How To Plan For Potential Corporate
Consultant Urges Firms to Consider Priorities, Disaster Scenarios, Do
By Alexa Bell, Investor's Daily
If Exxon Corp. had tested its crises management plan properly, the oil giant wouldn't
be in the mess it's in now.
That is the way it seems to Steven B. Fink, president of Lexicon Communications Corp.
in Los Angeles. Fink worked for then-Pennsylvania Gov. Dick Thornburgh during the
1979 Three Mile Island nuclear power plant accident. Brought in to design a publicity
campaign for the state, he suddenly found himself at the center of Pennsylvania's nerve-
racking but ultimately successful efforts to manage the crisis.
Today, Fink is a public relations and crisis consultant who helps others prepare for the
worst. At best, he said, planning for possible disasters helps companies head off crises
altogether. At worst, it provides a framework for controlling the damage.
Organizations caught off guard by crises often pay the price in long-term damage. "One
crisis leads to others," Fink warned. "(Companies) weaken their attention and the vultures
Union Carbide Corp.'s experiences provide a perfect example of the domino effect a
crisis can have, Fink added. After the 1984 disaster in Bhopal, India, the company's stock
became severely undervalued, leading to a hostile takeover effort and, ultimately,
elimination of thousands of jobs and the sale of company assets.
Fink teaches companies to avoid such calamities by recognizing danger signs and taking
action early on. Companies should be on the alert, he said, for situations that will:
• Escalate in intensity.
• Gain unwarranted attention from outsiders, such as the media or government.
• Interfere with normal business operations.
• Jeopardize the positive public image of the company or its officers.
• Damage a company's bottom line in any way.
Using these conditions as a guide, Fink helps clients develop a prioritized list of the worst
things that could happen to them. Each potential problem is assigned a "crisis impact
value," based on its potential to cause damage.
The probability of problems is also rated. This assessment is based on history and a
company's systemic weaknesses.
Potential crises that rate high in either impact value or probability are vulnerabilities that
need to be reduced, Fink said. Companies can develop strategies such as better quality
control, that will reduce the probability a specific crisis will flare up. They also can
develop contingencies to limit the impact of a crisis once it occurs.
Companies also must consider the cost of each intervention -- and weigh them against the
cost of doing nothing, Fink said. "Then management has a dollars-and-cents way to make
a decision," he said.
Indeed, making decisions is one of the biggest problems in managing a crisis according to
Fink. "Many executives get the analysis-paralysis syndrome in a crisis," he noted. "It's
because there's a lot at risk in a crisis, sometimes life and death."
One of the first decisions executives must make in a deteriorating situation is whether a
crisis is actually occurring.
"Let's say a complaint comes in about a tainted product during the night. . . .Then what?
Do you ignore it, wait or investigate immediately? Who makes the decision?" Fink asked.
He suggests that companies establish a crisis management team whose responsibilities
include identifying crises. If two or three team members decide a crisis is in the offing,
the crisis management plan should be implemented.
Team members usually consist of a core of decision-makers led by the chief executive or
some other authority. Secondary team members with technical skills or other types of
expertise should be lined up to handle crises calling for specialized knowledge, Fink said.
Companies also may want to set aside meeting places where team members will gather
automatically in a crisis.
This is a strategy that has been used successfully by United Airlines in handling potential
crises, Fink said. United's "situation room" contains a conference table with phones at
each seat and a speakerphone in the center. A chemical firm, one of Fink's clients, has a
similar facility stocked with food, cots, computers and cash.
"The cash is to get money out in the middle of the night, to rent cars or a crane, " Fink
A good crisis plan also designates company spokespeople. These should not always be
top-level executives, Fink cautioned. Sometimes technical experts are needed or people
close to the disaster scene.
All of those selected, he added, should receive media training.
While the interventions identified in a plan should be general, they should be backed up
with pertinent details. Information belonging in a crisis management plan includes the
names and phone number of crisis team members and other key players; where
equipment or supplies can be procured; and instructions for operating machinery.
