Why a crisis preparedness strategy is insurance worth paying for

We need to change the mindset towards crisis preparation in the Middle East, says Nic Labuschagne, regional lead for crisis and issue management at APCO Worldwide.

There's a surprising level of resistance to crisis preparedness in the Middle East, says Nic Labuschagne (©GettyImages)
There's a surprising level of resistance to crisis preparedness in the Middle East, says Nic Labuschagne (©GettyImages)

After nearly two decades working in crisis and issue management in the Middle East, I still meet with a surprising level of resistance to crisis preparedness from senior leaders who should know better.

There’s little you can be sure of when it comes to crisis management. But there is one certainty: a crisis will come, sooner or later. And when it does, someone will have to be brought in to mitigate the situation. But it is always a case of closing the stable door after the horse has bolted.

Oddly enough, no one seems to argue with paying the elevated crisis management rates while the crisis is happening. When the dust has settled, and the question of why there was no crisis preparedness is asked, the response often that it is much easier to get budget for emergencies that it is for prevention.

The real challenge is not so much dealing with the crisis; rather, it is inculcating a risk-aware mindset and preparing the organisation for the inevitable.

But why do we have to reach a critical tipping point where reputations are on the line before any action is taken?

It has a lot to do with the decision-making hierarchy in the organisation. Crises are strange – everyone is involved, but no one seems to be in charge. The same holds for decisions about crisis preparedness. Which part of the organisation should pay for it? Without a clear owner, there will be no budget. The decision is easy when the crisis is happening – the CEO can easily justify the costs involved in mitigating the crisis. But the chances are that he or she would have been reluctant to pay for the work needed to protect the organisation in the first place.

We should all consider crisis preparedness an insurance premium worth paying. Organisations regularly pay for health insurance, productive asset insurance, and key man life insurance – so why not for an organisation’s most valuable asset: its reputation?

Boards of directors and executive management teams have a clear responsibility to protect the organisation’s assets. Making sure it has the appropriate measures in place to protect its reputation is fully aligned with that responsibility.

A September 2019 survey conducted by PricewaterhouseCoopers (PwC) found that, throughout the globe across 25 industries, companies that survive crises well all did the same three things:

• Prepared for crises 
• Trained 
• Effectively communicated verified facts with key stakeholders.

PwC’s analysis showed that this three-pronged approach to crisis preparedness gave a competitive advantage because such a significant number of competitors fail to take these basic measures and suffer the consequences.

Take a highly competitive industry like the food industry, where margins are tight, market share is critical, and customer loyalty is prized.

If one company suffers a crisis, such as food contamination or tampering, but deals with it quickly and transparently, the damage to their reputation will be short-lived and may even be enhanced if it is handled in a caring and professional manner.

Contrast that with a second company that suffers the same situation, but responds slowly and unprofessionally, opts to cover up the situation, and denies responsibility. Their reputation will suffer far greater damage, and might ultimately put the company out of business.

To put the findings of the report into action and to get your organisation heading in the right direction, there are three basic steps to crisis preparedness:

• Generating scenarios and analysing the risks 
• Developing the response protocols that are normally embedded in a crisis plan 
• Training the crisis response team

Scenario planning is an incredibly useful tool, particularly when it is supported with a method that uses a portfolio of "flags" – each of which indicate possible changes in the probability of a given scenario becoming reality. These scenarios and their flags direct the crisis response protocols, and inform the development of the collaterals that are prepared for each of the scenarios. No plan will ever cover all eventualities, and in most cases, even if you get the scenario right, the plan will not be a perfect fit.

This doesn’t matter. What does is that you have protocols in place and enough materials to stabilise the situation until clarity emerges and some level of calm can be restored.

But preparing and assessing risk is not an easy or natural topic for humans to confront. In fact, a fascinating body of knowledge is emerging from the school of behavioural economics which demonstrates how poor we are at assessing risk, and how our decision-making capabilities are influenced by a broad range of deep-rooted psychological biases.

The idea that we make rational decisions in our own best interests has been shown to be deeply flawed: this has a major impact on how organisations understand and deal with potential risks.

Many of our actions are driven by delusions and self-rationalisations, undermining our best interests. Being aware of these human shortcomings, and adopting a structured, objective approach to risk assessment allows us to be better informed about the potential risks our organisations face, and how best to deal with them.

Nic Labuschagne is regional lead for crisis and issue management at APCO Worldwide

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