30 minute read
Institutional investors turn to the courts
When protecting asset value through litigation is increasingly seen as your fiduciary duty
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Institutional investors are encouraged to exercise the rights attached to the securities in which they invest assets for their beneficiaries (retirees, clients, etc) and to actively engage with investee companies.
There is also a renewed interest for ‘fiduciary duties’ of institutional investors and the extension of those duties to environmental, social and governance (ESG) issues related to their investments. Institutional investors must often manage assets in the long-term interest of their beneficiaries while taking into consideration the long-term consequences, both financial and non-financial, of their investment activities.
By acting as ‘good stewards’ through the exercise of due care in the selection of investments and the monitoring of investee companies, institutional investors can contribute to the creation of value in the long term for their beneficiaries. It can also help investors prevent, to some extent, undue destruction of value. Unfortunately, institutional investors are sometimes confronted with misconduct, wrongdoing or even fraud that can lead to significant losses on their investments, which also harm the interests of beneficiaries. Institutional investors must then consider available options to recover the value that has been destroyed – or at least part of it.
While looking at the recent developments and how industry practices have evolved, it
Charles Demoulin
Partner at Deminor Recovery Services
seems increasingly more difficult to disregard the option of litigation when harm has been done to assets entrusted to a professional investor. We will therefore focus on some aspects related to legal actions that can help institutional investors protect the assets under their management.
1Evolution towards a more active and direct participation in litigation
to protect the assets For many decades, investors have been able to rely on the mechanism of class actions in the United States in which one or several (institutional) investor(s) act(s) as ‘lead plaintiff(s)’ in the interest of an entire class of aggrieved investors. Where those class actions lead to recoveries, most often through a class settlement, investors included in the class can claim their own share of those recoveries even if they have not been themselves directly and actively involved in the litigation.
There have been discussions and opinions in the United States about whether and to what extent institutional investors have a fiduciary duty to take the necessary steps to collect available damages to which they are entitled as a result of a class action. A related issue is whether those investors have a duty to take a more active role in this type of litigation (e.g. by acting as lead plaintiff) or to leave the class (opt out) in order to pursue individual claims for their own benefit.
In Europe, the question of the involvement of institutional investors in securities class actions has also been raised. In a 2007 paper, the UK National Association of Pension Funds (NAPF) asked the question “Do trustees have a fiduciary duty to join a securities class action?” and answered that “It seems self-evident that trustees have a duty to protect the assets in their scheme and that they should therefore at the very least not neglect opportunities to recoup losses, where the cost and effort are commensurate with the expected return.”1 This is not limited to trustees in the strict legal sense but also applies to other ‘fund fiduciaries’ (as confirmed by NAPF in a document from 2015).
At first sight, starting a court action could be considered as taking investor stewardship obligations to another – more contentious – level. We see however no reason to exclude litigation and the enforcement of rights from the scope of engagement activities that can be expected from institutional investors. In its Global Stewardship Principles that were ratified in 2016, the International Corporate Governance Network (ICGN) provides under Guidance 4.3 ‘Engagement escalation’: “Investors should clarify how engagement might be escalated when company dialogue is failing including… seeking governance improvements and/or damages through legal remedies or arbitration.”2
The relevance of this issue for institutional investors has not diminished, quite the contrary. Over the last years, they have been presented with a higher number of opportunities to recover losses through
litigation, which are no longer limited to securities class actions. This is due to some extent to a landmark opinion of the US Supreme Court of 24 June 2010 (Morrison vs National Australia Bank) which significantly restricted the scope of US securities regulations (and related class actions) with respect to ‘foreign cases’. As a result, institutional investors had to consider alternatives to litigation in countries where US-style class actions are not necessarily available and investors have to be directly and personally involved in a court action. This is very often the case in Europe.
This evolution had an impact on how institutional investors could effectively discharge their duty ‘to protect the assets’. If litigation requires a direct and active involvement from the investor, the decision whether or not to be involved in a court action can have far-reaching consequences.
