickly.  Key preparation pieces include identifying the team and conducting a practice drill to identify gaps in the strategy. (continue reading… )

 

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