Crisis Preparedness: An imperative to stay competitive

PwC India's first ever Crisis Survey presents cutting-edge insights into crisis management based on the experiences of some of India’s largest organisations. What we found is game-changing. The survey comprised views of senior executives from 25 industries; 70% C-suite; 36% heads of departments; 68% from publicly-traded, PE-funded companies. In the last five years, 80% faced at least one crisis.

Five takeaways from the most comprehensive corporate crisis data depository ever

It's not if. It's when: No one is immune.

In all, 68% of respondents were from large organisations – either publicly-traded companies or having private equity investors. The number of crises increased with the organisation’s size. Some experienced more than 5 crises in the past 5 years – or one per year. At least half of the respondents experienced between 2 and 5 crises in the past 5 years. From 80% of respondents facing at least one corporate crisis in the last 5 years, the average crises faced are two. All organisations are vulnerable.

"Crises can increase given the increasingly volatile economies and continuous disruption faced by businesses. Nearly all respondents (97%) in India – including those who haven’t experienced a crisis – expect to be hit by one in the future. If not contained in time, it can become an existential crisis. The definition of a crisis varies by industry, said Vishal Narula, Leader Crisis Managament, PwC India."

"Crises that have occurred in the past and affect us today may not necessarily exist in the future, and those that are expected to hit in the future don’t seem to be triggers in the present." added Vishal."

The future concerns echo the 'breaking news' trend

Geopolitical disruption will increase 3.5 times
As 'news' shapes our perception of tomorrow, leaders believe the possibility of crises triggered by the changing geopolitical scenario would be 3.5 times higher in the future.

Fraud /Ethical Issues/Corruption will increase 3 times
Leaders anticipate that the likelihood of their organisations facing a major crisis due to Fraud/Ethical Issues/Corruption could be thrice as higher in the future.

Competitive/Marketplace disruption will increase 2.5 times
With the rise of entrepreneurship and rapid adoption of technology, most respondents believe the possibility of a crisis due to Competitive/Marketplace disruption is 2.5 times higher in the future.

Narula added, "Leaders seem to be looking at the 'known unknowns'. While their prediction of future crises is based on their current and past experiences, the real threat to their existence could come from anywhere – that is, the 'unknown unknowns'. Only organisations that regularly test their crisis response plan and train themselves on it will become crisis resilient."

Impact and chain reaction of crisis
Crises hit without discrimination – penetrating every layer and affecting both internal and external stakeholders in unique ways: 78% business relationships; 77% reputation; 73% workforce; 75% financial strength; 70% operations; and 70% legal/regulatory.

Irrespective of organisational size, business relationships – vendors and customers – financial strength and workforce morale are the worst hit, sending the organisation on a downward spiral. Regulators and law enforcement agencies also step in as news spreads fast, causing immense reputation damage.

The impact of a crisis is not experienced in linear form. While grappling with the main crisis, almost every respondent faces a secondary crisis, complicating the situation. Consequently, the crisis leader is distracted from responding to the situation and ends up fire-fighting other issues. The most common issues are competitive disruption (23%) and financial and liquidity issues (20%). Surprisingly, almost one-fifth of respondents faced a secondary crisis due to leadership misconduct.

Ancillary crises can be eye-openers as they bring to the surface deep-rooted problems and could serve as crisis triggers themselves if not fixed. As part of Crisis Preparedness, it is important to have a sound understanding of the stress fractures and gaps in the organisation to prevent a crisis from branching out into several ancillary crises.

Who’s responsible for crisis management? Everyone – and no one
Everyone from board members to C-suite executives to Legal to Risk to IT claim responsibility for varied crisis roles – preparedness, response, recovery, communications. But who is the crisis leader?

Although many respondents are involved in Crisis Remediation or Recovery, only 24% of them 'own' it. Most executives then look up to ‘someone’ who owns the crisis agenda. The key executives of the organisation are naturally expected to ‘own’ the crisis agenda.

It's imperative to establish clearly-defined roles and responsibilities and to appoint a crisis leader. The absence of a designated leader can cause concern as clear communication, coordination, fact-finding and decision-making are required during a crisis. Respondents ranked the ability to make timely, deliberate decisions as one of the largest vulnerability areas. Only 27% of respondents felt the crisis leader had significant experience and authority to navigate through a crisis. Furthermore, 82% of companies sought external help either during or after their most serious crisis since most did not have an in-house team for crisis management.

Companies that emerge stronger from crisis do specific things
A crisis is an opportunity to emerge stronger: 42% of leaders who had already faced a major crisis in the past 5 years said they were "in a better place" post-crisis – with some even reporting revenue growth as a direct result of their crisis management.

How did these companies emerge stronger? The secret lies in the steps they took. The PwC report focuses on the Crisis Preparedness steps these companies adopted that others can learn from and adopt before a crisis hits them. Crisis Preparedness will help companies to stand out and see positive results in many areas, including revenue growth.

