Deloitte survey finds significant gaps between board members’ awareness of crisis threats and preparation to handle them

Published: 29 February 2016

Board members around the world have confidence in their organizations’ ability to deal with crisis situations (76 percent), but are less confident that they, and their organizations, are prepared for them. Fewer than half (49 percent) of the board members surveyed say their organizations have the capabilities or processes in place required to handle a crisis with the best possible outcome, according to the Deloitte Touche Tohmatsu Limited (Deloitte Global) survey report “A crisis of confidence.” The global survey conducted by Forbes Insights on behalf of Deloitte, was undertaken to assess the state of crisis readiness in large organizations. More than 300 board members from companies representing every major industry and geographic region responded to the survey.

“Most businesses will face a crisis at some point; it’s a matter of when, not if,” says Peter Dent leader of Deloitte’s Global Center for Crisis Management. “Board members should discuss with management to ensure there is a sound and common understanding of the risks that can leave an organization vulnerable to crisis. It’s equally important to deepen that understanding by strengthening the systems used to detect and prevent adverse events from occurring in the first place.”

Additional survey findings include:

• Disparity between feeling ready vs. being ready: More than three-quarters of board members (76 percent) believe their companies would respond effectively if a crisis struck tomorrow. However, only 49 percent of board members say their companies engage in monitoring or internal communications designed to detect trouble ahead, and only 49 percent say their companies have playbooks for likely crisis scenarios. Even fewer, (32 percent) say their companies engage in crisis simulations or training.
• Damage to corporate reputation ranked top area of vulnerability, followed closely by cyber-crime: Survey participants said the crisis areas that make them feel the most vulnerable are corporate reputation (73 percent) and cyber-crime (70 percent). Two-thirds (66 percent) named supply chain issues, regulatory action, and natural disasters as vulnerabilities as well.
• Gap between vulnerability and preparation: When asked about specific crisis areas, board members were more likely to acknowledge their vulnerability, than they were to say they had a plan to address it. For example, 73 percent named reputation as a vulnerability, but only 39 percent said they had a plan for it.
• Board members aren’t engaging with management: Fewer than half (49 percent) say they have engaged with management to understand what has been done to support crisis preparedness. Only half say board members and management have specific discussions about crisis prevention.
• No quick fixes: Fewer than one-third (30 percent) of board members whose organizations had been hit by crises said their reputations recovered in less than a year. Sixteen percent said it took four years or more. Financial and operational crises had similar long recovery times.

“It’s clear that crisis awareness, preparation and resilience needs to be a more prominent topic in the boardroom. While the approach may differ depending on the company, no board should underestimate the challenge of crisis preparedness” said Dent.