Accenture Corporate Crisis Management

8/9/2019 Accenture Corporate Crisis Management

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Corporate Crisis ManagementPreparing for a Rapid Response toUnexpected Events


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Catastrophe, crisis and unexpected

events are part of the businesslandscape. A quick look at the lastten years demonstrates the broadrange, unexpected nature andsometimes devastating impact ofcatastrophic events on businesses,their shareholders, their customers,and the communities they serve.

Large scale crises, whether stemmingfrom catastrophic events, managerialmisconduct or other causes, alwaystend to have a significant effect onearnings and share prices. Companiesmay or may not recover from suchsituations. Some companies come backstronger than ever, but some companiesaffected by crisis have disappearedaltogether, either through liquidation ormerger, and some have suffered fromlingering reputational damage.

In the past few years, we have seenan intensification and accelerationof crisis events, which is closely

related to an increasingly complexand interconnected global operatingenvironment for businesses. With

companies looking at a much broader

range of opportunities, often acrossa more diverse geography, it is notsurprising to see emerging risks joiningexisting concerns. Among thesegrowing Drivers of Corporate Risk are:

Resource ScarcitySpot shortages of energy, keymetals, food sources, even waterhave characterized the decade,with significant risk implications forcompanies trying to balance supplyand demand.

EnvironmentalResponsibilityCompanies are more often beingheld accountable for their actionsby an increasingly environmentallyaware public, as well as by rapidlychanging national and multinationalenvironmental regulations. This risk

is compounded by increased weathervolatility and severity related toclimate change effects.

Geopolitical SecurityIn an age of numerous regionalconflicts, expanding terrorism andshifting power centers, we seeincreasing impacts on business frompolitical changes and instabilityat both regional and local levels.Such political risks affect businessoperations or investments across manyparts of the world.

Technology

DependencyThe rapid proliferation of digital andmobile communications has creatednumerous choke points that aresusceptible to physical disruption, or,more and more often, to cyber-attackby individual hackers or by organizedactivist or criminal groups.

Alongside this multiplication of externalrisk factors, many companies have

also taken on additional risk throughtheir continuing drive for increasedefficiency. Widely implementedbusiness practices such as 'just-in-time'

It takes 20 years to build areputation and five minutes toruin it. If you think about that,

youll do things differently.

Warren Buffett


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(JIT) logistics, lean supply chains, and

reduced redundancy in operations mayincrease efficiency and lower operatingcosts, but they can leave companieswith little margin for disruption orerror. Efficiency without appropriateattention to risk can potentially createfragility in operations.

Finally, the pace of technologicalchange (widespread use of the Internetand mobile communications is lessthan 20 years old), along with rapidglobalization and interconnectionamong economies makes it moredifficult for traditional risk and crisismanagement practices to keep up.Companies often find themselvespreparing for and responding to thelast crisis, while pushing into newbusinesses without establishing thenecessary safeguards against failure.

Risk management, more than ever, isone of the key strategic disciplinesin this environment. However,

rapidly changing risk profiles and theproliferation of new and differentkinds of risk, along with unprecedented

economic volatility, mean that

companies must ask themselvesdirectly: what sort of crises could weface? And, if an unexpected eventstrikes, how can we prepare ourselvesnow to position the company forrecovery and future growth?


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The negative effect on a companys

share price is only one measure ofthe impact of a crisis (alongsidereputational and brand impacts, loss ofrevenues, fines, impacts on cash flow,and other repercussions) but this publicand market-driven impact is frequentlythe most dramatic.

In Figures 1-3 we have picked a fewsimple examples to demonstrate thisoften stark effect.

The plots show examples of companies

affected by a crisis event, representedin time by the red circle. Company 1faced a crisis following a large andhistorically-common form of humancatastrophe; Company 2was exposedto a huge and technically-complexindustrial accident; and Company 3faced a global product recall followingthe failure of a key design elementwithin one of its core products.

The companies are from differentindustries, and the specific industry-

wide index of share values has beennormalized and tracked against theindividual companys performance. Asis almost always the case, the impact

on share value following a crisis is not

only negative; it is often pronouncedand can persist over a prolonged period,despite the industry.

Other interesting aspects of these andsimilar data sets include:

Multi-stage crisis eventsThe demonstration of the multi-stagenature of many crisis events is shownin the cases of both Company 1andCompany 2. Here, we can clearly see

two distinct phases of impact, andin the case of Company 1, its sharevalue had begun to recover beforefalling dramatically away. The reasonin both cases was a re-estimationby the public of the level of impactof the crisis and indicated thatcompany responses were inadequatein relation to the actual scope of theissue. Significantly under-estimatingthe impact of the crisis may give thecompany short-term breathing space,

but the facts will always surface.

