Crisis Management: Looking Back At 2014 and Forward To 2015

How did 2014 play out and what are the 3 crisis predictions for 2015?

By Tim Johnson, Chief Operating Officer, Regester Larkin

 
Last year’s ‘Year in Review’ was largely an internal Regester Larkin project. We asked our colleagues around the world what they felt would be the defining crisis of the year and what would occupy their clients in 2014. As we will come to see, many of our predictions proved prescient.
 
Interest in the article prompted us, this year, to seek our clients’ views directly. On a late November morning, therefore, a small number of senior crisis managers from blue-chip multinationals sat down to breakfast to discuss their reflections on the previous 12 months and give their views on what would occupy them in the months to come.
 
So what was the consensus view?
 

It’s been a busy and diverse year for crisis managers

 

The geopolitical backdrop, provided by Crimea’s annexation, the wider Ukrainian conflict, and the rise of Islamic State and its vaulting ambitions for a borderless Caliphate, meant crisis managers found themselves grappling with challenges ranging from threats to staff and physical assets to a dizzying array of new sanctions.
 
The number of corporate crises was also noteworthy. US car giant General Motors found itself recalling millions of cars due to apparently faulty ignition switches, Britain’s behemoth retailer Tesco found itself engulfed in an accounting scandal, and Asia witnessed the deaths of hundreds in the Korean ferry disaster.
 
And, of course, there is the tragedy that is Ebola in West Africa, which pushed international public health organisations centre stage and thrust pandemic planning back under the microscope.
 
We suggested 2013 passed by without a defining crisis. Yet 2014 provides us with a number of worthy contenders.
 

A look back at our predictions for 2014

 

We predicted that four types of crises would dominate in 2014: operational failures; regulatory interventions; technology and public outrage; and complexity of crisis primacy. How accurate were we?
 

1. Operational failures

We said: As practitioners, we know that organisational value chains are complexly interactive. And in periods of deep cost control, failure rates increase as ‘system redundancy’ is removed. Organisations must therefore avoid complacency and continue rehearsing their response to the most likely crisis scenarios they face, no matter how ‘impossible’ they may seem.
 
What happened? Tragically, the ‘impossible’ happened for Malaysia Airlines, not once, but twice within four months.
 
There is, to date, no evidence that cost control played a role in the disappearance of flight MH370 or the shooting down of MH17. But both became indelibly associated with the financially troubled organisation, eventually pushing it into nationalisation.
 
The lessons are clear. While organisations cannot prepare for every eventuality, they need to ensure that their crisis structures and capabilities can accommodate ‘the impossible’. Crisis managers must continue to convince senior leaders that ‘anything can happen’.
 
 

2. Regulatory interventions

We said: Governments globally are placing ever-increasing amounts of regulation between themselves and industry. We proposed that companies would fall foul of excitable new regulators. And, regulators would fall foul of the industries they police and the politicians they serve.
 
What happened? As predicted, 2014 was the year of the regulator, with the financial services sector, once again, providing eye-watering evidence. Supervision of the European banking system was radically overhauled. And, the fines were unrelenting. Six banks were fined £2.6 billion by UK, US and Swiss regulators for manipulating currency markets alone.
 
Indeed, regulation took on a new nuance as commentators muttered darkly about it being used as a weapon of geopolitical significance as countries explored their protectionist armoury in a lacklustre global economy.
 
So ‘big business’ continues to be ‘guilty until proven innocent’. And the lesson is that compliance, compliance, compliance, in the spirit as well as the letter of the law, was the motto of 2014 and will continue to be so.
 
 
3. Technology and public outrage
 
We said: Relentless innovation will continue to produce technology but boundaries will be tested and levels of acceptability stretched. Public and political outrage will follow.
 
What happened? Security weaknesses in technologies designed to encourage intimate and social sharing became the source of public outcry.
 
In January, details of 4.6 million Snapchat accounts were downloaded and temporarily posted online by hackers. In October, 200,000 private photos were stolen and leaked from the same platform. And, Apple, Google and Dropbox all battled away accusations that their Cloud services had been breached.
 
Sadly, ‘technology company battles hacker’ has become a daily headline.
 
However, an interesting debate emerged around the use of Unmanned Aerial Vehicles (UAVs), better known as drones. UAVs are not new, but the debate about their use emerged at speed as companies including Amazon and DHL tested public perceptions on the civilian application of this hitherto military hardware.
 
This debate has barely begun. From logistics to oil and gas exploration, these extraordinary machines promise much. However, the debate will need to be managed carefully and their deployment executed safely or a high-profile accident may ground them before they’ve taken off.
 
4. Complexity of crisis primacy
 
We said: The question of who assumes the lead in the strategic management of a situation that may have its origins within rather than at the end of the supply chain will feature in a number of crises. We called this ‘whose crisis is it anyway’?
 
What happened? The trend continued in 2014 with McDonald’s, Burger King and Starbucks all facing supply chain issues. It was also reflected in flight MH370’s disappearance. Both Malaysia Airlines and the Malaysian government were expected to demonstrate ‘ownership’ but faced the challenge of coordinating joint activity and aligning communications.
 
But, 2014 didn’t raise this problem to the fore as we predicted. We got that wrong. However, our clients stressed that ‘supply chain crisis management’ remains a key concern for them and that it should remain a priority for their colleagues in other organisations.
 
In conclusion, the majority of our predictions were accurate and the examples explored, we hope, provide valuable lessons for crisis managers.
 
 

So, what are our predictions for 2015?

 
 
The operating landscape for 2015
 
Organisations do not exist in a vacuum. To undertake crisis contingency planning, crisis managers must understand the environments in which they operate. To identify predictions for 2015, therefore, we need to first look around us.
 
