Top Ten Crisis Risk Management Maxims

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  • As part of its continuing focus on theresponsibilities of corporate counsel,the Conference Board presented a pro-gram, on The Growing Role of Gen-eral Counsel in Crisis Management.Luke Kissam, general counsel of Albe-marle Chemical; David Snively, generalcounsel of Monsanto; and William VonHoene, general counsel of Exelon dis-cussed crisis management issues fromthe perspective of corporate counselwith examples drawn from their ownexperience. Bill Ide served as modera-tor. Bill is chair of the ABA Task Forceon Attorney-Client Privilege and Part-ner, McKenna Long & Aldridge LLP. Heis a former President of the ABA and theformer general counsel of Monsanto.

    Each of the three panelists noted thattheir respective industries specialtychemicals, agritech/bioengineering andnuclear power were not high on thelist of those most trusted by the public.Security of physical plant is of course ofvital concern to all three, but anothercommon theme among them was theimportance of public relations and thefact that good science is not alwaysenough to avert media or reputationalcrises. As Luke Kissam commented,Out of the gate, we [high risk, lowtrust companies] are perceived by thepublic as less trustworthy and less cred-ible, so we have to do more than othercompanies. Whether youre right orwrong simply doesnt matter.

    What to do, then? The panelists werecharged with giving some advice on thesubject, and their combination of hard-won experience and insight made for anenlightening presentation of the chang-ing parameters of what defines success-ful crisis risk management today. Fol-lowing is a list of Top Ten Crisis RiskManagement Maxims which the edi-tors of The Metropolitan CorporateCounsel have culled from that presenta-tion.

    1. Understand The Concerns OfYour Constituency And Cultivate

    Trust William Von Hoene noted that

    because Exelon operates nuclear facili-ties, it is essential for him to be candid,and to respect the concerns and fears thepublic may have about nuclear reactors.The one thing we do not want to do isto be perceived as denigrating the seri-ousness of ANY release of nuclearmaterial from a public relations stand-point it is very difficult to give assur-ance to the public using statistics with-out appearing to minimize the signifi-cance of something like this. Under-standably, the public wants the peoplerunning the nuclear industry to be com-pletely candid; and we must demon-strate that we subscribe to that. It isessential to understand and respect thefears and concerns of your constituency,especially if your industry, falls into thelow trust, high risk categories.

    Cultivate relationships with yourconstituency when there is no apparent

    problem or issue. While its impossibleto anticipate every problem, you canusually anticipate the constituenciesyou will be dealing with when you havea problem. Understand them; try toshape the landscape while you can.He noted that even a small problem canbecome a big problem or contribute tomaking another problem more difficult.

    2. Theres No Such Thing As A SmallProblem

    David Snively then spoke about hisexperience at Monsanto, where earlyrecognition of crises has been criticalfor many years. One of the things thatset us apart has been our ability to moveswiftly and with agility; we want toknow whats behind a crisis, so we canalter its course early. Where handling aproblem is delegated to subsidiary in aforeign country, it is important to assessits resources and whether it has the mul-tifunctional capability necessary to suc-cessfully meet the challenge. Greaterawareness of local politics and practicescan contribute to assessing the scope ofa problem.

    3. Beware The Creeping CrisisAnd Keep Your Eyes Open

    Similarly, Luke Kissam spoke of hisfear of the creeping crisis, which canoccur if a company, despite doing excel-lent science, attracts the attention of themedia who mistakenly report on it. It isessential for high risk, low trustindustries to remember that good sci-ence is not enough; anticipate that thescience your company or even yourindustry is doing may become public,and be ready to head off misunderstand-ing.

    4. Find Natural Allies And CredibleAdvocates

    All three general counsel indicatedthat it was helpful to find advocates whodo not have a close relationship with thecompany academics, distinguishedpeople to tell as much of your storyas they can. They will bring extracredibility to the table.

    Luke Kissam stepped in here toexpress his agreement. No one wants abad product; its bad for business. Soyou have to do the tests, and when youdo, its best to have the tests done out-side your company by well qualifiedresearchers. We might help fund theresearch, but in order to guarantee thatthey do their best science, its importantthat the scientists reach their own con-clusions that they own the results.These scientists have become our mostconvincing advocates. He added thatAlbemarle had found tremendous advo-cates among firefighters and fire mar-shalls, who have spoken out on thecompanys behalf as supporters ofeffective flame retardants.

    5. Create Cross-Disciplinary TeamsAnd Practice Preparedness

    As William Von Hoene remarked,By the time legal problems reach aGCs desk, they must be looked at in aholistic fashion. There are almostalways public relations, operational, ormarketing aspects. Legal departmentsneed to coordinate their efforts with the

    departments responsible for theseareas.