2The importance of taking informed decisions and monitoring the
investment chain Where an institutional investor has a (fiduciary) duty to consider participating in litigation, the first step consists in being properly informed, essentially about (1) the existence of a potential claim, (2) the size of the recoverable losses, and (3) how and under what conditions those losses can be recovered. Investors usually want to be involved in meritorious claims (even if they can participate based on a ‘no cure, no pay’ model) and to understand the consequences of being involved in a court action (what can be expected from the investor during the proceedings? etc). Institutional investors should gather as much information as possible at an early stage, bearing in mind that claims for damages can sometimes be subject to relatively short limitation periods.
Even though there are differences between jurisdictions and the same questions are not relevant in all of them, certain issues can be common to various legal systems. It can be useful to draw a list (or to seek assistance to draw such a list) of all key issues related to potential litigation for which investors should seek input before deciding whether or not to participate.
Once the investor has received the information, the next step consists in analysing it in order to come to an informed decision. Even where investors owe a fiduciary duty towards beneficiaries, this does not prevent them from seeking proper advice before taking their decision. Investors may also adopt standardised procedures to facilitate their work and decision-making process, including by adopting internal policies with respect to litigation.
The exercise of an investor’s duties towards its beneficiaries to protect their assets and interests must also take into account the roles and tasks of third parties throughout the entire investment chain. Institutional investors should start by making sure that the information about potential litigation efficiently flows back to them, so they can rapidly consider this option and take an informed decision.
In relation to the decision-making process, it is also important to identify the persons or entities vested with the proper powers and authority when it comes to actively participating in litigation. Indeed, the management of investments is often characterised by a certain degree of delegation to third parties (asset managers, custodian banks, etc). It is problematic if an institutional investor is prevented from claiming or recovering damages because no timely action was taken. It can be equally problematic if a claim is brought without the required authority or if several similar claims are brought by, or on behalf of the same investor due to a lack of coordination or oversight.
This pleads for clear, robust and transparent processes, not only at the level of the institutional investor (including its own internal governance) but also in its relationships with all parties involved in the investment chain. While the support of other parties is often required in order to participate in litigation (e.g. a custodian bank providing statements of the investments to support the
claim for damages), the institutional investor should also make sure that decisions to actively participate in litigation are taken at the proper level and that those decisions, once taken, are executed accordingly. This includes the issue of delegations (to the extent they are legally and/or contractually possible) and the extent of those delegations. The same goes for the ongoing monitoring and reporting on the further steps of the litigation.
Institutional investors should therefore include appropriate clauses in their agreements with parties involved in the management of the assets. Delegation of tasks and responsibilities (which can make sense from a practical point of view) should not entail any dilution of fiduciary duties and accountability on the part of the institutional investors.
In this respect, we can refer to the ‘Model Contract Terms Between Asset Owners and Managers’ proposed by the ICGN to help asset owners formulate their contracts with fund managers.3 The ICGN document includes proposed model terms for stewardship under which it suggests the following additional clause, depending on the extent of delegation of stewardship activities to the manager (language used here is equity-specific but could be easily amended for relevant rights under other asset classes): “The manager is granted authority to carry out the following rights in respect of assets held in the Portfolio: (voting/ bringing forward counterproposals/ proposing shareholder resolutions/calling for special audits/attending general meetings/calling an EGM/recovering the proceeds of class actions or other litigation brought by other parties/ bringing class actions, derivative actions or other litigation]. An appropriate proportion of the costs of any such exercise of rights will be attributable to the Portfolio. The Client retains the following rights in respect of assets held in the Portfolio: [bringing class actions, derivative actions or other litigation/recovering the proceeds of class actions or other litigation brought by other parties/calling an EGM/ attending general meetings/calling for special audits/proposing shareholder resolutions/ bringing forward counterproposals/voting). The Manager undertakes to raise with the Client situations in which the exercise of some of these rights might be appropriate, and the parties will agree on an appropriate good faith allocation of any associated costs.”