Big fish syndromeThis is the subsequent industry-wideimpact following either very-large-scale events or events affecting apredominant player in that sector. Inthe case of Company 2, the industrywas similarly affected by the eventbefore it began to recover, althoughthe industry recovery took place fasterthan the specific company recoverydid. The market capitalizations ofvarious companies within that sameindustry were adversely affected

through no direct fault of their ownstrategy or operations.

Markets dont lie: tracking a crisis throughshare price

Figure 1. Tracking Company 1share price following

crisis event

15 Jan

Normalized Company 1 Share Price Normalized S&P 500 Index

0.90

0.95

1.00

1.05

1.10

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15 Feb 15 Mar 15 Apr 15 May 15 Jun


crisis event

Normalized Company 2 Share Price Normalized Industry Index

0.40

0.50

0.80

0.90

1.00

1.10

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16 Apr 30 Apr 28 May 11 Jun14 May 25 Jun

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1 Feb 15 Mar 29 Mar 09 Apr15 Feb 12 Apr 26 Apr

0.90

0.95

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1.05

1.10

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crisis event


crisis event

1 Oct


0.95

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21 Jan

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26 Nov29 Oct 24 Dec

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15 Oct 12 Nov 10 Dec 7 Jan

0.85

0.90

Note: Each figure illustrates the

normalized share price of the companytracked against the relevant industryindex. In each example, an initialplateau is reached between the onset ofthe crisis and the major share price drop(between 2 weeks and 1.5 months).This is the stage during which twothings happen in the public domain;1) external stakeholders developtheir initial perceptions and reactionsto the severity of the crisis, and 2)stakeholders form their basic opinionof the company's responsiveness,either good or bad. Market analystsand other third party observers willultimately provide additional insightsthat will have a bearing on the firstissue, i.e., impact to operations, cashand the environment. However, publicopinion on the company will be heavilyimpacted by those first few weeks andthe initial perception of crisis response.

A good news storyCompanies rarely respond to suchcrises with the scope and intensitythat is needed and expected fromstakeholders during such events. Weexplore here the essential elements ofhigh-performance crisis management.When such approaches are adopted,the company can develop a capabilityto respond positively to negativeevents. In the example of Company4, the externally-visible publicrelations plan, including efficient

crisis communications, implied a highimpact 'operational triage' at workbehind the scenes. This companyworked to get their message out earlyand structured the communications,timing and content to help preventescalation in the public eye. Thecommunications were paralleled byan active operational crisis responseeffort to address issues themselves.Through these integrated efforts, thecompany leveraged the opportunity to

defuse the immediate impact througha well thought-out regional strategy tominimize the depth to which the crisiswas felt.


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Broadly speaking, risk management

deals with the identification andassessment of risk exposures of acompany, and the development ofapproaches to control those exposuresin order to provide an optimal setof risk/reward tradeoffs. Strongcrisis management capabilities arethe logical extension of a holisticrisk management approach anddemonstrate to shareholders,customers, employees and the globalmarket that management is able todeal with extreme circumstances andunexpected negative events.

Crisis events, whether natural orman-made, almost always have anegative initial impact on sharevalue. Paradoxically, however,such events offer companies anopportunity for management todemonstrate their ability to deal withdifficult circumstances. Effectivecrisis management can have a moresignificant benefit than hedging

against the economic effects of

the unexpected event. A strongdemonstration of leadership inadversity can dramatically improveinvestor opinion and protect, or evenimprove, the companys share price.

The only good crisis, of course, is onethat does not happen, either becausethe companys operating proceduresreduce the possibility of adverse events,or because early and effective responseto a potential crisis solves the problemwithout undue harm to its people,

assets, reputation or share price.

Crisis management is one of the logicalelements of risk management planning,in this case picking up where plannedmitigations have failed. Many crisesstem from problems which pre-datethe proximate cause of the crisis oremerge as a result of cascading andcompounding events which lead to anultimate catastrophic failure.

The companys board of directors

and senior management need tomake building the crisis managementcapability a high priority, withappropriate funding, resourcesand attention. Ensuring that crisismanagement capabilities and planningare in place should be one of theexpected performance factors forleadership.

Accenture has identified four essentialelements for helping to achieve highperformance in crisis management.

