Regester Larkin chief operating officer, Tim Johnson, takes a look back at 2015 and discusses emerging trends in approaches to crisis management and suggests what might keep crisis management professionals busy in the year ahead.
When we prepare the ‘Year in Review’ we cast our expert eye over the issues and crises that have emerged over the preceding twelve months. In doing so we identify potential lessons and emerging patterns in the discipline of crisis management.
Our (straightforward) objective is to ensure we and our clients, are as informed – and therefore prepared – as possible to meet the challenges of the year ahead.
The simplicity of this task is highly dependent. 2013 produced very little to work with, leading us to conclude there had been no defining crisis of that year. Whereas, in 2014 we identified ‘a number of worthy contenders’ for this unwanted crown.
However, 2015 is on an altogether different scale; the process of sifting through the crises that have defined this year is utterly daunting. Volkswagen’s emissions scandal in Europe, the Samarco mining dam collapse in Brazil, the near implosion of FIFA, doping allegations in world athletics, a Germanwings pilot’s suicide, Nestlé’s Maggi Noodles recall in India, cyber-attacks on household names and terrorist killings all over the world, are but a few memorable examples. So, where do we start?
To assist us, we once again convened a select number of crisis management professionals from prominent companies and institutions over breakfast, representing a wide range of sectors including infrastructure, defence, energy, finance and government.
So, as coffee poured we set about deconstructing an extraordinary twelve months to identify those key lessons, and explore the direction of our guests’ 2016 crisis management preparedness activities.
Were our predictions for 2015 accurate?
We began by reflecting on 2015 and specifically on the predictions we made in our last review.
Balancing shareholder and stakeholder expectations
Our first prediction was that corporations would fall foul of stakeholder expectations in a bid to deliver for shareholders. Did 2015 deliver as expected?
While the pugilistic Uber dominated mainstream media headlines, as it traded insults with taxi drivers and city authorities around the world, it was in fact the pharmaceutical sector which attracted sharpest rebuke from politicians and pressure groups.
The industry is, admittedly, experiencing change. Shareholders want better performance and healthcare systems better drugs, while the cost and difficulty of achieving both is ever increasing.
Consequently, new strategies are emerging. Industry giants are now devouring fledgling biotech firms which focus on single cures, Merck’s acquisition of Idenix is just one example. With this there is no issue, the court of public opinion has ruled this balancing act acceptable. This process brings new medicines to market at a justifiable price and, because it is doing so efficiently, shareholders benefit.
But, when the court of public opinion believes this balance has been inverted, problems arise.
When Turing Pharmaceuticals acquired the rights to parasitic infections drug, Daraprim, only to raise the price by 5,000 per cent, it provoked a fierce backlash, from which Turing emerged bruised and defeated.
Likewise, Pfizer’s $160 billion acquisition of Allergan has attracted similar fury. Pfizer claims the transaction provides necessary R&D scale. Opinion formers say this is nonsense, instead it is about tax arbitrage and Pfizer’s desire to become an Irish firm (via Allergan), thereby reducing its tax exposure. Something it previously attempted with its failed bid for AstraZeneca in 2014.
This story has many chapters left to run, and our guests agreed.
Digital defences breached
Our second prediction was that this year would see organisations’ cyber defences tested to the limit. My Houston-based, co-director Claire Snowdon looks at how organisations can respond to this threat in: ‘Managing a cyber crisis: the most effective way to prepare leadership teams for a high-tech threat’.
Industry bodies and government research departments have yet to produce accurate figures comparing the breaches of 2014 and 2015; yet it does not take government statistics to recognise 2015 was the year this risk came of age. Examples abound from the Denial of Service Attack at influential UK parenting website ‘Mumsnet’, to the breach at US health insurer Anthem, which saw the loss of tens of millions of customers’ data in what is thought to be the largest such incident in corporate history.
One of the most interesting examples is without doubt the October breach at UK telecoms company TalkTalk. Despite not knowing the scale of the breach, TalkTalk decided to warn all customers that their data may have been accessed in a series of broadcast interviews by CEO Dido Harding. The breach was subsequently revealed to be far less serious than feared.
The commentariat was divided on whether TalkTalk’s strategy constituted exemplary transparency, which would ultimately bolster customer support, or whether the company had acted prematurely.
