How to respond effectively to crises

Whether it involves an environmental issue or an activist investor, a crisis can hit out of nowhere. A quick response is often the key to turning it around.

Some time back, a ship spilled a small quantity of oil in Philadelphia harbor.

Nobody knew whether the company that owned the ship was at fault, says Thomas J. Rozycki Jr., who represented the organization. When he spoke to the board of directors, however, he advised them to offer to pay for the cleanup.

“Basically, it gave the media and the protesters nowhere to go,” says Rozycki, who is managing director of the public relations firm Prosek Partners.

When a crisis hits, the public expects an immediate response, even if it’s just to acknowledge that you’re aware of it, he says. Whether it’s a data breach or an activist investor battling your management in the press, be prepared for an immediate response, experts say.

The shipping company announced it would fund whatever cleanup was necessary and figure out who’s responsible down the road, Rozycki recalls. It later turned out that an earlier dredging of the canal had left behind an anchor that pierced the boat. The company wasn’t at fault, and it was reimbursed.

Nevertheless, the response successfully demonstrated that the company was a responsible corporate citizen.

Are you prepared for a crisis? Learn how to build a world-class crisis communications playbook in this free guide.

Dealing with data breaches

It’s not just environmental crises. Companies commonly face a range of crises, from data breaches to activist investors.

In recent years, a long string of businesses and governmental agencies have seen massive data breaches and theft of credit card numbers and other information.

The numbers of data crimes appear to be rising. In 2013, CrisisResponsePro.com, which tracks communications in data breaches, recorded fewer than 30 public statements on the topic, says CEO Jim Haggerty. In 2014, the number rose to 130. The number was on a pace to reach 300 by the end of 2015. The companies that have done best in crises are those who learn from others’ mistakes, he says.

Here are some takeaways:

  • Tell your customers. Immediately inform the public of the potential breach, be transparent about the impact, and clearly articulate how you will resolve the issue. Negative sentiment will only fester and grow if your company isn’t forthcoming and proactive with information.

  • Use all your channels. If you’re hacked, you might lose control of your website. Use Twitter, Facebook and all your channels to communicate, says Andrew Gilman, president and chief executive of CommCore Consulting Group.

  • Apologize and make it right. Let consumers know immediately that you will cover any fraudulent charges and launch a security review and investment in fixing the problem, Haggerty says. One company communicated to investors that insurance would cover much of the cost of dealing with the breach.
  • Offer regular updates. Tell the public you are aggressively addressing the situation, and your IT team is working around the clock with others to gather facts and provide information to customers, Haggerty says.

Engage activist investors

PR can overlap with investor relations when an activist investor shows up.

Often companies assume the worst when activists take interest, says Kal Goldberg, a partner at the strategic communications firm Finsbury. But that alone is nothing to panic about. Sometimes the investor will stir up noise in the media, and sometimes companies leak information on the investor’s interest, seeking to boost share prices.

RELATED: Are you prepared for a crisis? Build a top-notch incident-response plan with this free download.

The organization’s first public statement tends to be an olive branch welcoming the input of all shareholders and looking forward to constructive dialogue. This establishes a holding pattern for the company to undertake the discussions it’s going to undertake.

Your advance work will guide your strategy, Goldberg says. Figure out what approaches certain investment funds tend to use. Some are aggressive, while others may wish to talk to the management and set a long timeframe for dialogue with the company.

“What you really want to do in activism is be ready, know what your first statements will be, and then go from there,” Goldberg says.

If the situation becomes public—and especially when it’s potentially disruptive—communicate with internal audiences and external stakeholders. In addition, investor relations will be required to take these steps, according to Ed Ditmire, vice president of investor relations at Nasdaq:

  • Communicate the ideas of the activists to the management and board of the company.
  • Talk to your largest shareholders. Take notes, assess support for the management-and the activist’s ideas.
  • Articulate a compelling case for the company’s strategy with these shareholders.
  • Review the interactions you’ve had with shareholders over the recent periods.

“You want to hear the criticisms—the activist’s ideas,” Ditmire says. “You want to communicate that to management—and shareholders, too. You have an obligation to serve them well. And likewise the company has messages, the company’s strategies, the company’s alternatives, and you need to communicate that to the investors.”

@ByWorking

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