Return on investment for crisis management or, perhaps, “Dear Chairman, how much do you like your job?”

18 May 2016

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Time and again I get asked to demonstrate why an investment in some crisis or continuity capability is necessary or valuable, or indeed why the effort involved is needed at all. Mostly, I take these questions in good faith, asked by people with a genuine desire to develop or add capability to their organisation, but lacking the necessary argument or platform from which to make the changes that they are seeking on their own.

However, just occasionally I allow myself to get riled by the question, or the questioner, as the premise of the enquiry itself seems to stem, so often, from a question of money; “why should we spend x number of precious pounds on this work?”. In these circumstances I usually turn to previous and well known crisis events and point to the differential between what those events have cost a business and what investment might cost to prevent, reduce or change the crisis risk itself. A cyber breach at a high street telecommunications provider has recently been recalculated to have cost the firm circa £68m in recovery and lost business. Would the investment necessary to have changed that risk cost anything like that sort of money? In a word, no.

I also turn to well-trodden research such as that from Knight and Pretty that investigates shareholder value at roughly 250 days post-crisis. That research bears out a swing of almost 22% in value depending on the perception of poor or positive response to crisis. Again, would the cost of reducing the impact, changing the crisis risk or improving the ability of the organisation to respond and recover come close to that sort of value? That would be no, again.

So, why are we still asking the question of ROI in light of these crisis events, research and knowledge that when they go wrong these events cost a lot? I think it’s because we are asking the question looking for the wrong type of answer and at the wrong level of the business.

The greatest impact of a crisis is beyond financial pain, even though that can be a significant pain, it’s one of reputation and relationships. At the C-Suite level those reputations and relationships are more than that of the company, they are personal and as a result very professionally painful. Getting preparation and response to a crisis wrong has repercussions long into the future of senior professional careers. Those with long enough memories will be able to reel off the names of Chairmen and Chief Execs who have faced the harsh spotlight of a crisis and not come off well.

As a result I think we need ask the question differently and to a different audience… “Dear Chairman, how much do you like your job?” “How about a prudent investment to ensure that something pretty ordinary doesn’t mar that carefully crafted reputation”. The real challenge is being able to access that audience and when/how to present that challenge.

Hey, I didn’t say it was going to be easy….

Comments

I can understand the basis for the "why the effort involved is needed at all" question because the approach towards making organisations & individuals invest in crisis management is often blunted by academic or intellectual approaches to the subject. The basic approach ought to be premised on a similar question (s): Why take insurance on a house that never catches fire? Why insure a car(s) that never gets damaged? Why start the fire, why have the accident etc? The answer is of course: PEACE OF MIND. When we are insured we are assured, and that brings the best out of us even if we never draw material dividends from our insurance; we plan with harmonious efficiency because we are insured and assured; our productivity levels rise because we feel secure. That basically is what happens when an organisation or individuals have invested in crisis management. Unlike with conventional insurance, however, crisis management is almost always a reality that strikes home- it is just a question of scale. Every institution or individual undergoes at some point in their span, a crisis mode or event; the crisis might even be episodic. When living dangerously (without a crisis management plan) the institution then relies on luck or serendipity to survive the crisis, too often with irrevocable setbacks. When "insured" with a crisis management plan, the institution not only minimises the harm and escapes the worst scenarios, but it is also able to continue its activities or even maintain its profit margins right through the crisis. This approach would appeal to the lay ear.

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