Undoubtedly, the CEO’s interviews made the TalkTalk breach stand out above other similar incidents. However, although it was a different type of crisis, comparisons were made with Volkswagen’s attempt to cover up its alleged manipulation of emissions test results, which has led to months of negative headlines and doubts about its integrity.
Recovery time for both companies will tell which approach is right.
Lamentably, the prediction that proved most gravely accurate was that security would dominate 2015.
Immediate verification was provided by the January shootings at Charlie Hebdo’s Paris offices by the so-called Islamic State (ISIS). And, sadly, ISIS didn’t stop there. The massacre of sunbathing tourists in Tunisia, the bombing of Metrojet Flight 9268 over Egypt and the explosion in Beirut on 12 November soon followed. Then, a day later, 130 were murdered in multiple attacks across Paris.
European parliaments became platforms for passionate speeches on how to deal with the threat, fighter jets were fuelled in anticipation of action, and armies were mobilised to support civilian police forces.
Unsurprisingly, we keep one eye on both of these risks as we look ahead to 2016.
‘Text book’ crisis management
It’s so easy to criticise poorly handled crises that we often forget to commend those which are well managed. But it is important to do so. Therefore, before looking forward, we should note two examples of crisis management from this year which were widely praised by our guests.
The first is Merlin Entertainments’ management of a high-profile accident at its famous UK site, Alton Towers, in June. The accident on its popular ‘Smiler’ ride inflicted serious injuries on 16 teenagers, two of whom lost limbs. The response, led by chief executive Nick Varney, demonstrated the perfect blend of concern and control, reinforced by sincere commitment to a thorough investigation.
The second is the exemplary handling of the crash of Germanwings Flight 9525, which was tragically flown into a French mountain side by co-pilot Andreas Lubitz on 24 March, an incident which Regester Larkin chief executive, Andrew Griffin, looked at in ‘Reflections on the crash of Germanwings Flight 9525’, in June.
While it’s true that airline companies rehearse crashes, and this was not the first recorded incident of pilot suicide in the industry’s history, it’s hard to overstate the complexity of the response required of Germanwings and parent company Lufthansa. However, they responded with compassion and precision to the worst incident the company has experienced.
The lessons from both cases are manifold and both are worthy of further investigation. They will be studied for years to come, of that there is little doubt.
The world we live in
It’s customary for the Year in Review to take a brief world tour before we make our annual predictions. Our aim is not to replicate the litany dedicated to global affairs, rather it’s to make the serious point that organisations don’t exist in a vacuum. Moreover, the world in which they do exist is unutterably turbulent.
Crisis management is the final safety net when all other organisational resilience mechanisms have failed. If we don’t understand our environment, we cannot hope to adequately prepare the businesses and institutions we serve.
Brevity prohibits us from addressing everything that has gone on globally this year. However, it’s possible to make two relevant, if broad, observations.
Change is everywhere:
In key regions, change is coming. 2016 will see the US elect its 45th President; meanwhile their Latin neighbours may continue their departure from the leftist policies typified by Dilma Rousseff in Brazil, in favour of the more centrist platform associated with the recently victorious Mauricio Macri in Argentina. In Europe, the gradual disintegration of the Schengen Zone, which allows free movement between 26 states, cannot be discounted as a result of the Paris terrorist attacks. While further east, China will continue attempts to rebalance its economy, observed with bated breath by an anxious global audience.
Risks are fluid and merging:
Different types of risk have always overlapped and influenced each other.However, the fluidity between risks and the management of them has never been so great. In the US, an act of terrorism by a ‘lone wolf’ in the name of ISIS may ignite a foreign policy debate which could, in extreme circumstances, merge with another relating to gun control. In Europe, the refugee crisis has transformed the ongoing economic crisis into a socio-economic one. In business, executives have long struggled to effectively place ownership of ‘risk management’ given the sheer range of risks faced. The fact terrorists (and criminals) are now as likely to target physical targets as digital ones makes this even harder.
The context within which organisations work remains as complex as it has been for many decades. The world we live in is both unsettled and unsettling.
Focus for 2016
So, where will crisis management professionals be committing their time and resources to and what are our predictions for next year?