The art of readiness

It’s no secret that sound preparation is key to successfully weathering a crisis. Without it, companies are more likely to find themselves subjected to negative media coverage, a tarnished reputation, lost customers, and high recovery costs—all of which dramatically affect their bottom line. A 2018 global Deloitte study found that being at the ready significantly reduces the negative impact of a crisis. In fact, 31 percent of organizations with a crisis plan reported that finances had been negatively impacted by a recent crisis, for organizations without a plan, that proportion jumped to 47 percent.

That said, to truly mitigate the negative impacts of a crisis and emerge stronger than before, it’s not enough to simply outline everyone’s role and hope for the best. You need to have a clear plan of action and put that plan into practice through a simulation exercise.

When a crisis strikes, it’s important that your organization runs like a well-oiled machine. Simulations help by giving employees, management, executives, and board directors an opportunity to develop capabilities, stress-test plans, evaluate coordination and communication, and preview real-time response capabilities. The feedback from such drills allows a company to determine which aspects of its crisis plan works in practice, pinpoint areas that need to be strengthened, and identify gaps in capabilities.

How does a simulation exercise work, and how do you execute one? While the answer to these questions are rather complex, a simulation exercise can be boiled down to three key steps.

Step 1: Define your purpose

An effective crisis simulation begins with the end in mind. You not only want to clearly define what risks you’re trying to prepare for, but you also want to have some idea of how you’d like your organization to be perceived when it comes out on the other side. Think hard about your objectives.

Then it’s time to select a few crisis scenarios that fall into the risk areas you’re planning for. A good rule of thumb when brainstorming potential scenarios is to make sure they’re relevant to your industry and your market. It might be helpful to speak with your senior management team, board directors, or employees on the frontlines to find out what keeps them awake at night.

Choosing a crisis scenario that is the most likely to occur is typically the best place to start.

Step 2: Plan

With one or two scenario ideas in hand, it’s time to start developing the simulation. This is no easy task. In many ways, developing a simulation is like developing a movie script—but it’s almost more challenging, since there’s no hard-and-fast narrative. While simulations do follow a rough outline, called a master scenario events list (MSEL), the objective is to make the event seem as real as possible. Facilitators and evaluators of the simulation follow the MSEL to ensure the exercise is on track.

Decision points and probable outcomes throughout the exercise must be anticipated and accounted for. Each outcome must be realistic, have its own set of consequences, and reflect the types of thought processes and actions people both inside and outside your organization will likely take in a real-life crisis. Simulation participants should be encouraged to consider a host of variables and work through what impact those variables would have on finances, customers, strategy, operations, and overall reputation.

To achieve a high level of realism and ensure the simulation is as multidimensional as the world we live in, it’s essential to inject as many external factors as possible—such as mock news stories or unexpected communications from third-party vendors or stakeholders with agendas different from your own.

Crafting such a detailed and realistic simulation can take weeks, if not months, but the more effort you put into it, the greater value you’ll inevitably gain in return. Consider obtaining support to plan and execute a crisis simulation from a third party, who can provide an objective perspective and add expertise that may not exist internally.

Step 3: Execute—and learn

When it’s time to execute the simulation, it’s critical to make sure key decision-makers are available and ready to participate—especially members of the C-suite and the board. A crisis simulation should be taken seriously and it requires the buy-in of everyone, particularly those at the upper levels.

As the simulation unfolds, take note of every decision and every bump in the road. If things don’t go according to the existing crisis management plan—or if someone doesn’t adequately fulfill their role or responsibilities—this must be recorded and revisited during the exercise assessment.

Like many aspects of crisis management, a simulation isn’t a one-off event. The information gleaned must be analyzed and the lessons must be applied to strengthen the crisis management plan. These amendments must then be worked into future simulations and, once those are completed, progress must be measured and compared.

This type of simulation exercise should ideally take place at least once a year, more often if your business experiences significant change. Changes that could warrant additional crisis simulations can include the onboarding of a new group of employees, a change in senior management, the implementation of a new IT infrastructure, or a change in regulations that might affect how your organization operates or reports.

Armed and ready

While formal crisis simulations can be challenging—and costly—to execute, they’re nothing compared to the consequences of entering a crisis ill prepared. By having your teams walk through actual worst-case scenarios, test plans, and dispel false assumptions, you’ll be equipping them with the skills they need to think clearly in the event of a crisis—and increase the likelihood of a successful and swift recovery.