making crisis simulations matter

Insight

Focus on:

Making crisis simulations matter

A plan is only a plan until you put it to the test.

You know it’s coming. But not when, where, or how big. You’ll sleep a lot better if you’re confident your crisis management plan works. One of the ways to earn that confidence is with a program of effective, multidimensional simulations that test your board, your C-Suite, and the organization that stands behind them. Do you feel this is “for real” while it’s happening? That’s one test of effectiveness. Do you feel you really learned something afterward? That’s an even bigger one.

There is more than one way to approach a simulation. The ones that create lasting value go far beyond the theatrics of a simple “fire drill” that focuses only on a short-term crisis. An effective crisis simulation puts the organization to a stringent test, whether or not the scenario represents the worst case. It demands the right questions and the right responses. It cascades realistically from one decision point to another. It plays through both your external and internal worlds. It leaves participants, including the C-Suite, feeling they’ve truly learned something by testing their responsibilities under trying circumstances that subject them to uncertainty, ambiguity, and conflicting and incomplete information—where there is often less known than unknown—so the crisis modus operandi permeates all levels of the organization from the boardroom to the front lines.

The foundation of this approach is preparation. The objective might be an orderly exploration of strategic market risk, a dramatic moment-to-moment sequence of scenarios and responses, or something in between. The trigger might involve technical failure, market disruption, natural events, or deliberate malfeasance. In each case, the effort an organization puts into planning and customizing its crisis simulation approach can pay off many times over when a real crisis strikes—in personal preparedness, process improvement, team coherence, and raw confidence. The result is a team that’s more confidently equipped to handle crisis, faster in reacting to it, and ready to scale up the necessary resources for response and recovery.

Introduction

Begin with a scenario? That’s your first mistake.
Instead, begin with a purpose. What is your organization trying to prepare for? When crisis happens, how do you want to look coming out the other side? 

Only with a clear objective can you construct a scenario that will advance it. And while the situation may be fictional, the stakes are real. The effectiveness of a crisis response can make or break an organization’s reputation—and reputation can count for as much as one-quarter of an organization’s market value.1 The average organization can expect a value-destroying event at least once every five years.2 Crisis simulation is not a place for shortcuts. There are still some organizations that don’t use simulations at all— but more and more are realizing the benefits and putting their plans into practice for preparation that really counts.

Designing across all dimensions
To protect organizational value, a crisis simulation should be as multidimensional as the real world in which a real crisis might play out. Whether real or imagined, it should include externalities, including realistic injections of “news” and stakeholders with agendas different from your own.

People should interact as they would in real life. They should consider and challenge the impact each decision will have on finance, customers, strategy, and operations—and those decisions should have palpable consequences. If participants run up against the limits of the simulation, the simulation hasn’t been designed broadly enough.

A maturity-based approach
Depending upon the purpose of the simulation, the scenario design, and the resources available, simulation approaches will vary.

At one end of the scale, a simulation can be as simple as a discussion of likely scenarios. The next level is a formal rehearsal of roles that tests strategies, information flows, and communications in a highly realistic, scripted environment. The most intense simulations can rival military “war games” in their dynamic use of worst-case scenarios and immersive, even stressful, environments. When participants make decisions, they should consider the consequences those decisions will have days, weeks, and even months down the line. Just as important, decisions need to be made at the right levels. Executives need to be confident others will handle the tactics while they focus on the outcomes, key stakeholders, and future consequences. Getting ahead of the game is critical for them.

An organization could choose a specific place along this spectrum to stage a needed simulation, or it might stage a progressive program that builds through simulations of increasing challenges following its organizational maturity.

No matter what type of simulation your organization chooses to conduct, realism is invaluable. The simulation should mirror your internal world as well as your external environment, including customers, regulators, competitors, suppliers, and governments, whenever appropriate and possible. It should help participants reach sound decisions while information assails them from many directions. The more realistic the experience, the more confidence it will build in you and your teams. It’s also vital to include the entire organization, from the board and leadership to the front lines. This is the only way to test decision-making authority and escalation paths.

How to start
First, decide on the objectives. Then think like a movie producer. Carrying out a crisis simulation isn’t unlike producing a movie. What’s the storyline —the scenario? How do I turn it into a script that determines who will say what to whom and when? This script is known as a Master Events List, or MEL. But a MEL should be more than just a script—because a script follows a prescribed narrative line. A MEL enhances realism by anticipating and accounting for all the decision points in the simulation, so cause and effect remains realistic from beginning to end. When participants interact with a MEL using real data in a real physical setting, the lessons are real as well.

Next, find the limit. A simulation that doesn’t challenge people won’t teach them anything. But a simulation that carries them past the breaking point will teach only humiliation and poor morale. Designing scenarios that deliver the most useful stress without going over the line is part science, part art form.

And that’s the easy part. The weeks that lead up to a simulation take rigorous planning. The hours that pass during a simulation are engaging, emotional, and challenging. When the simulation ends, the real work resumes—because collecting the lessons and applying them to create a stronger crisis management plan is where the real value lies.

Simon Cole, "The Impact of Reputation on Stock Market Value" (World Economics, February 2013)

2 "Reputation Review" (Oxford Metrica and AON, 2012)

About crisis simulation

The Focus on series is part of Deloitte's commitment to provide insights that help board members and senior executives navigate the crisis management lifecycle, including readiness, response, and recovery.

Download the PDF to see how the world’s leading companies are addressing crisis management issues. 

Focus on: Making crisis simulations matter
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