Despite rising crises, Deloitte study finds organizations’ confidence exceeds crisis preparedness
- Sixty percent of crisis management leaders believe that organizations face more crises today than they did ten years ago
- Organizations’ confidence in their crisis management capabilities often does not align with their actual level of preparedness
- Being at the ready significantly reduces the negative impact of a crisis, particularly if senior management and board members have been involved in creating a crisis plan and participate in crisis simulations
NEW YORK, NY, USA 20 June 2018–Organizations are keenly aware of the increasing threat of crises. According to Deloitte Global’s 2018 crisis management survey, Stronger, fitter, better: Crisis management for the resilient enterprise nearly 60 percent of respondents believe that organizations face more crises today than they did ten years ago, yet many may overestimate their capabilities to respond.
The study, which builds on the findings of Deloitte Global’s 2015 study A crisis of confidence, surveyed over 500 senior crisis management, business continuity, and risk executives about crisis management and preparedness.
“With the rapid pace of change facing companies worldwide, and with crises on the rise, it is critical for organizations to be ready to respond with skilled leadership and plans that have been tested and rehearsed,” says Peter Dent, Deloitte Global crisis management leader. “Organizations that are adept at crisis management take a systematic approach to steering clear of potential crises and managing those that do arise with an eye to both preserving and building value.”
Confidence outstrips preparedness
This year’s study uncovered dramatic gaps between a company’s confidence that they can respond to crises and its level of preparedness. The gap becomes even more evident when evaluating whether organizations have conducted simulation exercises to test their preparedness.
Nearly 90 percent of respondents are confident in their organization’s ability to deal with a corporate scandal, yet only 17 percent of organizations have actually tested the assumption through simulation. The gap is reminiscent of the 2015 findings, which illuminated the fact that board members believed they could respond well if a crisis struck, yet playbooks of likely scenarios failed to exist.
Experienced a crisis before? Key learnings drive preparedness for the future
Eighty percent of organizations worldwide have had to mobilize their crisis management teams at least once in the past two years. Cyber and safety incidents in particular have topped companies’ crises (46 and 45 percent, respectively).
Many who have already experienced a crisis are learning from them. Following a crisis, nearly 90 percent of organizations have conducted reviews. The major insight from these examinations is that many crises may have been averted. This appears to prompt organizations to take action to forestall future crises. Respondents identified the need to improve detection and early warning systems, invest more effort in prevention, and do more to identify potential crisis scenarios.
“Crisis management shouldn’t start with a crisis—at this point it may already be too late. The ability to prevent a crisis can be fortified by looking at the entire life cycle of a crisis instead of just readiness and response,” continues Dent. “Successful crisis management also requires overcoming any biases to ensure that the board and senior management look closely at risks. Even those, and perhaps especially those, they believe aren’t likely to happen.”
Boards and business leaders must be crisis-ready
When responding to a crisis, strong leadership skills and situational awareness are critical. The survey finds that nearly a quarter (24 percent) of respondents cite the effectiveness of leadership and decision making as one of their greatest crisis management challenges. To help leaders be prepared to navigate their organizations through a crisis, organizations should consider: organizing leaders ahead of time, clearly defining their various roles and responsibilities; training leaders in the tools and techniques that can help them through a crisis; identifying, improving and counterbalancing leadership tendencies and styles which, while they may serve as strengths in normal situations, could cause trouble in a crisis.
Further, board and senior management participation in crisis exercises is critical, as is their involvement in developing an organization’s crisis plan. More than four in five (84 percent) respondents say their organizations have a crisis management plan in place, and those who enlist the board to participate say the number of crises has declined over the last decade (21 percent), compared to those without board involvement (2 percent).
Third parties are part of the problem—and the solution
Crises often emanate from the actions of third parties, such as suppliers and alliance partners, but the same third parties often play an important role in helping to manage and mitigate crises. Recognizing this, 59 percent of respondents say that they participate in crisis exercises with third parties, examine third parties’ crisis plans, or both. Bringing in outside organizations and coalescing internal teams is an important part of addressing, and potentially preventing, crises.
Crises aren’t inevitable. Many of them are avoidable, which is why smart business leaders invest in crisis management capabilities. These strengths can help their organizations avoid costly, and sometimes irreparable, damage to finances, employee morale, brand, and reputation. Truly effective crisis management goes beyond being reactive and simply protecting existing value. It also enables resilience and powers future performance, thereby enabling an organization to emerge stronger.
About the Survey
This quantitative survey was conducted via telephone by ComRes on behalf of Deloitte Touche Tohmatsu Limited. Fieldwork occurred between November 2017 and January 2018. The participants were all crisis management, business continuity and risk senior executives, and specifically:
- In senior management positions, but below board level
Working for large corporations in the private sector with an annual global revenue of at least US$5 billion for companies based in the United States, and at least US$1 billion for all other countries
The survey reached 523 crisis management, business continuity and risk senior executives across 20 countries in five global regions: North America (109 respondents), Latin America (114), Europe (106), Middle East/Africa (69), and Asia-Pacific (125).
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