THURSDAY 14 APR 2011 8:23 AM


The single biggest mistake companies make during a corporate or operational crisis is a lack of communication and transparency with stakeholders and employees, says a new survey.

The research by the Canadian Investor Relations Institute (CIRI) and PR firm Fleishman-Hillard also found that the majority of analysts say a poorly managed crisis causes a company’s value to shrink.

The survey polled financial analysts and investor relations officers 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few have an effective crisis management plan in place to deal with negative scenarios — and if they do it is probably out of date.

At the same time, 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.

Yet for those who have a crisis plan in place, only 29% of companies update it once a year, according to the survey results. And while 85% of responding analysts say a corporate crisis has the greatest negative impact on a company’s value, more than half of responding IROs say their company builds a plan that prepares them only for an operational crisis.

An IRO’s role during a crisis was found to be crucially important. According to the survey, 85% of responding analysts say IROs are a main point of contact for a corporate crisis specifically. Yet only 19% of them 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.”