Proof (almost) that swift and open crisis communication preserves business value

July 4, 2012 by Jonathan Hemus

I’ve long been an admirer of the work of Oxford Metrica which focuses on the impact of a crisis on the value of a business.  It shows that the way in which a business responds to a crisis (not the fact of the crisis itself) defines the extent to which value is lost – or sometimes won – in the aftermath of a crisis.  They call it the “acid test” of management.

So I was fascinated to read its 2011 Reputation Review produced in partnership with AON’s risk management practice.  I was especially drawn to a section which focused on ethics violations in the healthcare sector, and the impact of crisis communication on value recovery or loss.

After analysing over fifty cases across a range of companies, Oxford Metrica was clear that the quality of communication had a direct effect on the financial impact to the business.  In particular, those that retained or grew their value following the incident:

Disclosed promptly
Demonstrated candour and transparency in their disclosure
Took responsibility for their actions or those of their agents
Demonstrated credible follow up behaviours
Those that lost the most value:

Either delayed communication responses or failed to communicate at all
Issued opaque or partial responses
Failed to take responsibility or express contrition
Attempted to shift blame
I suggest that these principles apply not just to ethics violations or healthcare companies, but to the vast majority of crises and businesses.

But if research doesn’t convince you, what about the experiences of those who have grappled with crises at the sharp end?  Research by IR (Investor Relations) Magazineasked managers who had endured a crisis for their main post-incident learnings.

The top four were almost a mirror image of Oxford Metrica’s findings:

Be communicative
Be fast
Be transparent
Be honest

I rest my case.

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