Monday, July 20, 2009

An Investigation in Bank Crisis Management

An MBA student from Ireland has posed a series of questions to the Institute for Crisis Management about the current banking crisis, as part of the research he's doing on his Master's thesis. This is the first of two or three parts of an article inspired by his questions:

Ahmed Hamed asked:

In your opinion, do you think that banks have adopted a different approach to crisis management since the recent banking collapses? If so, in what ways?

I doubt many banks have made significant changes in their approach to crisis management. Based on nearly 20-years of research in business crisis management, the Institute for Crisis Management maintains that two-thirds of all crises are preventable. ICM calls them “smoldering crises.” They start out small, often internal, but not always, and are the kinds of issues that someone within the organization should spot and recognize as potential future disasters.

For example: loaning money to people who won’t be able to pay it back, just to make a quick up-front profit, knowing that someone later will have to suffer because of that decision. If financial institutions had “done what is right” and followed good business practices in the first place, the current financial crash would likely not have happened.

By the way, the other third of all business crises are what ICM calls “sudden crises” and that includes fires, explosions, natural disasters and workplace violence.

In your opinion, do you believe that it’s better to keep the media at arm’s length when a crisis occurs or do you believe it is important that the public is made aware of any issues that the bank may face?

It is important first, to identify what the crisis IS, then secondly, identify the key audiences or stakeholders, and ONLY then, begin formulating a communication strategy. In most cases there are several audiences that need to hear from the organization in crisis, including employees, business partners, investors and regulators.

In each case there is usually a better way to communicate with each of those audiences than through the public or mass media. For example, employee meetings, employee news letters, employee hotlines and an employee intranet. Business partners need to hear directly and in-person from company leaders. So do investors and regulators.

I am not suggesting that a company in crisis ignore the media, but the media is rarely ever the best way to reach the audiences that are most important.

How co-operative or open to the media do you think banks are in general when crises occurs? Can you give specific examples?

Most banks don’t know how to “use” the media, and the customers that most executives need to reach don’t depend on the mass media for their information to begin with.

No comments:

Post a Comment