Once a plan is completed, it must be tested and updated. This is where Exxon failed in its
crisis planning, Fink believes.
"If Exxon had been able to contain and control the (Alaska) oil spill in five hours as its
plan called for, it would not be dealing with the loss of oil, revenue and image it's going
through now," he claimed.
A Simulated Disaster
Techniques for testing plans can be as simple as role-playing or as elaborate as simulating
a disaster. One of Fink's clients hopes to stage a chemical spill, complete with a derailed
train and local police reaction.
If the plan doesn't work perfectly, don't despair, Fink said. It's probably a sign things are
"The goal is not to find out if it works, but to find out how it doesn't," he said. "It's too
neat if you don't find any problems."
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Preparing your company for inevitable
Public Relations By Rod Irvin
There’s good news and bad news about crises. The good news is that business
news coverage actually declined by 20 percent in 1998, the last year for which
statistics are available. The bad news is that crises will continue to occur, and
most organizations don’t have written plans for crisis response.
That “it won’t happen to me” attitude isn’t limited to small companies. Ninety
percent of CEOs responding to a survey indicated that they consider crisis
situations inevitable. Nearly all — 97 percent — of those same CEOs were
confident that they personally would respond well in a crisis situation. But only
half of them said their companies had a written crisis plan in place. If you ask the
next logical question — “When did you last test your crisis or emergency plan?”
— still fewer companies would report that they are prepared.
Many business managers act as though crises are reserved only for major
manufacturers, airlines, railroads and oil companies. In fact, the most common
business crises aren’t the transportation emergencies, fires and explosions that
often first come to mind. Labor disputes, white-collar crime, management-caused
business disruptions, product recalls and whistle-blowing are among the most
common crisis situations in today’s business environment.
The Institute for Crisis Management (ICM) reports that the same crises occur
year after year. Many if not most of those crises can be anticipated and planned
for. And, because technological advances have dramatically increased the speed
and reach of information delivery, organizations should not be surprised to see
news coverage about their crises reported around the world in a matter of minutes.
The news media and the public expect prompt responses from companies when
crises occur. Bob Franken of CNN told participants in a crisis seminar that if he
were assigned to cover a breaking crisis, he would expect the company to be
prepared to respond by the time his crew arrived on the scene.
Does the requirement for speed mean companies have to shoot from the hip?
Not at all. In fact, that’s one of the worst ways to respond in a crisis setting. Too
many organizations find themselves reeling more from the way they responded to
the crisis than from the event itself.
Norman R. Augustine, writing in Harvard Business Review, says the best way
to manage a crisis is to avoid it. Preventing crises means organizations don’t have
to respond to a crisis. Well-managed companies know that one key to avoiding
operational emergencies is to invest in capital improvement and implement sound
quality, health, safety and environmental processes. Too many companies fail to
take the next step and anticipate the crises that are most likely to occur and
consider how they would respond to those crises.
If, as most CEOs predict, crises are inevitable, then companies need to prepare
for crisis response. That means they have to recognize when a situation is moving
toward a crisis situation. Once they know they have a crisis, management teams
need to be skilled in resolving the crisis. Finally, best-in-class organizations will
conduct a thorough review of both the crisis and their response to it and learn
from that experience to be better prepared for future crises.
While companies consider all stakeholders in managing crisis
communications, they recognize that news media form the conduit through which
a large share of communications messages travel — especially during the early
stages of crisis.
If you talk with reporters about the problems they have in covering their beats,
you’ll likely hear several concerns:
• Organizations don’t provide adequate information.
• We are viewed as withholding information because we fear negative reaction.
• They want to talk with experts, and we provide people who don’t know the
• Too many organizations don’t have a concern about deadlines.
The gap between information the media wants and what companies provide is
a good topic to consider as you’re planning for crisis response. Your stakeholders
will be asking the same questions reporters are asking, and perhaps the best way
to reach them with your messages is to know how to respond quickly.
