While market manipulation and fraud are a constant threat in business, crisis is a defeatable foe, said Jeffrey M. Cunningham during a discussion on techniques boards can use to prepare for and respond to crises.
Left to Right: Richard Levick, Tim O'Donnell, Brad Karp and Jeffrey Cunningham
A successful crisis response requires advance planning, said Brad Karp. “Board members have to make sure there’s a plan in place, that everyone understands their role and that they have a very good working relationship with the control functions in the corporation—the heads of compliance, audit, legal and risk, because those are usually the positions in the corporate structure that have access and foresee the seeds of a crisis.”
A strong enterprise risk-management culture in the company at the board level is critical, said Tim O’Donnell, “and insurance, specifically D&O liability insurance, plays a key role. If it’s not done correctly, it can add to the crisis, instead of being your safety net.” Moreover, implementing strategies for litigation management with inside and outside counsel and ensuring you have an insurance carrier who understands securities class action lawsuits is a must. “You don’t want the first time you meet your D&O insurance carrier to be after you’ve already been sued,” said O’Donnell.
Today’s instant permeation of information makes crises like the BP oil spill situation radically different than Johnson & Johnson’s Tylenol crisis 28 years ago. What’s changed, said Richard Levick, is the expectations of shareholders, regulators and journalists. “The demand for speed is extraordinary.”
Moderator:
Jeffrey M. Cunningham, managing director and senior advisor, NACD
Panelists:
Brad Karp, chairman, Paul Weiss
Richard Levick, president and CEO, Levick Strategic Communications
Tim O’Donnell, president, ACE Professional Risk, ACE USA