Risk Management and Crisis Management


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1Prepare for unexpected failures

Crises usually occur because some aspect of riskmanagement has failed. Crisis management needs to be an

extension of the overall approach to risk management, nota distinct activity. Integrating both of these activities withthe business is essential. Just as risk management should betreated as a key business process, inseparable from otheraspects of the business cycle including sales, manufacturing,and distribution, so is the case with high performance crisismanagement.

First steps to

high performance

Conduct robust scenario

planning

Every crisis is different, and it isimpossible to anticipate exactly where,when and how one or more adverseevents might turn into a full blowncrisis. However, through a combinationof scenario planning and risk exposureanalysis, it is possible to better

prepare for various types of events bychallenging assumptions and highlightingboth the range of possibilities andpotential capability gaps (or strengths) indealing with them.

While scenario planning is a fairlywell-developed discipline in someindustries including chemicals,energy, and transportation suchplanning does not always integratevaluable risk exposure identificationand driver analysis coming from other

internal processes. By bringing riskroot cause/driver analysis from otherrisk processes into scenario planning,an additional dimension of potential

vulnerability is introduced, which helps

focus attention on potential whitespace (unaddressed gaps) in processeswhich can allow event escalation. Thisdual approach can help establish arobust set of considerations for use inbuilding resilience to crisis events. Thegoals of these initial steps are to:

1) challenge current planningassumptions about what mighthappen to test robustness againstwhat could happen;

2) proactively identify types ofcapabilities and processes that couldprevent or mitigate crisis situations;and

3) create a seamless interactionbetween normal risk managementpractices and crisis management,increasing awareness of developingsituations and response effectiveness.

The path to best-in-class

Leverage analytics to drive

prediction

Use predictive analyticsas a decision support toolto drive a forward-lookinganalysis of scenarios, responseeffectiveness, and criticalcorrelations that can complicateor escalate events. Better

understanding of the driversof extreme events, whetherexternal developments orinternal process interactions,can help build a robust, flexibleand dynamic crisis managementprogram. The objective forenhanced analytics is not topredict events, but to helpcompanies develop more

meaningful warning indicators,and an increased awareness oftheir leverage in preventing ormanaging 'runaway' crises.

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First steps tohigh performance

Prepare crisis management

structures and plans

While crisis management has a numberof major elements, it takes two maindimensions: internal and external.

Internal crisis plans should focuson operational elements and shoulddetermine who needs to do whatin a crisis situation both to protectand maintain operations, as well asprevent escalation. Responsibilitiesshould be clear, with senior executiveoversight as appropriate. Often thetraditional crisis management plantakes the form of a thick folder,gathering dust on senior executives'shelves and providing little businesssupport. What is required is primarily abusiness exercise, not a risk one, whichwill subsequently allow anyone inmanagement or on the board to know

immediately their own role and theroles of others during a crisis.

While it is inevitable that some form

of key documentation will be required,it is the process of developing thiswhich should be the first step ofembedding crisis management in alllayers of the company. This processwill prompt numerous questions aboutroles and responsibilities, helping makethe approach more business-focused,practical and appropriate for real-worldsituations. It will then become easierfor subsequent actions to becomehardwired into business processes andmanagement decisions, making thecrisis management plan operationalthroughout the company.

The external crisis plan focuses oncommunications and informationflow, with particular attention to thepublic, investors, media, regulatorsand government authorities at alllevels. The plan should reach broaderaudiences such as employees andcustomers, as well. There is a needto make a distinction between the

target audiences (e.g. public, investors,regulators) and the mechanism groups(e.g. media). There is a messagecomponent and a method component.


Develop the long term vision

Map out a master plan todevelop fully integrated crisismanagement capabilities whichare embedded in operations,codified in business processes,founded in risk managementplanning, and executed viareal-time systems. A coherent

and phased roadmap to thiscrisis management end statewill enable increased capabilitieswhile supporting maximumprotection available at any givenstage of development.

2Ensure that crisis management operates across structures,

functions and divisions, both vertical and horizontal

The crisis does not care how the company is structured. In

any real crisis situation, problems quickly leave organizationalconfines and become the concern of the entire company.Crisis management, therefore, must be established in sucha way as to be effective across different operations andfunctions.

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3Recognize the crisis as early as possible, and takequick, decisive action

There are numerous examples of crises that could have been

headed off if identified and acted upon earlier. While theremay be operational penalties for inaction or late action,there are even more significant reputational consequencesfrom being seen as hesitant or indecisive. The companyshould start positioning itself for response, recovery andgrowth as soon as the crisis is identified.