Conclusion
Institutional investors should act as good stewards by making sensible investment decisions, by exercising their rights as shareholders and investors and by engaging with companies in order to create value in the long term for their beneficiaries. This may also help them prevent such value from being destroyed or at least better understand or mitigate the risk of value destruction. However, there will still be circumstances in which, in spite of all their due care and efforts, undue harm will be done to the assets under their management. At that point, bringing a claim can become a valid option to recover (part of) the losses, in the interest of the beneficiaries.
Recent examples of successful recoveries show that litigation, even outside of the context of US securities class action, is an efficient and valid way to recoup losses suffered as a result of misrepresentations, fraud or other forms of misconduct. Over the last few years, institutional investors have demonstrated a high level of awareness and interest for this concrete way of ‘protecting the assets’ being placed under their care. It is, therefore, not surprising that an ever-increasing number of those investors consider participation in litigation, whenever possible and justified, as part of the duties they owe towards their beneficiaries.
1NAPF, Securities Litigation – Questions for Trustees, p.2 2http://icgn.flpbks.com/icgn-global-stewardshipprinciples/#p=1 3https://www.icgn.org/sites/default/files/ ICGN_Model-Contract-Terms_2015.pdf
Staying ahead of disruptive changes is not easy for boards of directors to manage these days. Until recently, disruptive innovations generally took a decade or more to transform an industry. Today, industries can be entirely remade by agents of disruption in half that time, or even less, as the half-life of business models continues to compress.
This shrinking interval leaves board members precious little time to react, let alone anticipate potential disruptions that could emerge without warning. To sniff out the threats and opportunities zeroing in on their industries and organisations, boards need to optimise all of the resources at their disposal, including internal audit reports and information.
The most valuable internal audit information is delivered by functions that routinely produce data-driven insights about the strategic risks confronting the business. When internal audit functions deploy advanced analytics, they can harness relevant data points to deliver a contrarian perspective that opens the eyes of audit committee and other board members to what they do not yet know.
As such, boards and audit committees should challenge their chief audit executives (CAEs) to optimise the internal audit function’s use of data analytics to help them obtain sharper, timelier insights on operational risks, marketplace conditions, competitors and other strategic risks.
New research on the data analytics capabilities within internal audit functions indicates that CAEs can benefit from some prodding and support on this count. Most internal audit functions have achieved a relatively low maturity level of integrating data analytics into the audit process. Only three per cent of internal audit executives describe their analytics capability as ‘optimised’, while nearly
Internal audit analytics can open the board’s eyes to strategic risks and keep it one step ahead of threats and open to opportunities
Brian Christensen
Executive Vice President, Protiviti
three out of four describe their analytics capability either as strictly ad hoc or as a collection of repeatable processes, according to Protiviti’s 2017 Internal Audit Capabilities and Needs Survey. As CAEs strive to develop their function’s analytics capabilities, internal audit stakeholders who already have benefited from analytics are demanding more data-driven insights from internal audit.
The need for boards to receive more relevant, data-driven and forward-looking insights regarding strategic risks is also intensifying. The price of lacking this access is painfully evident in the growing number of organisations with seemingly sound strategies and growth plans that have struggled or even ceased to exist when disruptive changes impact their industry.
By challenging CAEs to deliver more data-driven insights regarding strategic risks, boards can improve their odds of recognising and responding to the market opportunities and emerging risks associated with major disruptions earlier and more effectively than the competition. Four ways to optimise internal audit insights
In a recent global survey of internal audit stakeholders conducted as part of The Institute of Internal Auditors’ ongoing Common Body of Knowledge research, seven out of 10 board members and executive decision-makers reported that they want internal audit leaders to focus on strategic risks in addition to operational, compliance and financial risks in the audit plan.
