Bloomberg Law
March 25, 2021, 8:01 AM

Facing a Corporate Crisis? Here’s How to Respond

John Leon
John Leon
The Law Offices of John Leon

Not a week goes by when a new crisis isn’t trending on social media or headlining the news. If it isn’t a politician caught in a fiasco or a celebrity’s misguided tweets, it’s a company being accused of some kind of mismanagement or has been victimized by cyber hacking.

A crisis can come in many forms and levels of severity—from temporarily inconvenient glitches to full blown scandals. We’ve all witnessed how one incident can quickly spiral out of control once it spreads across the internet and a company ends up lying exposed to public criticism or even worse, multi-million dollar litigation. The years it took to build a company, a career, or a brand can be undone within mere hours or days.

No matter the situation, one thing most of these have in common is a failure in crisis management. There can be several reasons why it reaches that point. Management misjudged the situation, mishandled it, or thought it would simply go away.

Many of the worst crises in corporate history escalated because the heads of the companies underestimated the problem. They may also have decided that it was merely a communications issue and could be handled with a non-response, a non-apology apology, or a swift denial. And often, some thought it best to wait until they were being served papers before they decided to call in legal representation from law firms that specialize in managing crises.

What Needs Immediate Attention?

Because any ongoing corporate crisis can involve legal issues, a reputable law firm with experience in crisis management can guide you through all the different areas that will need immediate attention.

  • Business as Usual? Yes, regular operations may experience disruptions during a crisis. But you can’t overlook the importance of keeping the business and the cash flow running to handle the situation. It is therefore even more important to be aware that certain adjustments in operational procedure may be required. To effectively contain the damage—whether it’s a database breach, financial issues, or human error— figure out a way to isolate the matter. A crisis is like a rapidly spreading virus that can infect various aspects of your company if not properly and expeditiously handled.
  • Confident Leadership: This involves presenting an optimistic and inspiring stance to maintain morale. It cannot be overstated how vital it is that the head of the company be physically and visibly present throughout. He or she should hold regular meetings and oversee efforts with department heads as things progress. This should unite everyone and motivate them to work even harder in helping fix the problem.
  • Transparency in Communications: This is obviously the most admirable course. It can also be an effective means of establishing internal assurance as well as maintaining a responsible and respectable standing in the public eye. But to avoid mistakes and stay on message, it is best to craft a communications strategy that covers specific points of the facts and the course of action being taken, without divulging anything that may have legal ramifications or could adversely influence ongoing negotiations.
  • Address the Plight of the Victims: If there are victims of a crisis, the company has to step up to its responsibilities. This is usually the area where legal liabilities are apparent. But more than that, any handling and negotiation has to be done with sensitivity, compassion, fairness, and a thorough understanding of the letters of the law if you are to reach a desirable resolution.
  • Protect the Company’s Future. Learn the lesson from the crisis. Even if the situation has been resolved to everyone’s satisfaction, there are no guarantees it can’t happen again. It is imperative that the company put the necessary protocols in place so that it doesn’t. This may sound like locking the barn doors after the horses have fled, but it’s better than crossing your fingers and hoping for the best. Whether it’s upgrades to the system, securing the company from any vulnerabilities, or introducing new training to the workforce, it’s worth the investment to prevent any possible future crisis.

A crucial thing to keep in mind though is that there is no fixed formula in dealing with all corporate crises. These are often complex situations with several different personalities caught in a web of constantly moving parts. The nature of the crisis will dictate how it should be approached.

In the right hands, disaster can be averted, a crisis can be mitigated, and there won’t be any need for prolonged, far more expensive, and damaging court cases. Skillful handling can bring a successful resolution to a crisis and effectively prevent the ruin of careers, brands, reputations, and entire companies.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

John Leon is the founder of the Law Offices of John Leon, dedicated to corporate crisis management. The firm is routinely called in at the earliest stages of a situation to counsel, mediate, and circumvent adverse impact on client companies and reputations, and prevent any escalation to litigation.