Insights & Reports > Kroll Global Fraud Report

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James Weeks

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In these difficult economic times, the best way to think about corporate crisis management is in terms of preserving consent.

Companies survive and prosper only with the consent of key stakeholders: customers, investors, and government agencies to name just a few. Lose their trust and cooperation and they can pull the plug by refusing to buy your products, your stocks, or your bonds, or by refusing to grant you licenses to operate. This has always been true. Right now, with trust in corporations a fragile commodity, it is true in spades.

How do the traditional, tried and tested crisis management mantras hold up? A lot of the received crisis management wisdom needs to be rethought in today’s unforgiving environment. Too much is frozen in time, still based on the assumption of continuity rather than disruption.

Consider management of crises emanating from possible corporate wrongdoing. Economic downturns always expose fraud that has remained buried while the merry-go-round was still turning. This time around, Bernie Madoff may be the prime culprit, but the big picture is much more complex than one – admittedly spectacular – Ponzi scheme. An angry public is hypersensitive to corporate wrongdoing of any kind, and looking to assign blame.

On both sides of the Atlantic, banks now stand accused of misleading local governments and investors by selling exotic derivatives that officials did not understand, and falsely claiming that deals would generate savings. In the current environment, the banks will be presumed guilty without trial. It’s not just financial institutions that have lost trust: some of the world’s leading corporations have found themselves embroiled in scandals ranging from sales of contaminated milk products to pollution of the Amazon. Even definitions of corruption and fraud have been broadened. Out-sized bonus payments and golden parachutes may not meet the traditional definition, but have nonetheless become synonymous with corruption in high places.

How is it best to respond, in order to preserve the consent of key stakeholders? An understandable instinct is to put one’s head firmly in the sand until the storm blows over, which is precisely the wrong response.

One obvious requirement is for corporations to address the specific issues that are destroying their reputations so that, if mud is thrown, less of it may stick. One of the most important roles of top corporate public relations people has always been to act as sensors of social change. Now is the time for them to assert their full power, to convince CEOs of the need for a fundamental rethink of how they explain their companies’ roles and their contributions to society.

The need is urgent. Formerly passive consumers, urged on by assorted activists, reenergized NGOs, and others, are demanding higher standards and greater corporate accountability. Meanwhile, corporate reputation management is becoming more challenging by the day, with The dispersion of credibility created by the rise of social media, bloggers, and tweeters.

Another clear imperative – particularly for financial institutions – is to unleash the full power of government relations functions to influence the outcome of the inevitable post-crisis regulatory backlash. Governments may have lost as much credibility as many corporations, and have their own crises to manage, but they do set the rules of the game.

The term “crisis management” puts the focus on the response of the business. Given today’s overpowering need to prioritize the company’s core stakeholders, maybe it is time to call it “consent management.”

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James Weeks is managing partner Asia Pacific, with Kreab Gavin Anderson, a specialist financial, corporate, and public affairs communications firm. James has more than 20 years experience as a public relations consultant, specializing in corporate positioning, issues and crisis management, and M&A communications.

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