Internal audit functions that fulfil this requirement are better positioned to deliver the type of insights and analyses that boards need to stay ahead of the disruption curve. To that end, audit committee chairs and other board members should consider challenging CAEs to execute the following four activities:
1Understand the critical assumptions underlying the business model
Management’s assumptions about markets, customers, competition, digital and other technology, as well as regulatory behaviour and other external factors, are fundamentals that shape the organisation’s strategy. Because the organisation’s business model is typically designed to function within the business environment envisioned by management, a dramatic shift in any of these drivers would likely require a swift re-evaluation of the model’s continued validity.
Given their independent status and continuous scrutiny of activities and risks throughout the enterprise, internal audit functions are well-positioned to monitor the strategic fundamentals of greatest interest to boards. When CAEs understand the business model’s key pillars, they can think more strategically when working with the audit committee and executive management to formulate audit plans and analysing risks.
Although auditors have traditionally focussed on operational, compliance and reporting issues, they must think more strategically. For CAEs and other internal audit leaders, this means being able to access and understand the contrarian points of view within and outside the organisation that are relevant to the sustainability of the business. To have their CAEs think along these lines, board members should consider asking internal audit leaders what concerns them when they listen to earnings calls of the company and its competitors – and also what critical business-model assumption concerns
them the most in terms of disruptive threats in the marketplace.
2Apply scenario analyses to evaluate situations that could threaten critical assumptions
Analysing different scenarios can help executive teams and board members understand and identify the factors that directly influence the failure or success of the business model. Scenario planning and analysis focusses attention on the potential sensitivity of changes in any of the fundamental business model assumptions. Industries that lack strong entry barriers may be especially susceptible to technological shifts, for example. As a result, these companies are more likely to face new and unexpected sources of competition.
TOUGH QUESTIONS FOR INTERNAL AUDIT CHIEFS
Board members can get a read on the internal audit function’s ability to deliver the unvarnished truth on the organisation’s business objectives, strategy and culture by putting the following questions to their CAEs:
1How does internal audit maintain a contrarian point of view while identifying strategic concerns, supported by data points, in a timely manner?
2Does the organisation’s risk management process misunderstand or underestimate the timing, impact or magnitude of emerging and existing risks? 3 Is the organisation unduly relying on the past in evaluating/ predicting market behaviour?
4What internal audit data do you share with senior executives to help them monitor progress on strategic objectives and risks?
5Does your function possess the right capabilities, including the necessary data analytics and supporting technology and expertise, to support evidence-based assessments of strategic risks?
DATA-DRIVEN INSIGHTS
Effective IT audits can help organisations improve internal controls and security
Since internal audit is one of the organisation’s key risk management functions, it can help identify an event (or combination of events) that could invalidate one or more of the entity’s critical assumptions. Boards should challenge CAEs to conduct scenario analyses that centre on identifying potential emerging or underestimated risks. For example, consider asking CAEs which fundamental assumptions look too good to be true based on internal audit’s work and consideration of plausible and extreme scenarios.
3Evaluate competitive intelligence
To facilitate the timely recognition of change, the gathering and assessment of competitive intelligence provides executives and board members with a valuable frame of reference concerning the effectiveness of organisational processes and customer experiences, the company’s response to market changes, and other strategic focal points. The most effective forms of competitive intelligence are aligned with the most critical assumptions underlying the strategy and business model while offering relevant perspectives and insights about evolving conditions through a range of quantitative and qualitative measures. Leading competitive intelligence capabilities also tend to access and analyse non-traditional information and data that often offer a contrarian view to conventional wisdom and entrenched management biases. Internal audit is well-suited to assist the organisation’s efforts with analysing competitive intelligence to more effectively mitigate the impact and likelihood of negative disruption.
4Distil and demystify timely information for board members
The board must receive timely, quality information regarding strategic risks. This information should be unfiltered and devoid of any sugar-coating. When this information relates to customer experience, for example, it should contain candid insights directly from customers concerning their interactions with the company. Data-driven insights on new and emerging strategic risks from internal audit are valuable on this count because they provide evidence-based clarity from an independent source. The more forward-looking these data-driven insights are, the better informed the board and executive management will be. Maturing audit analytics capabilities
By applying data analytics to larger portions of their function’s audits, CAEs and their audit staff can generate data-driven insights on more aspects of organisational risk and the company’s progress toward its strategic objectives. The continuous auditing and monitoring technology tools that help produce analytical insights also will reduce the amount of manual information-gathering that internal audit conducts. In turn, these efficiency gains can enable CAEs to allocate more expertise to focus on the areas and issues of greatest concern to executive management and the board.
