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The Key to Corporate Resiliency: The Role of Planning and Preparedness in Crisis Management

By: Ken Burris, Vice Chairman, Witt O'Brien's

DATE: November 9, 2016

One of the most critical responsibilities of an executive is building corporate resilience through an effective crisis management process. Corporate resiliency is derived from three specific processes: awareness, action, and preparation. Most executives recognize the impacts of known events such as, fires, floods, cyber-attacks, workplace violence etc., and have developed plans for dealing with such events. However, crisis arises from being faced with an unknown or unimaginable event for which there is no mitigation strategy. The inability to effectively deal with an event, known or unknown, subsequently impacts reputation, employee morale, and company value.

Corporate resiliency, in its simplest terms, is an organization’s ability to return to a normal operational tempo—including throughout its entire web of suppliers, manufacturers, distributors, retailers, transportation carries, and the other participating partners—after some period of time following an incident (1). Creating corporate resiliency contains two unknowns that are imperative to understanding and developing an actionable planning process:

  • What constitutes normal operational tempo?
  • What is the period of time?

Awareness as it relates to resiliency is the process of establishing a clear understanding of normal operational tempo and identifying risk. What are the baselines, both qualitative and quantitative, of the critical inputs or outputs constituting normalcy? These can be environmental conditions, just-in-time delivery schedules, production or service expectations of clients, or financial solvency; however defined, the awareness process identifies what constitutes normal for the organization. The impacts of a crisis can be immediate and long lasting. Without the guidepost of normal, the journey to recovery is exceedingly difficult.

Awareness can also enable leaders to identify and handle unexpected, non-normative events and their subsequent solutions. In a recent Global Economic Forum survey, participants were asked to identify situations or threats they believed had the highest consequences for their companies. According to the “2016 Global Risk Report,” the following are the top ten risks global companies face:

  1. Large-scale involuntary migration
  2. Extreme weather events
  3. Failure of climate-change mitigation and adaptation
  4. Interstate conflict
  5. Natural catastrophes
  6. Failure of national governance
  7. Unemployment or under-employment
  8. Data fraud or theft
  9. Water crisis
  10. Illicit trade

Some of these risks fall into the “unimaginable” category, unless you are running a global company; however, all executives should identify natural catastrophes and extreme weather events as possible risks to plan against.

The action process is the influencer of time. The crisis or emergency event itself represents zero-hour, with every action thereafter and its associated frame of time referenced back to zero-hour. In crisis management, “time” refers to the timeframes associated with specific actions within response, business continuity, and recovery efforts during a crisis event. What are the time estimates associated with the resources and efforts required for these critical functions? Response actions are generally measured in minutes to hours; business continuity actions from days to weeks; and recovery actions from months to years. In extreme cases, the timelines can extend for years, as is the case with BP’s Macondo crisis of 2010 and the Fukushima Daiichi’s nuclear power facility crisis of 2011.

Time has an exponential impact on an organization, both tangible and intangible. Morale of staff, internal and external trust, company value, and good will impartment are all influenced by time. The process of determining time then identifies the surge capacity required 1) to return to normal, 2) to identify the resources needed to accelerate the return to normal, and 3) to inform executives charged with the decision making process with implementable options that maximize corporate strategies for recovery as well as impact value and reputation of the company.

Once awareness has been established and actions taken, only then can an effective preparedness process begin.

Once appropriate and effective strategies for mitigation of an incident are identified, emergency action plans should be developed for implementation during an event. Business continuity plans should be established after correctly identifying the business essential and critical operations necessary to maintain as near-normal operations as possible during an event. Crisis communications plans must be shaped to take advantage of known actions, timelines, and pre-identified stakeholder groups, to better inform stakeholders and remain transparent during and in the aftermath of an event.

While much of the legwork and time goes into planning, the preparedness process is not completed by merely creating plans. Perhaps the most vital step in the process is training and exercising the plans at every level of the organization. The “C” suite may have only a minor role in an emergency action plan for a small incident; yet, its role in a large incident becomes critical. The crisis communications plan is geared toward the “C” Suite specifically, and requires a complete understanding of the roles and responsibilities as well as the varying mediums of communication with stakeholders. The “C” suite should train and exercise on a selected plan annually, at a minimum.

Individuals experienced with crisis have a clearer view of the stakes and how difficult a journey to recovery can become. Forbes and Deloitte recently conducted a survey of 300 board members from some of the world’s largest companies on the ability to handle a crisis. The study, “Crisis in Confidence,” indicated that reputation and morale take the hardest hit and are the most difficult to effectively recover. Data revealed 30 percent of board members, who had experience in past crises indicated their reputations recovered in less than a year; 16 percent indicated it took four years or more. Therefore, using experience as an indicator, it can between one and four years to recover reputations and/or rebuild employee morale after crisis.

Start creating corporate resiliency today, and if necessary, seek professional services to assist with the process. Most executives would find an incident recovery timeline of one to four years to be unacceptable. Yet, it is not uncommon and can be lengthened without effective planning and preparedness. Become aware, understand necessary actions and their influence on time, and prepare today for a crisis of tomorrow. Your company’s reputation and value depends on it.

  1. Yossi Sheffi, “The Resilience Enterprise, Overcoming Vulnerability for competitive Advantage,” 2005, The MIT Press.

About Witt O'Brien's

Witt O'Brien's builds resilience. We offer a full range of crisis and emergency management solutions to prepare your organization before disaster strikes, and to help you respond and recover more quickly if it does. We help you Control the Outcome®. To learn more about our real-world experience and innovative solutions, please visit us at wittobriens.com and follow us at twitter.com/WittOBriens.

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