Develop the A-team for crisis

management

Reacting quickly is hard. Butearly recognition is one of the keydeterminants of effective crisismanagement. Ensuring a close interlockwith the risk and operational indicatorswithin the business is an effectivemethod of achieving this. Identification

of potential crisis situations must bethoroughly incorporated into scenarioplanning and ultimately into operationalprocesses.

In a crisis environment, eventsoften move too quickly to allow forexhaustive review and multiple levelsof approval. One of the major factorsin effective crisis management canbe the prior development of a small,centralized team with communicationsaccess to key executives, department

heads and board members ('A-team').

This central A-team should be

thoroughly prepared for dealing witha range of crisis situations and shouldhave ownership of both the internaland external aspects of the crisismanagement plan. Contact informationfor operational, legal, financial andregulatory resources should beincorporated into the plan. Back-up oralternate resources for team membersshould also be identified and briefedas part of the plan, and one (or more)board members should be part of theprocess of developing this A-team.The team will also be responsible forleading the exercises and testing of theexisting crisis management planning.The exercises should take the learningsback through the processes to ensurethat with each refinement, thecompany is increasing its capability.


Get the best out of your

Golden Hour

In emergency medicine, theGolden Hour refers to a periodof time following a personstraumatic injury, during whichthere is the highest likelihoodthat quick medical treatment willprevent death. Tie your response

planning to a Golden Hourshould unforeseen scenariosstrike. Your actions in this initialwindow often determine howyour efforts are later judgedby the public plan well aheadwhat your first steps might be.

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4Communicate thoroughly, effectively andfrequently with all audiences

Company management cannot prepare for every conceivable

crisis. They can, however, prepare a communicationsframework that will facilitate rapid communication andrapid response to changing events.


Integrate real time

communication and analysis to

align management perceptions

and commentary

Organizations should ensure thatthose who may have to speak to themedia are thoroughly trained in how tohandle tough questions both in formalmedia and 'off the record', convey

key messages and avoid embarrassingsound bites. Additionally, in this age ofcontinuous recording and video (e.g.,cell phones) it is critical that companystaff learn how to talk about crisisevents no matter where they are, orwith whom they are speaking. Theconcept of 'always on' communicationis truly the norm today and staffneed to be prepared to manage thisnew reality.

In a 24/7 media environment, acompany's performance in the mediaarena is carefully evaluated andbecomes an important element in

how audiences judge overall crisis

response. In a crisis situation, theperception of the way the company ishandling the crisis becomes reality asexperienced by external stakeholdersincluding media, governmentofficials, customers, employees andshareholders. Crisis managementcan be said to deal with the reality,while crisis communications managesthe perceptions so that they areconsistent with the true situation ofthe company. Both crisis managementand crisis communications, however,play an important role in determiningif and when the company regains lostshareholder value.

Mechanisms to increase alignmentmight include internal (encrypted)text alerts to inform managementon messaging changes and dedicatedcommunications coaching staff toprovide ongoing support to multipleleaders, versus point in time advice.These can help support the critical goal

of ensuring that messages are bothcomprehensive and factually correct;because public statements based

on incomplete knowledge can soon

negatively affect the public image ofthe company.


Prepare your people to a

greater depth

Ensure all leadership is trainedin speaking with media and thepublic in general; understandsclearly who is authorized to

speak for the company and whatthe messages are; is directlysupported by public affairs andlegal; and regularly participatesin filmed communicationspractice exercises. Effectivecommunication is the result ofplanning and practice.

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Crisis management is a core business

process, not a one-time event. Crisisplanning should evolve with theorganizations own strategy, focus andpeople. Once a crisis occurs, however,the organization should be ready toact on two levels: first, to contain andcontrol the immediate damage; and,even while this is taking place, to beginthe process of recovery and growth.

Crisis management is also a logicalextension of a well-formed andcomprehensive enterprise level risk

management program. As notedearlier, crisis management picks upwhere the previously developed riskmitigations have failed, and shouldtherefore not operate as a silo orstand alone process. Additionally,when crisis management planning iscoordinated with other enterprise levelrisk efforts there is a much greaterlikelihood that the white spacebetween organizational structures andbusiness processes will be identified

and managed.

Protecting the employees,

shareholders, and the public is at theheart of good risk management. Highperformance crisis management helpsto make sure that when events beginto move beyond your initial plans andefforts, there is a credible backstop torely on. It prepares the company forfuture growth even at the worst oftimes.