Responding quickly will be easier and of more value to both the public and to
your organization if you’ve:
• Identified the types of crises that could most likely occur;
• If you’ve done scenario planning and stepped through potential crises; and
• If the person who serves as your company spokesperson and your legal counsel
have agreed in advance about what you can say in the early stages of crises
Most stakeholders know you can’t provide every detail in your initial
statement, for example. But they do expect you to acknowledge the event or
action that has promoted the emergency or crisis. It is also a positive if you can let
your stakeholders know when you’ll have more to say. If the situation involves
the likelihood of serious injury or death, your statement should reflect the sincere
concern and empathy of both the spokesperson and the organization he or she
represents. As you work through the crisis situation, the timeliness of your
updates, how well you answer the most important questions and the visibility of
senior management involved in managing crisis will be among the key factors in
determining how well the public believes you managed crisis communications.
The difference in successfully managing crisis response and failing to do so is
often advance preparation. It is easy for companies to say they don’t have time to
develop crisis plans they hope they’ll never use. But, well-managed companies
seem to find time to plan for crisis response. They know the impact a poorly
handled crisis can have on their corporate reputation and ultimately, the value of
David Morehous is an attorney in the Knoxville office of Baker, Donelson,
Bearman and Caldwell. Mr. Morehous concentrates his practice in the areas of
securities law, mergers and acquisitions and corporate law. He is a member of
the firm’s e-business group, and can be reached at (865) 549-7120.
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Practice plane crash gives teams tools to battle crises
By JENNIE TUNKIEICZ
of the Journal Sentinel staff
Last Updated: June 9, 2001
Racine - When ABC Air Flight 666 crashed into Lake Michigan last week, the simulated
disaster was eerily real for one participant.
"It felt very real," U.S. Coast Guard Boatswain Mate 1st Class Brian Kastner said
Tuesday. Kastner, now stationed in Kenosha, was part of the rescue team at the scene of
the Alaska Airlines Flight 261 crash into the Pacific Ocean on Jan. 31, 2000.
"It was almost scary how similar it was," Kastner said.
The U.S. Coast Guard was among more than 20 agencies that participated in the four-
hour simulated crash of a 60-passenger plane one mile off the Racine shoreline that was
designed to test the skills, response times and cooperation in case of a real emergency.
Efforts were made to keep the fake disaster as real as possible, said David Maack, Racine
County emergency management coordinator.
Real people and fake body parts were plucked from Lake Michigan, along with items
made to look like airplane parts.
When divers were removed from the water by rescuers and brought to shore, they were
replaced on the boats by people made up to have real injuries, such as broken legs or
gashed heads. Rescue personnel had to take them from the boats to rescue squads and off
to area hospitals.
People playing the part of victims' family members paced the floors of the Family
Assistance Center and demanded information. Media "actors" tried to ply information
from tight-lipped public information officers.
Kastner said the involvement of civilian boats helping look for and find victims added to
the reality of the scene because that was what happened in the Alaska Airlines crash.
Kastner said he could see real intensity building for the rescuers and hear stress in their
voices while they continued to calmly do what they were trained to do.
Sheets of rain to constant drizzle, cold and a building fog off of the lake delayed the
exercise for about an hour and increased the need to wrap it up by 1 p.m., Maack said.
But, it all helped make the action real.
"In real life, the action would have been 100 times more than what we were able to do,"
Among those participating in the action Tuesday was Midwest Express Airlines.
"We used it as an opportunity to test our Family Service System, Crisis Communication
System and almost every service related to the initial response to an accident," said Lisa
Bailey, communication director for the airline.
Bailey said it was one of many drills the airline had conducted over the years, and she
said she was pleased with the response time in the exercise.
Maack said it was invaluable for local law enforcement and rescue agencies to work with
agencies such as the FBI, National Traffic Safety Board, U.S. Coast Guard and the state
Department of Natural Resources all at the same time. While the agencies all identified
areas of improvement, Maack said, the exercise was overall a success.
"It's always easier to respond to something you've had exposure to," Maack said. "Would
it be a flawless response? Probably not. But it would be much better because we've
developed these relationships with other agencies, even if it was just for an exercise."
Appeared in the Milwaukee Journal Sentinel on June 10, 2001.