Financial executives and investors today are haunted by a chilling sense that the world economy may be at risk of a worst-case systemic breakdown. Their persistent nightmare is that a simultaneous piling up of related – or unrelated – events can create a stunning chain reaction of economic, financial market, and social catastrophes.
Popular uprisings and regime changes in the Middle East and North Africa, a devastating earthquake and tsunami in Japan, ongoing debt crises and bailouts in Europe, threats of inflation, food and water shortages and dangerous global imbalances are the most immediate and dramatic threats, but not the only ones.
Predictions of upcoming apocalypse have little value unless they are turned into a learning opportunity for individuals, companies and societies. In this regard, drawing on the lessons from the recent financial crisis, environmental catastrophes and corporate ruin, our collective understanding of the important ingredients of crisis preparedness and resiliency has dramatically improved. Equally importantly, it has become indisputable that crisis management should not be viewed as a standalone activity that happens after the fact – but rather a proactive and integral part of all strategic and tactical initiatives.
Yogi Berra got it right. “It’s tough to make predictions, especially about the future.” Thus, there is little hope that most of us will be able to accurately anticipate future dislocations and get out of the way just in time. Instead, as a proverbial tsunami is approaching, we must be able to quickly develop situational awareness, understand its potential impact and quickly chart the path to safety. In the language of business strategy, this equates future survival with one’s ability “put it all together.” Specifically, risk management, corporate strategy, proactive stakeholder interaction and crisis communications must all be seamlessly integrated in response to the volatile world. Indeed, we know of no period in recent memory that so persuasively drives home the need for a holistic approach to the challenges ahead – and their necessary solutions.
Going forward, every firm must strive to make crisis management and crisis communications an indissoluble part of executive decisions that are closely integrated with strategic planning and risk management processes. Crisis management and communications by definition also require concerted contingency planning: formulation of adverse scenarios and stress tests, early warning systems that inform decision makers of potential disruptions, the formation of dedicated multidisciplinary teams that fully understand their roles and actions in a crisis, risk management dashboards and multi-pronged strategies to minimize loss.
In addition to the immediate purpose of such preparation — helping organizations navigate a dangerous world — its long-term benefits will include improved firm-wide communication and important awareness of risk and uncertainty as a permanently fundamental feature of doing business.
In conjunction with internal activities that foster organizational learning and agility, direct communications with all stakeholders and the public at large are of paramount importance. Firms need to put in place a number of simple but often ignored best practices that address public concerns and fears. This entails accepting and involving the public as legitimate partners to executives and the board and identifying their specific concerns at both the local and global level. Will a company be able to withstand an oil price shock or an interruption of vital supplies? Has a company protected itself against a run on a bank – or future legal liabilities? By being forthcoming, speaking with empathy and compassion and understanding and articulating each concrete concern, firms can help shape public perceptions of the crisis rather than let inchoate anxieties fester. Such mindset of coordination and collaboration goes a long way in this regard, enabling all actors to speak with one voice.
Only when firms holistically unite their most critical activities – executive decision making, governance, strategic risk management, strategic planning, and crisis management – will they be in a position to tame the profound uncertainty now confronting them, build lasting value, and, thus, unleash the upside of risk to benefit all stakeholders in a volatile world.
Richard S. Levick, Esq., is the president and CEO of Levick Strategic Communications, a crisis and public affairs communications firm. He is the co-author of The Communicators: Leadership in the Age of Crisis and Stop the Presses: The Crisis & Litigation PR Desk Reference, and writes for Bulletproofblog. Levick is on the prestigious list of “The 100 Most Influential People in the Boardroom,” which is compiled by NACD Directorship magazine. Reach him at firstname.lastname@example.org and follow him on Twitter @richardlevick.
Leo M. Tilman is president of L.M. Tilman & Co., a strategic advisory firm that serves financial institutions, corporations, governments and institutional investors worldwide. He is a faculty member at Columbia University and the author of Financial Darwinism: Create Value or Self-Destruct in a World of Risk. Tilman has been profiled as a Business Visionary by Forbes and honored by the World Economic Forum as a Young Global Leader. He can be reached at email@example.com.