LOUISVILLE, KY: Despite the endless succession of corporate scandals that dominated the front pages, last year witnessed a significant drop-off in business crises, according to an annual report by the Institute for Crisis Management (ICM).
But after 2001, a year marred by terrorist attacks, the collapse of the dot-com industry, and the beginning of the economic downturn, there was nowhere to go but up. Even with the decline, the year 2002 was still only the third most crisis-ridden year in the past decade, according to ICM's calculations.
Enron, WorldCom, and ImClone Systems were the most crisis-prone businesses in 2002, while telecommunications, pharmaceuticals, and software companies were the most crisis-prone industries.
Larry Smith, the institute's president, explained that types of crises come and go in cycles. The environmental and workplace issues of the late 1980s and early '90s gave way to a flood of class-action lawsuits later in the decade, which was followed by the current corporate meltdown.
"Management seems to learn their lesson and fix things, and then after a few years, they
forget the hard-learned lessons and begin to slip," Smith said.
In 2002, crises related to corporate mismanagement and white-collar crime were up,
but other categories, including labor disputes and catastrophes, were down.
Sixty-five percent of 2002's crises came from what Smith calls smoldering issues, which begin slowly and often can be averted. Many of these are employee or accounting issues.
"There's got to be somebody who recognizes or is witness to them and doesn't recognize the potential escalation of it, and figures if they ignore it, it'll go away," he said, adding that
the figure reflects an overall lack of crisis planning.
"There's never enough planning," Smith continued. "There's only been a couple of instances where there was evidence the company had any kind of plan, and was able to start responding immediately. In most cases, it was days or weeks before they hired somebody, who had to play catch-up.
The report, now in its 13th year, draws on 1,500 news sources. The ICM database reflects a sampling of negative news coverage.