A crisis of confidence
Board survey finds gaps between awareness of crisis threats and preparation to handle them
SINGAPORE, 19 February 2016 — Board members around the world have confidence in their organisations’ ability to deal with crisis situations (76 percent), but are less confident that they, and their organisations, are prepared for them. Fewer than half (49 percent) of the board members surveyed say their organisations 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.”
“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 organisation 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 organisations 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.
“In an era when risks can turn into reality in the blink of an eye, it is important for the Boards to relook at the business assumptions which have served the companies well (thus far). It is through constantly challenging traditional wisdom and stress testing the business strategy that companies can hope to keep “black swan” type of crises at bay,” says David Chew, Deloitte Singapore Centre for Corporate Governance Co-Leader.
“With the widespread use of technologies in today’s environment, the Board has a key role to play in ensuring that management is building a cyber savvy organisation. Boards need to inquire about the organisation’s cyber risk strategy, what information the organisation is exposed to third party partners, and the cyber resiliency of the organisation’s ecosystem, adds Thio Tse Gan, Southeast Asia Leader for Deloitte Asia Pacific Centre for Regulatory Strategy.
The global survey conducted by Forbes Insights on behalf of Deloitte, was undertaken to assess the state of crisis readiness in large organisations. More than 300 board members from companies representing every major industry and geographic region responded to the survey.
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 percent had annual revenues between US$500 million and US$999 million; 47 percent were between US$1 billion and US$4.9 billion; 23 percent were between US$5 billion and US$9.9 billion; 12 percent were between US$10 billion and US$19.9 billion; and 2 percent had annual revenues of US$20 billion or more. Respondents were divided among three regions: EMEA (32 percent), Asia/Pacific (32 percent) and the Americas (36 percent), and represented companies from all ﬁve major industry sectors (Financial Services, Consumer & Industrial Products, Technology / Media / Telecommunications, Life Sciences & Health Care, and Energy & Resources).