The importance of a crisis plan
By Dave Driscoll
Remember when we naively believed that “life as usual” would more or less continue indefinitely? That innocence has evaporated as the year 2020 has reminded us not to take even the most basic things for granted. So, as a business owner, how are you supposed to plan for situations you never would have imagined?
A well-thought-out crisis plan provides guidance for crucial aspects in an emergency situation when thinking clearly is difficult. As leadership is managing the most immediate needs of the situation, a crisis plan provides confidence that important details are not being overlooked and helps everyone know how to proceed.
Risk assessment is the first step in creating a crisis plan. Consider the “worst-case scenarios” that could potentially impact your business. Some are obvious, like product failure or recalls, a workers’ strike, death of the owner or key personnel, loss of your facility, loss of your largest customer or vendor, or a data breach. Don’t forget to consider public relations disasters due to social media posts, bad reviews, disgruntled employees, and illegal or unethical activities. Not to be morbid, but you also need to use your imagination and identify less-likely scenarios such as natural disasters, an active shooter situation, customer or employee injury or death(s) due to product or equipment malfunctions…or a pandemic. Discuss with your key personnel and advisors to identify your company’s internal and external vulnerabilities.
Analyze how your business would be impacted by potential crises, including:
- shutdown due to facility damage or health concerns
- damaged reputation (of a leader OR the company)
- misuse of your products (think: children eating laundry detergent pods)
- loss of leadership through death or leaving the company
- customer dissatisfaction
- employee grievances
- key materials/supplier interruption
- technology or social changes making your product or service obsolete
- revenue reduction
- drastic increase in demand (eg: grocery stores and delivery services during the pandemic)
- increase in expenses to address challenges
Determine what you can do now to minimize these possible impacts. Take all proactive steps that are reasonable, including training, education, maintenance, insurance, sound financial management, secure IT procedures, and strong human resources and customer relations policies. Develop contingency plans to address various circumstances.
How could your company quickly move operations to another location?
What creative options do you have to shift your business model? (For example, offering virtual or carry out services.)
Could you repurpose your offerings or equipment? (Many companies redirected production to create desperately-needed PPE during the pandemic, others donated food to healthcare workers.)
Do your employees know who to contact in case of a coworker’s illegal, unethical, dangerous, or unhealthy behavior?
What resources could you tap for assistance in a financial or public relations crisis?
Who will fulfill crucial roles during an emergency?
Risk management is essential to protecting business value; this is not the time to procrastinate.
Your crisis plan should also include a contact list of people to be notified, in order, in the event of an urgent situation. Establish a short list naming who is permitted to discuss the situation with the media on the company’s behalf; don’t assume you, as the owner, will be available to speak. Drafting sample messages for likely scenarios will help share relevant information coherently, convey confidence and compassion, and relate to your company’s values. Don’t underestimate the difficulty of doing so in the midst of an emergency with emotions running high and questions coming from all directions. Talk to your employees in advance (and often) regarding policies for sharing company details – controlling information flow is extremely difficult given social media and the ability to video or photograph from ever-present smart phones. Employees should know the company’s expectations for protecting sensitive information. Priority should always be given to respecting the privacy of any victims and their families.
Share your written crisis plan with your employees, advisors, and even family members. Then train everyone for their roles and revise the crisis plan at least every two years, brainstorming for threats and updating for relevance. Following a solid crisis plan cannot prevent every setback, but anticipating and preparing will minimize the negative impact on business value, employees, and the community. The unpredictability of 2020 can be a catalyst for strengthening your business against future risks.
Dave Driscoll is president of Metro Business Advisors, a mergers & acquisitions, valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at [email protected] or (314) 926-1091. www.MetroBusinessAdvisors.com