CRISIS MANAGEMENT YOUR STEPS TOWARD RECOVERY

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1 AUGUST 2017 CRISIS MANAGEMENT YOUR STEPS TOWARD RECOVERY CONTENT: 2 PREPARING FOR A LOSS 3 BUSINESS INTERRUPTION 4 AFTER AN EVENT 5 WHAT IS YOUR PR PLAN 6 MEDIA CONSIDERATIONS

2 AUGUST 2017 FIRST STEPS TOWARD RECOVERY Somewhere in the U.S., a business is experiencing an event that could dramatically affect its production, its brand, or even its existence. This event may never make the news, but for the business owners, such an event could have a long-lasting, negative impact. According to Agility Recovery, a business disaster recovery company, 8 percent of business interruption events fall under the isolated event designation. A power outage, an auto accident, a product recall, a tornado, a fire any one of them, compounded by a lack of planning, could spell disaster for a company. Preventing the risks that arise from these kinds of events should be a top priority for any business. SO MANY THINGS CAN GO WRONG The largest category of business disaster is an isolated event: an accident at work; a car or truck crash; the failure of machinery or of a structure; a faulty product that causes injury and requires a recall. According to Agility Recovery, a business-disaster recovery company, 38 percent of business interruption events fall under the isolated event designation. Hurricanes are the next-most common interruption event, at 23 percent, and winter storms come in next at 20 percent. Overall, some type of weather-related disaster accounts for around 60 percent of work interruption events, but the risk can vary greatly depending on geography. Businesses at risk for damage from hurricanes worry less about winter storms and vice versa. On the other hand, accidents can happen anywhere. PLANNING IS THE BEST PROTECTION The single most effective thing a business can do to overcome a disastrous event, experts agree, is to have good crisis response system already in place. Without a crisis management plan, businesses are taking a huge risk. Who do you call first? What can you do immediately to lessen the chances of further damage? What should you tell employees? How do you deal with the media? All these questions and more can be addressed in a comprehensive crisis management plan. These plans can t predict every type of problem, but they can provide an invaluable guideline on how to best respond when disaster strikes. Fortunately, there is a wealth of information and resources, often drawn from the experience of other businesses, which consultants and HR specialists can provide to businesses with the foresight to prepare for the worst. PREPARING FOR LOSS A crisis management and recovery plan isn t built overnight, but it can be worked out over time, with input from upper management and from workers. 2 Crisis Management

3 The first step is to assess potential loss scenarios. Determine which types of disasters are most likely for your business and at your location(s). Prioritize them, and see which responses and actions would be duplicated under different scenarios. Thinking these things through can give you a wealth of ideas on how to minimize the damage. Secondly, think about alternative locations. Can production be switched to another facility? Are there housing options for workers who might be displaced? Are there backups for administrative files or computer servers? Also, identify your key contacts. Who will coordinate the response with company leadership? Who will handles media duties or answer questions from the public? Who will talk to first responders and the regulators who will come later? Do you have a contractor who is familiar with your facilities and can step in to begin repairs? An inventory of equipment and company facilities is also important. If equipment is destroyed, can you replace it? Do you have assets such as computers tagged so they can be identified if damaged? Are serial numbers for assets on file, and is there a backup? Do you have blueprints, photos, or videos of facilities, to document how things were before disaster struck? A crisis management plan can be built upon existing emergency action plans. Such a process simply thinks through the scenario to a few new levels, and recognizes that documenting, communication, and working on recovery are essential steps to getting back to business. HERE S YOUR CARD A very valuable tool for employers can be a system of cards and posted information sheets that let employees know what to do during a crisis. The posters could list phone numbers of first responders, basic steps to take during emergencies, evacuation procedures for fire or severe weather, procedures for office closings or other disruptions, and a phone number for communications during an emergency. Much of that information, especially the essential phone numbers, can be placed on a card that fits inside a wallet. A company emergency hotline number, a website to refer to, or some similar resource can be listed on these business-card sized documents. Employees will have something to refer to quickly, something they can carry with them at all times. BUSINESS INTERRUPTION A crisis management plan can be built upon existing emergency action plans. Such a process simply things through the scenario to a few new levels, and recognizes that documenting, communicating and working on recovery are essential steps to get back to business. In the world of property and casualty insurance, any crisis or disaster that shuts down operations is referred to as a business interruption. A rather cool term for what may be an emotional time, but as you ve heard before, the health of your business requires a level head and proper planning. Marsh & McLennan Agency 3

