Survey: Few Companies Are Prepared to Manage a Crisis

Majority of Analysts Say a Poorly Managed Crisis Causes Detraction in a Company's Value

TORONTO, April 12 /CNW/ - The biggest mistake companies make during a corporate or operational crisis is a lack of communication and transparency with stakeholders and employees, causing a negative impact on valuations, according to a survey jointly released today by the Canadian Investor Relations Institute (CIRI) and Fleishman-Hillard Inc.

The survey polled financial analysts and investor relations officers (IROs) at companies across Canada and the United States on operational and corporate crisis preparedness. It found that while many companies are mindful of the potential damage crises can cause to their sales, reputation and share value, few have an effective crisis management plan in place to deal with negative scenarios — and if they do it is likely out of date.

Further, the survey found that half of responding IROs from the financial services and healthcare industries claim they don't follow a crisis communications plan at all. The survey looked at both operational crises, which are issues impacting a company's day-to-day business, and corporate crises, issues involving a firm's executive team or finances.

"Given the recent widely known sector crises — the 2008 financial meltdown, healthcare product recalls, extreme environmental damages, automotive sector crisis and other headline-grabbing frauds and scandals — companies need to be armed with a plan," said Tom Enright, CIRI president and CEO. "No sector or company is immune to a crisis; having a crisis communications plan in place is simply prudent risk management.

"The survey reveals that a poorly managed crisis clearly has a negative impact on a company's share valuation, so it is imperative for IROs to be prepared," Enright continued. "A crisis communications plan is one of the most important tools a company can have in its arsenal."

Yet for those who have a crisis plan in place, only 29 per cent of companies update it once a year, according to the survey results. As a rule, it is best practice to update a crisis plan at least once a year to ensure the content is evolving and maintaining relevance in today's marketplace.

Not only is there confusion around the frequency of updating a crisis communications plan, companies also struggle with its focus:

  • Eighty-five per cent of responding analysts say a corporate crisis — fraud resulting in accounting restatement — has the greatest negative impact on a company's value.
  • But over 50 per cent of responding IROs say their company builds a plan that prepares them only for an operational crisis.

"While it's clear IROs understand how trust, transparency and proper disclosure can impact a company's valuation during a crisis, many are still ill-prepared to demonstrate this through proper communications," said Anne Lachance, senior vice president and global financial services co-chair with Fleishman-Hillard. "The value of having IR as an integral part of any company's communications crisis plan can't be underestimated; having a clear, thought-out plan in place at the end of the day allows for quicker reaction and faster recovery to a potential crisis. Displaying a strong effort to communicate frequently with investors and shareholders throughout a crisis goes a long way to preserve and maintain a company's reputation and stock price."

When focusing on digital communications, the survey found that while many analysts and IROs recognize the potential impact that social media outlets — Twitter, Facebook and YouTube — can have on their companies, few have a crisis plan in place that incorporates social media protocols.

According to the survey, over 50 per cent of responding analysts look to the corporate blog for information during a crisis, but only 17 per cent of responding IROs say their companies use this tool as a channel for crisis communications. Given that less than half of responding IROs monitor social media platforms during a crisis, IROs clearly need to incorporate these tools in their plans to maintain control of the corporate message during a crisis and minimize wide-spread negativity.

An IRO's role during a crisis is very important. As the conduit between analysts and the company, it's imperative that IROs play a lead role in developing the communications plan.  According to the survey:

  • Eighty-five per cent of responding analysts say IROs are a main point of contact for a corporate crisis specifically.
  • Fifty-five per cent of IRO respondents don't know if the crisis communications plan is updated after a crisis.
  • Fifty per cent of IRO respondents don't know if their company conducts crisis simulations.
  • Only 19 per cent of responding IROs contribute to the corporate blog, which was deemed as an important source of information by responding analysts.

"Given the importance of the IRO's role during a crisis, they need to play a much larger role in developing the crisis communications plan, executing crisis drills and regularly updating the document," said Enright. "Their involvement in the process should be from beginning to end."

About the Survey
The 2011 Fleishman-Hillard Inc. and Canadian Investor Relations Institute joint survey on crisis communications preparedness was an online survey conducted among 34 financial analysts and 78 investor relations officers in the U.S. and Canada. Interviewing for this survey was completed during the period of Sept. 27 - Nov. 17, 2010.

About Canadian Investor Relations Institute (CIRI)
CIRI is a professional, not-for-profit association of executives responsible for communication between public corporations, investors and the financial community. CIRI contributes to the transparency and integrity of the Canadian capital market by advancing the practice of investor relations, the professional competency of its members and the stature of the profession. With 600 members, CIRI is the world's second largest society of investor relations professionals. For further information, please visit CIRI.org.

About Fleishman-Hillard
Fleishman-Hillard Inc., one of the world's leading strategic communications firms, has built its reputation on creating integrated solutions that deliver what its clients value most: meaningful, positive and measurable impact on the performance of their organizations. The firm is widely recognized for excellent client service and a strong company culture founded on teamwork, integrity and personal commitment. Based in St. Louis, the firm operates throughout North America, Europe, Asia Pacific, Middle East, Africa and Latin America through its 80 owned offices. For more information, visit the Fleishman-Hillard website at www.fleishmanhillard.com.

Fleishman-Hillard is a part of Omnicom Group Inc. (NYSE: OMC) (www.omnicomgroup.com). Omnicom is a leading global advertising, marketing and corporate communications company. Omnicom's branded networks and numerous specialty firms provide advertising, strategic media planning and buying, interactive, direct and promotional marketing, public relations and other specialty communications services to more than 5,000 clients in more than 100 countries.


SOURCE Canadian Investor Relations Institute

For further information:

Alison Ford
Fleishman-Hillard
Canada
416-645-3296
alison.ford@fleishman.ca
                    Paul Newmann
Fleishman-Hillard
U.S.
312-729-3647
paul.newmann@fleishman.com

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