Corporate crises are defined as any sudden threat to a company’s reputation and survival, with time constraints for making a decision. Examples can be natural disasters, disputes, management misconduct, fraud, rumours, labour conflicts or confrontations.
Increasing media scrutiny, global news coverage and the growing popularity of social media mean corporate reputations can swiftly be damaged. According to Ernst & Young, about 50 per cent of a company’s value is based on intangible assets such as company goodwill.
Crisis management can therefore be defined as a strategy to limit the reputational, financial, safety and other threats to a company’s survival. Responsive actions should be taken to end the crisis as quickly as possible and limit any negative publicity.
Once the crisis situation is under control, companies should quickly move to the reputation-recovery stage and make plans to undo the damage done.
Evaluation after a crisis should not be neglected. A crisis manual should be revised or developed so that a set of metrics can be established to define what scenarios could constitute a crisis and what communication mechanisms should be adopted to contain a crisis situation in the future.
The majority of multinationals and well-known listed companies in Hong Kong have a crisis management team, usually consisting of the management team together with communications and legal professionals, to handle any unexpected situations.
For Chinese corporations, however, crisis management is a new concept. As most overseas Chinese companies are state-owned enterprises, the speed of their response to contain a crisis situation may be largely affected by bureaucratic organisational structures. Sinopec’s reaction to a recent incident, where about 150 metric tonnes of plastic pellets were dumped into the sea by Typhoon Vicente, is an example.
The growing popularity of social media makes it very difficult to manage a crisis situation because, unlike a distorted news report, the comments made on social media are very difficult to rebut. For consumer brands, a social media crisis manual should be developed for crisis situations. Social media monitoring tools and understanding when to speak out and when to stay silent are also very important to contain a social media crisis.
When it comes to business schools, very few MBA programmes include the topic of crisis management in their curriculums. However, I do see a trend of more and more business schools incorporating the subject into their MBA syllabuses.
Academic results, sensitivity to issues and common sense are some of the qualities that companies look for when recruiting MBA graduates.
Winky Moon is a PR consultant who has held senior roles at Ogilvy PR and Hill and Knowlton Strategies. She has an MBA from the University of Wollongong.
As told to Michael Taylor