For these reasons, CAEs and board members alike should make data analytics a critical component of the internal audit function. This means sustaining a consistent effort to advance the internal audit function’s analytics capabilities beyond ad hoc activities to an optimised maturity level. Boards can assist this maturation process by encouraging CAEs to take the following actions:
indicators, key risk indicators in operational processes, and information used in strategic decision-making activities conducted by the senior executive team and the board. ■ Seek ways to increase the level of input audit committee members and other key stakeholders provide when developing, using and expanding analytics tools and when determining what data should be monitored by these tools. ■ Implement steps to measure the success of data analytics efforts and consider the most effective ways to report success and value to the audit committee, the board and other key stakeholders.
ANALYSING DATA
Internal audit champions can deliver better access to information
■ Seek out opportunities to expand internal audit’s knowledge of sophisticated data analytics capabilities so that the function has a more comprehensive and precise understanding of what is possible with analytics, what similar organisations are doing with analytics and what progress is needed to advance these capabilities. ■ Consider the use of ‘champions’ to lead the analytics effort and, when appropriate, to create a dedicated internal audit analytics function. Internal audit analytics champions help bridge the gap between the analytics function and operational auditors while encouraging greater analytics use throughout the internal audit function.
Compared to other organisations, those with analytics champions and dedicated analytics functions in place deliver more value, experience higher demand for their analytics services, and obtain better access to higher-quality data.1 ■ Identify new data sources, both internal and external, that can enhance internal audit’s view of risk across the organisation. Increase the use and reach of data-based continuous auditing and monitoring to perform activities such as monitoring fraud
As the pace of industry disruption quickens, there is growing recognition that an ‘analogue’ approach to auditing can no longer suffice as a long-term strategy if the function is to help executive and board-level decision-makers anticipate, analyse and respond to relevant strategic threats and opportunities. The good news is that the technology tools and data exist to help CAEs and their internal audit functions operate in a more digital, data-driven and real-time manner. Structured data is particularly plentiful in all organisations – and can, and should, be harvested by internal auditors to uncover the valuable insights, efficiencies and issues buried within it.
What’s more, roughly two out of three internal audit functions already use some form of data analytics in their audit process. Of course, advancing a fledgling analytics capability to a more mature state that delivers timely, relevant insights to the board and executive team is not easy. However, analytics can prove to be a game-changer in helping board members and senior executives stay ahead of disruptive trends looming on the horizon.
PAN-PAN! An airline’s lesson in staying calm in crisis
Establishing mechanisms that allow you to consider every possible scenario will best prepare for the unexpected
A few weeks ago over the clear, cold winter skies of Sydney in Australia, a China Eastern passenger plane bound for Shanghai radioed that it needed to make an emergency landing.
Anxious passengers described hearing a very loud noise and a burning smell soon after MU736 left Sydney Airport on the Sunday evening. What they most likely heard – for it is now the subject of an official air safety investigation – was an explosion in the left-side wing engine casing that left a large hole. Thankfully, the plane was able to return safely to Sydney for inspection.
Media reports at the time shared the cockpit’s voice recording and what was noticeable was two-fold – firstly the calmness and professionalism of both the air traffic control and the China Eastern pilots and, secondly, the use of the phrase ‘pan-pan’ to describe the situation.
The use of pan-pan was appropriate and consistent with the universally accepted distress signal hierarchy of mayday and pan-pan. Mayday is used when there is imminent danger to life or the continued viability of the distressed vessel.