    David Snively described the impor-tance of cross-disciplinary teams, andthat at Monsanto, IT is especiallyimportant. Because information is thekey to global risk management, IT maywell be the single most important com-ponent of the program. Should the ITsystem go down either by externalforces or a natural event, the resultswould be catastrophic unless the riskmanagement plan includes prepared-ness for that possibility. Monsanto has apredesignated multifunctional teamwithin the company to implement crisismanagement which includes legal, gov-ernment affairs, public affairs and awhole range of other talents. In addi-tion, people are brought in from the out-side to provide training. On call are ahandful of consultants who specialize indealing with the media in crisis situa-tions and can serve as the companysface externally in difficult situations.

    All three counsel stressed the impor-tance of preparedness. Mr. Kissamdescribed the drills run at Albemarle forone-time crisis management a plantexplosion, a truck spill. Once the drillbegins, everyone stops in their tracksand heads to the Situation Room imme-diately.

    6. Involve The Board In CrisisManagment

    The three general counsel thendescribed the crisis risk managementefforts they currently have in place.David Snively commented that Mon-santo has a very structured crisis man-agement program. Enterprise riskassessment is run from the board down.

    Bill Von Hoene mentioned that atExelon, the Risk Oversight Committeeis a subcommittee of the Audit Commit-tee of the Board of Directors. Everyquarter for each one of Exelons threebusinesses, the Board compiles a reportto the Risk Oversight Committee ofwhat it considers to be the ten most sig-nificant potential risks, indicatingwhether it is mature or immature. It isarguably a burdensome task for theBoard to take on, he added, but I dothink that for a board to take on thisassignment provides comfort to ourshareholders that the Board is applyingits collective wisdom to performingwhat may well be its most importantfunction in todays troubled world.

    Luke Kissam noted that a similarprogram had been implemented at Albe-marle, and that its Risk Committee,while not a subcommittee of the AuditCommittee, did communicate with itregularly about enterprise risk manage-ment. He also observed that in his expe-rience directors are becoming increas-ingly involved with risk management.This is of great interest to them in a cli-mate where directors face personal lia-bility and auditors are reviewing direc-tors actions to determine if theyveasked the right questions.

    7. Pay Attention To RecordsRetention, Especially Emails

    All three general counsel voicedtheir concerns about records retention,

    especially with respect to email. LukeKissam expressed that he was moreworried about the creeping crisis thanthe one-time crisis he had earlierdescribed. He mentioned education anda stringent records retention policythat includes email were essential andadded that many times problems canstart at the top. In my experience, nineout of ten times the most damningemails are written by top executives orboard members someone at or close tothe top. So you have to pay attention tothose people especially.

    David Snively emphasized that atMonsanto, once a crisis with legal over-tones arises, a record retention hold isimmediately placed on any relatedrecords. Everyone is made to under-stand that everything they write downwill be on record. Crisis managementmeetings are held face to face, prefer-ably with a legal officer present. Weraise peoples sensitivity to whatsexpected of them. We have a briefingabout what we did right and what we didwrong. People need to know that every-thing they write may become availablein litigation.

    William Von Hoene concluded theemail discussion on a hopeful note. Wetrain everyone on email authorship earlyand often. We have some pretty neatexamples of how things said in jest orcarelessly can have tremendous reper-cussions. General and repeated trainingare essential. I believe that while emailcontainment may be an insurmountableproblem, its also an attackable prob-lem.

    8. Act DecisivelyDavid Snively described Johnson &

    Johnsons handling of the Tylenol recallas a classic example of good crisismanagement. We all can learn from that.J&J got on the issue early, they acted onit, they put the right people in front to betheir face and they were decisive. Theyturned the situation around in a way thatprovided the public with confidence inthem and their products that continuesto materially contribute to making themthe profitable company they are today.

    9. Redefine Successful RiskManagment

    Learn to define success differently.Dont just shoot for legal success. Insome cases, general counsel should con-sider making decisions that may notseem advantageous from a litigationstandpoint, but they may be best from apublic trust standpoint. There is a publicrelations cost to denying, obfuscating orevading what the public may perceive asa serious issue.

    10. Be Prepared For A Long HaulGet ready for a long ride. Usually the

    business response is to get things doneas quickly as possible, but if you areunrealistic about the size and scope ofthe problem, youll make mistakes upfront in trying to accelerate the solution.Von Hoene noted that building trustrequires seasons of work, not just anepisode or two. All three agreed that ittakes time for crises to be resolved, andit behooves a general counsel to take thelong view when confronted with them.

    Top Ten Crisis Risk Management Maxims

    May 2007 The Metropolitan Corporate Counsel Page 59

    By Julia R. Dillon

    Julia R. Dillon is an Associate Editor atThe Metropolitan Corporate Counsel.

    Compliance Readiness Corporate Counsel

    59 Conference Board 4/25/07 10:40 AM Page 1