4 AUGUST 2017 The losses due to a business interruption can be daunting: damaged property, the affect on workers, lost sales, and the challenges of re-starting production. The better prepared you are, the quicker you can expect to overcome these kinds of setbacks. COMPLICATED WORK In the world of property and casualty insurance, any crisis or disaster that shuts down operations is referred to as a business interruption. There are numerous concepts, terms and formulas used when calculating business interruption expenses, such as: time element, expected sales, continuing loss calculations, etc. Experienced brokers and accountants can walk business owners through these calculations and process and how they apply to individual cases. The important thing is to discuss possible scenarios with your support team and ensure that your brokers and accountants have a background in these areas. AFTER THE EVENT After a business interruption event, be sure to review your policies and coverage to have a better understanding of what is covered. Develop a claims team that includes personnel who are knowledgeable, have the appropriate financial documents and understand the business affected by the loss. Next: Contact your property broker, who will typically notify your insurers of the loss. Set up initial meetings with your claims team and your insurer s claims team (adjusters and various experts). Develop a list of damaged assets and assess need to repair or replace. Gather the documents necessary to substantiate your loss to insurers. Develop reconstruction or repair timelines. This includes considering whether the damaged facilities will be restored, or whether you will make improvements or updates. Prepare preliminary estimate of overall loss for reserve purposes or advance payments from your insurers. In many cases, insurers will advance payments on claims in order to help a business begin the restoration process. SALES, REVENUE, AND PAYROLL Companies will have to determine how much revenue has been lost in sales and payroll, as well as calculate extra expenses caused by the business interruption. Businesses do best with these claims when they are realistic with their calculations and have good documentation to back their case. It can be difficult to convince insurers that sales would ve boomed, for example, had the event not occurred. Again, experienced brokers can help a company come up with a good formula for these projections. 4 Crisis Management

5 WHAT S YOUR PUBLIC RELATIONS PLAN? A disastrous event at work has many downsides. There could injuries or even fatalities. Serious property damage is a possibility. And production, sales, even basic operations could grind to a halt. Intangible things like your company s brand also needs to be considered. That is why public relationship must be planned and handled appropriately because damage to your company s brand could be as difficult to overcome as physical damage. Most companies aren t ready. According to PR experts Padilla, most companies get failing grades in being prepared to respond to a crisis. The firm s data shows that: 31 percent of companies are ready for a crisis. 50 percent feel they don t have the right talent to manage a crisis 60 percent have not drilled on the plan in the past two years Only 33 percent can responds with a press release within 30 minutes FACE THE MUSIC Those who are experienced in crisis management say it is more a matter of when than if a crisis will happen to your business. They may not all be high-profile events, but some kind of serious event or problem will crop up at some point. Those in the PR community say it s important to respond quickly and with empathy when an event happens. Companies should have a designated spokesperson who quickly shows that the company: Cares about the people (consumers or workers) who are affected by a disaster Takes responsibility for any shortcomings in initial response Is working with the proper authorities in addressing and investigating the problem Will keep the public posted on further developments Spokespersons should also show gratitude to the community and first responders for assistance and good will. They should not speculate or freelance about the event share only known facts. If it s appropriate, educating the public on broader issues raised by the crisis will give the media more to work with. Marsh & McLennan Agency 5

6 THE WORST TIME TO HANDLE A CRISIS is when you re experiencing one. A crisis plan should be developed and rehearsed before any crisis occurs. Different events may require different tactics and responses, but the basics of addressing the media and reassuring the public are going to be very similar for many, if not all, types of events. Experts say that the first hours of a crisis can determine the success or failure of the response plan. So companies must be sure that their response can happen quickly and efficiently. Be sure to have backups if key personnel are out of town, for example. Know who is available on the weekends. Have templates for statement ready to go and make sure they are available even if power is out or a facility is inaccessible. It is also important to note that any company in this position has some legal risks as well. Your crisis communications team should coordinate with your company s legal team in making a plan; when the plan goes live, interaction with the legal team is highly advisable. The two teams should work closely together when a crisis strikes. MEDIA CONSIDERATIONS There are some basic truisms of modern media. For one, conventional media always look for conflicts. The if it bleeds, it leads, approach has been a cliché for decades, and there s really no reason to think this will change anytime soon. Sensationalism is baked in to traditional media. Expect it, plan for it, and don t over-react if it seems unfair. Stick to your message, and continue to work with the media in getting that message across. At the same time, the brave new world of social media continues to grow in its ability to shape narratives and opinions. Do not neglect social media considerations when crafting your crisis management communications strategy. Many companies have PR or communications people dedicated to social media for day-to-day operations. They should be included in disaster planning as well. For smaller companies, knowing where to turn for quick advice and help is essential. For crisis events, which can negatively affect your company s brand, it s important to get help and advice from consultants who have experience with crisis management. These are not impossible tasks, but preparation and a good communication strategy is essential to manage this particular type of crisis. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change. Copyright 2017 Marsh & McLennan Agency LLC. All rights reserved.