types of crisis

The different types of crisis and company in a VUCA world

In a volatile, uncertain, complex and ambiguous or VUCA world, there are different kinds of companies and crises. These will determine how a company handles the crises it will inevitably face, because let’s not forget that there are only two types of company: the ones that have already experienced a crisis, and the ones that are yet to do so.

 

Listeria outbreaks, leaks from Commissioner Villarejo’s circle affecting IBEX companies, hacking at Everis and Cadena SER and so on. Week after week, crises such as these draw our attention to the huge challenges facing companies. In a liquid, digitalised, hyper-connected and hyper-vulnerable society, many of these challenges revolve around monitoring information by those charged with managing all kinds of crises. When there’s an emergency, speed is the main thing on everyone’s minds. Order is disrupted and chaos and uncertainty take over and bringing order to chaos is the key goal in a VUCA context.

Before social media came onto the scene, the monitoring process was already rather complex, with the media poised to report any change likely to make waves. Twitter, Facebook, YouTube and Periscope (which accompany us wherever we go on our smartphones) have multiplied the risks. Social media has given every stakeholder a voice, transforming them into prosumers (especially employees, one of the main risk vectors).

We live in a VUCA (volatile, uncertain, complex and ambiguous) world. In this new context, any small incident in an organisation can turn into a crisis streamed in real time before alarm bells have even begun to ring. It’s useful to be familiar with the different types of companies in terms of crisis management and the types of crisis they may encounter.

 

Types of crisis

At Señor Lobo & Friends, we divide companies into two types:

 

HARD

  • These companies are highly concerned with preventing all kinds of crisis. They have internalised the need for a culture of prevention and identified the risks they face.  Also, they have set up a system to detect risks and mobilise management teams. Other characteristics is that they have solid operating procedures and engage in regular training to ensure that they act quickly and appropriately in the event of a crisis.
  • Quick adpatation to change. The management procedures in place cover almost all possible incidents, but teams are equally able to adapt to unforeseen events because no two cases are ever exactly the same.
  • If they suffer damage to their business or reputation, these companies quickly absorb the impact and immediately set to work on their recovery.
  • They adopt a digital approach. These companies are very aware that we live in an inter-connected world where any stakeholder and their mobile device are a potential media outlet. Hyper-transparency has obliged them to reconsider their good corporate governance policies.

WEAK

  • Companies in this category have a weak preventive structure. They either haven’t given a thought to prevention or believe they’re immune from crises. Many of them make a huge effort to market their products and services, but dedicate zero time and energy to preventing reputational risks.
  • They lack procedures for prevention and management. They don’t have trained spokespeople, which puts them at a huge disadvantage in the event of a crisis. By the time they accept (if they accept) the need for a crisis strategy, the tsunami is already behind them.
  • They haven’t identified the risks they face. They’re sure to have worked out exactly how to make money at all costs, but that doesn’t work these days. It’s only a matter of time before bad practices come to light in our hyper-transparent world.
  • They are not resilient. When a crisis hits them, they have almost no chance of neutralising it in time. The damage to their reputation and business will be so huge that, in fact, some companies may even have to shut down. Just ask Magrudis.

 

The key starting point

This is a key starting point for dealing with any crisis worthy of the name. Bear in mind that information is currently shared in a digital, hyper-transparent context, with cyborg citizens (as they are referred to by cyborg anthropologist Amber Case) able to communicate in real time.  That includes stakeholders in our companies. This hyper-connection makes organisations that don’t meet good corporate governance standards hyper-vulnerable, especially if they are WEAK companies.

The situation is exacerbated by the emergence of organised digital activism in a VUCA context, which places new ethical demands on the digital and media agenda and has prompted many companies to rethink their values and restructure their risk prevention strategies. They don’t have much choice if they want to avoid a crisis, which Señor Lobo & Friends classify as HIGH IMPACT or LOW IMPACT. High-impact crises, like the one that hit Magrudis, can quickly wipe out a company’s reputation and business. This is due to several inherent characteristics:

 

HIGH IMPACT

  • Rapid spread in a digitalised context
  • Often caused by close stakeholders or triggered by employees themselves
  • Severe damage to share price values (in the case of companies listed on the stock exchange) and reputation, leaving a very negative digital footprint
  • High levels of attention on social media and traditional media

 

LOW IMPACT

  • Issues that are often latent in an organisation and are not addressed or are only superficially addressed can evolve over time and pick up speed in some situations to become HIGH-IMPACT crises
  • Triggered within the company itself. May be controlled by the company during this phase by making certain changes.
  • Low reputational damage with no impact on share price values, digital footprint unaffected
  • Low levels of attention on social media and traditional media

 

It’s possible to react to a crisis before it’s too late

In this hyper-connected, hyper-transparent and hyper-vulnerable VUCA setting, many companies have realised that they must update their risk management procedures to adapt to live streaming of incidents and crises. This is all the more true when these incidents involve customers or members of the public. In these cases, the first we tend to hear of an issue becoming a problem is a complaint shared on social media.

Many companies are now becoming more aware of this situation and of the need to adjust their monitoring and response procedures to allow them to react more quickly. But internal warning systems are often outdated and inefficient. By the time an incident has been evaluated and a warning message sent, it may have been going on for several hours already. That means that a small incident that could have been dealt with before it left social media has developed into a crisis by becoming a trend that the media then convert into a news item.

It’s not unusual to see updates to crisis manuals that cover new digital risks but fail to implement an efficient internal warning system or use a warning system based on telephone calls, emails or WhatsApp messages. And that’s not all: many companies haven’t set up appropriate systems for detecting threats and conveying them to the threat assessment team quickly and safely. That makes them WEAK organisations.

 

The need to invest in warning systems as a preventive measure

There’s no point investing in crisis management operating procedures, appointing and training spokespeople or conducting simulations if you’re going to overlook something as essential as rapid threat detection. By detecting risks early, we can really minimise the reputational damage and impact on our profit and loss statement.

Any investment in this initial phase is far more profitable (in cost-benefit terms) than in any of the other components of our protective shield. That’s why I believe early detection, communication and assessment of threats is so important in dealing with crises in real time – if you want to be a HARD company, that is. Without these elements, companies and brands will be overwhelmed by crises and left at the mercy of events.

Responsible companies must be aware of the change in communication paradigm that they face in different types of crisis. Although it’s important to update their management procedures, they must realise that it’s even more important to improve their detection and warning systems. Failing to implement these systems in the current context would be foolhardy, to say the least. Putting them in place is quite simple if you know exactly how to create a powerful, digital early warning system.

It’s important to ask yourself whether you want your company to be HARD or WEAK in the face of the HIGH-IMPACT crises that are becoming more and more frequent. It’s up to you. The VUCA world is here to stay.

If you need help, then give us a call.

Managing Director at Señor Lobo & Friends. With 14 years of experience in crisis and emergency communication, she also accumulates international experience as a project advisor to companies and institutions such as the European Commission.

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