Preparing for the future

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This publication outlines four

essential elements which a companyshould adopt on its journey to highperformance crisis management.From successfully preparing for theunexpected, through to ensuringa robust crisis communicationsapproach, implementing theseelements (and sub-components)will not only help reduce theimmediate impacts of crisis events,but will help position the companyto rapidly recover and benefit fromthe event, leveraging the situationfor future growth and competitivedifferentiation.

At Accenture we know, fromexamples across our global business,that integrating crisis managementwithin a consistent and completerisk management framework canlead to high performance. In workingwith clients, and drawing from deepindustry insight, our experienceindicates that adopting these practical

elements can yield measurable rewardsfor the company.

Accenture can help businesses on their

journey to high performance throughcrisis management. We can be withyou anywhere on the continuum of riskand crisis management models. Wecan offer a team of people with deepglobal and industry experiencepeoplewho are pragmatic in their approach.People who can provide insight andguidance on how to put strategyand risk management together for acompanyand make it work. We knowhow to help you use these elements forall theyre worthand assist in movingyou closer to becoming that high-performance business you want to be.If youd like to find out how we canhelp do that in your company, pleasecontact us.

What Accenture can bring

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I have always found that plansare useless. But planning is

indispensable.

Dwight D. Eisenhower

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Copyright 2011 AccentureAll rights reserved.

Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture.

About Accenture

Accenture is a global managementconsulting, technology servicesand outsourcing company, withmore than 215,000 people servingclients in more than 120 countries.Combining unparalleled experience,comprehensive capabilities across allindustries and business functions,and extensive research on theworlds most successful companies,Accenture collaborates with clients tohelp them become high-performance

businesses and governments. Thecompany generated net revenues ofUS$21.6 billion for the fiscal yearended Aug. 31, 2010. Its home page iswww.accenture.com.

ACC11-0462 / 11-2809

About Accenture Management

ConsultingAccenture is a leading provider ofmanagement consulting servicesworldwide. Drawing on the extensiveexperience of its 13,000 managementconsultants globally, AccentureManagement Consulting helps clientsmove from issue to outcome, withpace, certainty and strategic agility. Weenable companies and governments toachieve high performance by combiningbroad and deep industry and functional

offerings and capabilities across sevenservice lines: Customer RelationshipManagement, Finance & PerformanceManagement, Process & InnovationPerformance, Risk Management, Talent& Organization Performance, Strategy,and Supply Chain Management.

About Accenture RiskManagement

Accenture Risk Management consultingservices work with clients to create and

implement integrated risk managementcapabilities designed to gain highereconomic returns, improve shareholdervalue and increase stakeholderconfidence.

About the Authors

Steve Culp

Steve is the managing director Accenture Risk Management. Based inLondon, Steve has 20 years of globalexperience in strategy definition, riskmanagement, enterprise performance

management and delivering largescale finance operations engagements.Prior to his current role, Steve was theglobal lead for Accentures Finance &Performance Management consultingservices for global banking, insuranceand capital markets institutions. Withhis extensive risk management andperformance management experienceand business acumen, Steve guidesexecutives and their teams onthe journey to becoming high-performance businesses.

We would like to thank Craig Murray,Himanshu Patney and Ron Brown fortheir contributions to this publication.

Craig Faris

Craig is executive director RiskManagement, Resources area. Basedin Washington, D.C., Craig bringsover 25 years of global, corporateand consulting risk and strategy

experience across a broad spectrumof industries including energy, utilities,retail and consumer products. He hasextensive experience in all aspects ofrisk governance, process design andmanagement, analytics, reportingand integration of key businessprocesses. His pragmatic experiencein crisis management stems from hisconsultancy assignments where headvises companies on crisis issuesand applications and as a formermember of a crisis response teamwith both a major oil company andlarge global retailer.

Nick Pope

Nick is a senior manager, RiskManagement. Based in London, Nickhas over 10 years of experiencein risk consulting, developing risksolutions for a variety of cross-

industry clients. His blend oftechnical and strategic expertiseallows a holistic understanding ofthe key risk challenges across theglobal environment. Nicks focus ison the integration of risk and crisismanagement with business strategy.His work is based on designing andimplementing solutions that helpexecutives maximize organizationalvalue by continuously evaluatingbusiness strategy with risk. Thisincludes proactive development ofcountermeasures for dealing withrisks that constantly threaten theachievement of enterprise strategicobjectives.

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Accenture Corporate Crisis Management