Pan-pan is used to alert everyone that there is an urgency on a vessel but that – in the opinion of the caller – there is no immediate danger to life or the vessel itself. Watching the media reports and listening to the audit it struck the author that, at least in terms of matters of life and death involving stricken crew and passengers, there is a consistent framework for airline staff to handle a crisis in a manner so that everyone understands the importance of the message and the level of response that the stricken vessel could expect.
It’s worth taking a moment to consider that again: a consistent framework to handle a crisis; in a manner that everyone Tom McLeod understands the importance of the message; Managing Consultant, in a manner that everyone understands the McLeod Governance level of response that the stricken vessel could expect.
How many organisations can say that – outside specific areas where, as is the case here, there is government intervention for the betterment of society – they have something similar in place.
Crises – by their very nature, for it wouldn’t be called a crisis otherwise – happen when you least expect it. They can be – and are – man-made, acts of God, financial, operational or reputational. They, of course, can also threaten life and limb, as was the case with the China Eastern saga. So how does one develop a framework that addresses such a myriad There is a of potential circumstances? Firstly, it is by acknowledging that you can’t prepare for every consistent framework possible scenario but you can put in place mechanisms that allow you to consider every for airline staff to possible scenario. The most handle a effective frameworks that we have developed and reviewed crisis in a are those that are based on clear manner so and well-articulated principles. What those principles are is ultimately at the determination that everyone understands of the relevant organisation. The British standard on crisis management does a good job in seeking to define them. For us, there are five key principles that we have relied on in more than a quarter of a century of reviewing crisis responses.
Acceptance
Acceptance that the world is a confusing place sometimes and that a crisis management framework is not necessarily seeking to control that confusion but seeking to manage the organisation’s response to it. These objectives are fundamentally different. Many an organisation has tried to do the former only to make the latter much more difficult to achieve.
Acceptance that not everyone sees the world in the same way that you do. This is particularly important in a crisis. When the proverbial organisational sun is shining it is very easy to be lulled into the thought that there is broad agreement on how things should progress. When the dark clouds of uncertainty visit in the shape of an unexpected event that collegiate assumption is often the first tenant to be sorely tested. Accepting that that is the case and designing your crisis management framework to be open to different views is a critical aspect of a robust response. A word of caution, though – accepting that there are divergent views is not the same as endlessly debating those divergent views. There is no such thing as a perfect crisis management plan, just one that is best suited to the circumstances.
You can’t endlessly consider your options in an environment where the crisis itself has robbed you of the one commodity you need most –and that is time.
Accountability
The cliché that success has many fathers but failure is an orphan could have been written specifically for the post-event evaluations on how one responds to a crisis. A crisis managed well soon leads to a return to
UNDER CONTROL
The airline’s crisis management plan kicked into action over Sydney
business as usual. A crisis poorly managed will lead to finger pointing and organisational retribution.
While I acknowledge that this is a scientifically untested hypothesis, we would suggest those times where there has been a crisis managed well there has been someone that has been given by the crisis management framework accountability to do something and that they have done that something exactly as was envisioned.
This accountability is not in terms of a title – we should note that we are not a great fan of a ‘crisis management leader’ title as it suggests that those with ‘normal’ operational responsibilities can somehow abdicate their responsibilities in the moment of greatest need.
The accountability that we mean is more in terms of being capable of taking control and being seen to be capable of taking control. Nothing is more cancerous to the likelihood of a successful management of a crisis than when those seeking leadership look to those with designated accountability and see that those that have been gifted the awesome responsibility have shirked their obligations at the worst possible time.
Expertise
There is a wonderful New Yorker cartoon, that mocks the recent trend towards anti-intellectualism. In the cartoon a passenger on a plane stands up and declares: “These smug pilots have lost touch with regular passengers like us. Who thinks I should fly the plane?”
If there is one place – actually there are many places, including an airplane – where you don’t want overconfident amateurs then it is in a crisis or, equally importantly, in the construction of a well-thought-through crisis management plan. When that moment of great urgency visits your organisation it is no time to be testing out whether someone is competent or not at their role. You need the very best to be giving their very best.
