WHEN BAD NEWS BREAKS – THE LEGAL PERSPECTIVE
According to a recent AON report, which analysed the impact of 125 corporate reputation crises over the last 10 years, in the worst cases up to 30 percent of shareholder value was destroyed.
Perhaps it is unsurprising, therefore, that reputation protection is now much higher on the board agenda than ever used to be the case.
Reputational risk is not just about the 24-hour news cycle and the impact of social media, however. Regulatory investigations, operational issues, data breaches, pressure groups, aggrieved customers, disaffected employees and sensitive litigation can all put at risk the reputation of a business, its brands and its directors.
People tend to expect more of a business, and of business leaders, these days, and this is not just limited to big business. Today, the media and other stakeholders are often quicker to find fault and apportion blame when things go wrong.
Indeed, the way a company responds to a crisis may itself say more about the business than the circumstances which gave rise to the crisis in the first place. Stonewalling legitimate enquiries with a ‘no comment’ statement or a failure to apologise for, or be transparent about, any shortcomings can backfire.
For this reason, and in any event, it is key that the communications team, both internal and external, and the legal team work together and remain joined up throughout the crisis.
It is also important to obtain advice as early as possible in the life cycle of a reputation crisis. Ideally, that means before the issue is in the public domain. By the time the media comes knocking, or a pressure group has set up a website, the crisis management team (CMT) will inevitably be in firefighting mode.
Jan-Mar 2019 Issue
Addleshaw Goddard LLP