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‘Crisis in Confidence’ survey
Serious gaps in preparation and ability to deal with a crisis
Three quarters of board members around the world are confident their organisations can deal with a crisis situation. However, less than half believe they are adequately prepared.
- Long and damaging reputation, financial and operational recovery rates post crisis
- Employee morale, company reputation, sales and cyber security most vulnerable
- More communication between boards and management on how best to respond to a crisis needed
24 February 2016: Although three quarters of board members around the world are confident their organisations can deal with crisis situations (76%), less than half believe they are adequately prepared.
Harvey Christophers, Deloitte Managing Partner Risk Advisory said: “Less than half (49%) of the 317 non-executive board members surveyed globally said they have the capabilities or processes in place to achieve the best possible outcome following a crisis. And even fewer, (32%) said their companies engage in crisis simulations (war gaming) or training.
“A most concerning finding in the global Crisis of confidence survey is that 70% of board members said it took their organisations up to three years to recover reputation following a crisis. And 16% said it took four years or more. Financial and operational crises had similar long recovery times.
“In Australia almost 60% of big businesses surveyed said it took them between one and three years to recover their business’ reputation as well as their operations. Half of the board members said it took the same time for financial recovery. And for 10% of the businesses, it took more than four years to recover.”
Graeme Newton, who is the Deloitte Lead Partner Crisis Management/Crisis Leadership said: “The critical thing is that it is not a matter of ‘if’, but ‘when’ the business will experience a crisis.
“More than half of the businesses surveyed (53%) had experienced a crisis in the past five years.
“Given that only 11% of non-executive directors in Australia rated their organisation’s ability to respond to a crises as ‘very effective’, and only 17% believe they have ‘extensively’ identified the potential risks that could create a crisis, it is imperative that Boards and management get together to ensure a sound and common understanding of the risks that leave their organisation vulnerable.
“Deepening that understanding will strengthen the systems used to detect and possibly even prevent some of those adverse events from occurring in the first place,” Newton said.
Additional survey findings include:
Disparity between feeling ready and being ready
- Less than half (49%) said their companies monitor or have the communications to detect trouble
- Only 49% said their companies have playbooks for likely crisis scenarios
- Even fewer, (32%) said their companies engage in crisis simulations (war gaming) or training.
In Australia damage to employee morale (53%), corporate reputation (48%) and sales (43%) ranked as the top three areas of crises vulnerability, followed closely by cyber-crime (41%)
- Globally the most vulnerable areas are corporate reputation (73%) and cyber-crime (70%)
- Two-thirds (66%) named supply chain issues, regulatory action, and natural disasters as vulnerabilities.
Gap between vulnerability and preparation
- When asked about specific crisis areas, global board members were more likely to acknowledge their vulnerability than being able to say they had a plan to address it
- 73% named reputation as a vulnerability, but only 39% had a plan for it
- In Australia 43% were confident they had a plan to recover reputation.
Other risk types with plans in place in Australia are:
- Cyber Crime (51%)
- Liquidity (50%)
- Supply Chain (47%)
Board members aren’t engaging with management
- Fewer than half of the board members surveyed globally (49%) reported they had engaged with management to understand what had been done to support crisis preparedness
- Only half of boards and management had specific discussions about crisis prevention.
Christophers said: “It is clear that crisis awareness, preparation and resilience need to be more prominent topics in the boardroom. While the approach may differ depending on the company, no board should underestimate the challenge of crisis preparedness.”
Newton said: “Open communication and practiced simulated testing are significant success factors when it comes to being prepared for a crisis. And the fact that only three per cent of the Board Members in Australia stated that they felt their organisation was ‘very capable’ in crisis prevention is of concern.
“Recent studies highlight that a company can expect a value-destroying incident at least once every five years*. This is an alarming reality so when these incidents occur it is important to have the right leaders in the right positions to minimise impact and resolve issues quickly and effectively.”
For more information, visit the Crisis of confidence webpage.
*2013. Cockram, van den Heuvel, Nicholas. Crisis Management: Key themes for success. Strategic Crisis Decision-making: The psychological tripewires and tramplines. Steelhenge Consulting Ltd.
About the A crisis of confidence survey
This study was conducted by Forbes Insights on behalf of Deloitte Touche Tohmatsu Limited. The global survey, conducted in the fourth quarter of 2015, included 317 respondents who identified as non-executive board members of their organisations. Among respondent companies, 16% had annual revenues between US$500m and US$999m; 47% were between US$1bn and US$4.9bn; 23% were between US$5bn and US$9.9bn; 12% were between US$10bn and US$19.9bn; and 2% had annual revenues of US$20bn or more. Respondents were divided between three regions: Europe Mid East Africa (32%), Asia/Pacific (32%) and the Americas (36%), and represented companies from all ﬁve major industry sectors (Financial Services, Consumer & Industrial Products, Technology / Media / Telecommunications, Life Sciences & Health Care, and Energy & Resources).
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