Sometimes short-sighted organisations will invoke the specter of cost management as a reason to perhaps go with that person that little bit less experience or who hasn’t actually gone through a crisis before but has read about it in a Harvard Business School case study. Resist that temptation as strong as you can.
The money spent on subject matter experts with relevant and recent expertise will be repaid many times over for the simple reason that they will be able to make rational decisions based on an understanding of the consequences much quicker than someone that is making such fraught decisions for the first time.
In a crisis, it is worth reiterating that time is the most critical factor you have. Don’t waste it and don’t think that you are doing your organisation any favours by cutting costs at this most precarious of moments.
Transparency
Misery may love company. In a crisis, conspiracies love an information vacuum. A CEO once told me about their response to a food contamination scare of an international subsidiary of a major American company. The communication protocol within that organisation was that everything had to go through corporate head office before being released. That sounded good in practice but for the fact that the food contamination scare happened on the other side of the world to where corporate head office was and where it was Sunday afternoon.
The CEO had to make a decision as to whether he respected the business as usual protocol or to take matters into his own hands. He erred on being transparent with all his stakeholders as soon as possible. When challenged by his superiors he said that he wanted to make sure that everyone had at their disposal all the information that he had so that educated decisions could be made.
A well-constructed crisis management plan enshrines transparency as a core value. This is not to say that you need to be giving everyone a play by play to the detriment of actually managing the crisis, but it does mean that you need to be ready. A way to do this is to designate someone as the sole person who can speak on behalf of your organisation so that others have their focus elsewhere.
Equally importantly, your framework needs to consider – and test pre-crisis – your approach to communication. Should you have pre-prepared statements that mirror the general stages of a crisis and fill in the unknowns as and when needed?
If you are not comfortable with that, have you decided what approval process will be enacted in the event of a crisis, remembering that the normal review and approval channels that a ‘traditional’ communication piece would be subjected to are likely to be too cumbersome in the event of an emergency?
And have you debated – outside the intensity of a crisis – whether your organisation would be comfortable in releasing publicly that you have no information that can better decipher the inevitably – blame. In such an environment, it is critical that there be as near as possible contemporaneous documentation of the key events and decisions. Why? When the post-crisis review (as should happen after all crisis incidents) comes and the moment for learnings is upon the organisation, you want to be able to rely on as near as possible objective chronology of what has happened.
How is this achieved? The contemporaneous note-taker should have access to all meetings to document all key decisions, noting who was there; what, if any, divergent views were expressed, and the agreed decision of the collective. As an aside, that there were divergent views is not a sign of weakness of the crisis response, in fact it is the opposite; it shows that those entrusted with responding to the crisis acted in a manner that was debated and appropriately considered.
Those who are more litigious of mind should consider how such work can be under the protection of legal professional privilege or its local jurisdictional equivalent.
Imagine if you will that the China Eastern pilots had not adopted an agreed crisis management response to the incident over Sydney in June 2017. One of the things that makes air travel tolerable is knowing that – should the worst happen – then there is an approach that will be enabled where everyone knows what to do and when.
This sense of comfort, of predictability, is that which a good crisis management plan should engender. Does yours?
current crisis than that which everyone else has? This last point is one that is hotly debated within organisations.
Does the admittance of limited or no knowledge enhance or hinder the credibility of your crisis recovery effort? We have always thought that the best strategy is to err on the side of too much communication as it generates trust that you will tell stakeholders what you know as soon as you know it.
If you are seen to be less than transparent what happens is that prejudices and gripes usually completely unrelated to the matter at hand are brought in by mischievous players that may see the crisis as an opportunity to further their agenda.
Note-taking
This may sound a strange criteria to have in an otherwise esteemed list of values that should be incorporated into a robust crisis management plan. Yet, for us, it is on par with all the others.
A crisis is an unpredictable cyclone of events, information, emotion and – nearly
SAFE LANDING
With a clear framework for action, you can pilot your organisation through a crisis