Whilst it is, of course, modish for crisis management professionals to describe the world in an almost post-apocalyptic fashion, sadly, as 2014 ends there is little reason for cheer.
 
In Europe: it’s tempting to be absorbed by the periphery, and by that we mean Ukraine and Syria. And they can’t be ignored. We return to this later. However, organisations with significant European operations must not lose sight of issues closer to home.
 
Europe teeters on the edge of recession and possibly deflation. But its politicians are deadlocked on implementing solutions. This won’t change quickly. Eurozone politicians are distracted by domestic skirmishes with right wing parties demanding a return to nationalism and protectionism.
 
Any continental European crisis managed by a ‘national champion’ will be instantly politicised.
 
In the Americas: it’s the same, but different. The US economy is growing due to some exemplary crisis management in fixing its banking system and the shale revolution has turned the energy value chain, mostly, in the US’ favour.
 
But, political gridlock also dominates the US. The politicisation of any crisis – or the rapid development of any issue into a crisis – presents a clear and present danger.
 
In South America, the picture remains, as ever, in flux. Pockets of real reform exist, most notably in Mexico, but the allegations of graft, criminality and the potential for expropriation or other state interference lurks around every corner.
 
In Asia: two themes dominate, simmering tensions between China and Japan and slowing economic growth. However, assuming that accidental military engagement is avoided, the geopolitical posturing will dominate summits, not boardrooms. Plus, the International Monetary Fund still predicts 7.1 and 6.4 per cent growth for China and India respectively. And, therein lies the point.
 
India’s Modi and China’s Xi Jinping will continue to make their markets more attractive. And, organisations will seek to maximise the opportunities presented. However, even the worldliest of organisations will stumble in their attempts at value creation. Crisis management skills will be required to catch their fall.
 
In the Middle East and Africa: the situation is as tragic as it is complex.
 
In Africa, a clinical response to Ebola is finally underway, although the economic consequences for affected countries will pervade for years.
 
And violence grips the wider Middle East. The lines of patronage and influence around the major regional powers, are dizzying and in perpetual flux. And now, there is a new dynamic. The oil price has plummeted, bringing potential domestic upheaval in oil producing states and possible further discord within the once powerful OPEC cartel.
 
For organisations with Middle East operations, the number of crisis scenarios they may be faced with is endless.
 
If there is a theme to all of this, it’s the role of the ‘state’. Western democracies are yet to rekindle their love of lightly regulated free markets, so politicians are making their presence felt. And, the plates of economic power continue to shift towards countries in which ‘government involvement’ has always been a way of life.
 
This matters. Whether it’s in crisis preparedness activity or during the midst of a live response, organisational leaders and crisis managers will need a finely tuned political antenna that extends beyond domestic borders.
 

Our predictions for 2015

 

It was against this backdrop that we asked our crisis management colleagues to help us make some predictions for 2015. Two lines of discussion arose; crisis preparedness and the sources of potential crises.
 

Crisis preparedness

 

Our guests agreed that a challenge they will face in 2015 is maintaining a globally consistent approach to crisis management structures when the presence their organisation has differs markedly across markets. Allowing flexibility without sacrificing discipline, and therefore resilience, remains taxing.
 
To this, we would add ‘functional preparedness’. Building robust functional crisis response capabilities, such as communications, HR and legal, as well as a senior response team, is a growing trend. We applaud this. Defining a strategic response to a crisis is pivotal. But, so too is executing it.
 

Sources of potential crises

 

While the range of potential crises is unending in the current environment, with our guests’ help, we predict that three areas will predominate the source of crises this year.
 
1. Maximising value, minimising ethical breach
 
Few successful organisations seek to break the law, breach international guidelines or fall short of stakeholder expectations as they create value. Most seek to uphold the highest standards.
 
However, while there are some obvious ‘wrongs’ and ‘rights’, the ‘grey areas’ are large and complex. To paraphrase, an ethical approach lies in the eyes of the beholders. And, the ‘beholders’ range from Asian regulators to Middle East sovereign investors to New York-based activists, to name but a few whose world view will always be fundamentally different.
 
Watch out for a range of potential crises as organisations seek to maximise the opportunities provided by Modi et al and, in doing so, inadvertently fall short of the standards set for them by one or more stakeholder groups.
 
2. Cyber, cyber, cyber
 
If an organisation’s systems are hacked, is it a victim of crime or a villain because its systems fell short? If an employee loses hardware containing sensitive data, is it the employee’s fault or the organisation’s for ‘allowing’ such a situation to arise?
 
Many organisations will find themselves facing these questions in 2015. ‘Cyber’ – in all its guises – will be a dominant source of crises next year. Our guests and colleagues were united in this prediction.
 
3. Security
 
Syria and parts of Iraq have become a global campus for the study of terrorism. While many budding jihadists are still studying, many will soon graduate and return home.
 
Sadly, and despite best efforts, someone, somewhere will beat intelligence agencies. This may not be with an event that turns the geopolitical tide. However, preparing to respond to security breaches, particularly for organisations with big capital assets, that manage critical infrastructure or are based in prominent areas will, sadly, be time well spent.
 

In conclusion  

 

For some, crisis management is about managing the unexpected. That’s true. Taleb’s black swan is out there. And, we must remain firmly flexible in contingency planning in case it arrives.
 
However, we know from the front line of crisis management that the organisations that consider the potential crisis scenarios they face and practise their response to them, are those most likely to emerge with their licence to operate intact or, on occasion, enhanced.
 
The challenge in 2015 is that there are just so many potential scenarios that are candidates for the ‘priority’ position on the crisis management list of ‘to dos’.
 
Our intention has therefore been to try and narrow the focus and provide a starting point for senior leaders and professional crisis managers. And, to that end, we hope our thoughts have been helpful.
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