Can crisis be good for you?
The potential damage from a crisis – and whether you emerge stronger from it – is governed not by the nature of the crisis but by how well you handle it once it arrives. There are three bedrock elements: preparedness, a fact-based approach, and effectiveness of all stakeholder communications.

In crisis, gathering facts faster and establishing your response hold the key to successful outcomes. As a result, 65% of respondents felt most vulnerable while communicating the narrative to the media. In a world of split-second virality, incorrect, insufficient or misleading information (or even correct information spread at the wrong time or the wrong way) can amplify the crisis. This necessitates investment in the fact-finding process from the 'zero hour' onwards during a crisis.

How can you make crises good for you?
Companies that emerge stronger and create a competitive advantage after crisis do five things:

1. Allocate budget to crisis management – before it hits
   Globally, almost 37% of companies better-placed post-crisis had allocated a crisis management budget before it hit – and nearly 50% saw their revenue grow due to this.
2. Have a plan – and test it
   When a crisis hits, a documented crisis management plan is indispensable. By a margin of 54% vs 30%, organisations that had a crisis response plan in place fared better post-crisis. And those with up-to-date crisis plans were four times more likely to come out on top. "Being prepared doesn’t mean you can anticipate every eventuality: While being mindful of the specific kinds of triggers. that could pose risks in your industry, make sure your crisis response plan is not tied to just one or two scenarios. Make it holistic and flexible. Test it and revise it. Then test it again. It is this preparation that sets apart organisations that make confident decisions from those that show knee-jerk reactions." adds Vishal
3. Adopt a fact-based approach – and don’t neglect key stakeholders
   Notably, 87% of the respondents recognise the importance of gathering facts and realise the benefits of garnering accurate facts quickly. It’s critical to address diverse stakeholders rather than a few only. An often-hidden upside of comprehensive stakeholder engagement and transparency is it can lead to external stakeholders rallying to advocate for you during a crisis.
4. Perform a root-cause analysis – and follow up
   Respondents better-placed post-crisis had done a root cause analysis of their crisis response. Nearly all (98%) acted on the results – 32% made some changes, 25% defined several projects to complete, and 16% took substantial action.
5. Act as a team, and hold to your values
   A strong correlation exists between great teamwork and great outcomes. Most companies who self-identify as "in a better place" (94%) confirmed that they acted as a team in response to the crisis, with similar majorities (92%) agreeing they acted with integrity.  

The new reality of crisis and crisis management; Learnings from your peers that you can apply

A new approach is required for crisis management. Today, there’s no room for error, and the cost of reacting too slowly, or ineffectively, grows each minute. In the wake of repeated, highly-publicised corporate crises – accelerated by smartphones and the always-on frenzy of media/social media – the public have become unsparing.

Vishal said "In the future, external stakeholders will demand hyper-transparency, expect a much-swifter reaction to crisis triggers and won’t hesitate to punish companies they perceive to be slow-footed in response. Ultimately, perfect handling of a crisis will be expected from Day One – even though crises are messier and potentially more destructive than ever before."

The future of crisis and crisis management has already arrived. Some key takeaways…

Crises will be more complex – and harder to contain:
Today's crises leach out and easily affect stakeholders across – and beyond – the organisation. A major cyber crisis today will not be extinguished by the IT/IS team alone. A reputational crisis triggered by a rogue employee caught on a dozen smartphones may not get rectified by their firing.

• Assume everybody is always watching:
  With the hair-trigger attention of outside stakeholders – and the belief that whistleblowing is an ethical obligation – you will be expected to handle any crisis instantly, effectively, and properly.
• You need a crisis leader:
  Crisis management requires a broad, tested response plan, ready to deploy from Day One. This cannot happen without one key person having a clear mandate and authority to develop a crisis management program that governs every aspect of preparedness, response, and communication.
• Cultural expectations are converging:
  Different cultures have historically had different ways of responding to a crisis. But expectations and norms are now converging, no matter where you operate.
• Crisis Preparedness is more than an opportunity:
  It will be a competitive advantage. There is long-term value in being crisis fit and see a future where managers and investors look to a 'Crisis Preparedness Index' as a key performance indicator.
• Crisis is, and always will be, a human event.
  It’s tempting to tuck crisis management under ERM. But only humans can manage a crisis effectively, and human beings (your people, customers, business partners, and more) are the most affected by it. The needs and expectations of all your stakeholders, internal and external, are constantly evolving, and so should your communications strategy.
• It is possible to be a crisis optimist:
  When faced with the likelihood of a crisis, it’s easy to go numb and be unprepared. Or swing the other way and over-focus on the crises you read about... at the risk of preparedness for the actual things that could hit you. Instead, you can choose to see crisis as an element of strategic risk intelligence: an opportunity for maturity and economic growth.

There’s every reason to believe that the crisis will continue to play an outside role in business outcomes. That’s why Crisis Preparedness should also play a more strategic role in your overall business priorities.

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