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Lorraine Schneider

February 17th, 2023

Why corporations must elevate the role of crisis management

0 comments | 20 shares

Estimated reading time: 3 minutes

Lorraine Schneider

February 17th, 2023

Why corporations must elevate the role of crisis management

0 comments | 20 shares

Estimated reading time: 3 minutes

A corporation must be ready to act swiftly in crises. Delaying action may result in devastating losses. Lorraine Schneider writes that as climate change, geopolitical conflicts, and a looming recession add more fuel to the fire, corporations must elevate the role of crisis management to better mitigate against, prepare for, and respond to the next disaster. She outlines key steps corporate leaders can adopt to deal effectively with disasters.


 

New year, new crises ahead: The major events that took a hold of 2022 (the re-emergence of war on European soil challenging the new world order, the continued response to the global COVID-19 pandemic, the rise of inflation, increased polarisation, etc.) are going to reverberate and add to the novel challenges and crises looming in 2023. Dragonfly’s 2023 Strategic Outlook illustrates how “the global order and the systems that govern stability are changing and shaping the many risks we forecast in 2023.” Caught in the middle of it, the corporate world quickly needs to scale up its preparedness and response efforts.

How can a major geopolitical event impact a company and require effective crisis management? Let’s look at just some of the impacts Russia’s invasion of Ukraine has had on corporations:

Supply chain impacts: Fewer than 15,000 Tier One suppliers are located in Russia, however, 7.6 million Tier Two supplier relations exist between Russian and foreign companies. With sanctions imposed upon Russia by the US government, the European Union, and others, this means that companies around the globe have either not been able to source critical materials for their productions or have had to find other suppliers, thereby causing significant delays in the supply chain.

Personnel impacts: As of January 10, 2023, there are over 7.9 million refugees from Ukraine recorded across Europe. As Ukraine started to get shelled, thousands of companies who employ Ukrainian workers have had to assess their stance on their duty of care with some aiding their employees and families in relocating to the safer, western part of the country or even abroad. This has particularly affected the global tech economy, with Ukraine having emerged as an essential player in recent years, thanks to its steady increases in the export of technology services, which reached $6.8 billion in 2021.

Operational impacts: Russia’s invasion of Ukraine prompted a mass corporate exodus from the country. Since February 2022, “over 1,000 companies have publicly announced they are voluntarily curtailing operations in Russia to some degree beyond the bare minimum legally required by international sanctions.” Led by Jeffrey Sonnenfeld, a team of experts at the Yale School of Management have been keeping a detailed list of companies, assigning them grades ranging from A-F, noting which ones have completely withdrawn (A), suspended their operations (B), scaled back (C), postponed new investments or development (D), or continued to conduct business-as-usual (F).

When disaster strikes, a corporation must act swiftly to protect and maintain its financial, business, and stakeholders’ interests. A wrong decision – or one taken too late – may result in devastating economic, trust, and/or physical losses. Now, as climate change, geopolitical conflicts, and a looming recession add more fuel to the fire, the corporate world must elevate the role of crisis management to better mitigate against, prepare for, respond to, and adapt to the next disaster.

Last fall, the International Organization for Standardization (ISO) released a new standard outlining protocols for businesses to establish a crisis management programme. Prior to this being issued, components of crisis management were found under ISO 22320:2018, which grouped together security and resilience, emergency management, and incident management. Having a standalone standard provides much more solid ground for companies to plan, establish, maintain, review, and continually improve their strategic crisis management capability.

Figure 1.  Building crisis management capability: principles, framework, and process

Source: ISO 22361:2022(E) p. vii

How can you begin elevating the role of crisis management and foster corporate resilience?

  • As a CEO and business leader, create and/or strengthen your company’s crisis management function. The core mission of your crisis management team is to protect and preserve the people, ideas, and legacy of your organisation. To date, when crisis management programmes are already present, they tend to be very limited in manpower and face increased demand in output without receiving matching resources. It is imperative that a crisis management function receives adequate funding and mission support to achieve true resilience.
  • As a corporate board member, educate yourself on geopolitical risks and their potential impacts on the business. Request joint briefings from the chief security officer and the head of crisis management. An essential part of board governance is positioning itself advantageously for the future, both in the short and long terms.
  • Examine the threats, hazards, and vulnerabilities that have begun and are going to continue redefining our everyday life in the coming years, such as: climate change causing sea level rise and mass migration, energy transition and resource competition including water and food scarcity, changes in the make-up of our global population, the emergence of extremely disruptive technologies (e.g., artificial intelligence, nanotech, quantum-enabled tech, or fusion power), periodic pandemics, etc.
  • Ask and identify: What are the company’s greatest risks? Is it a supply chain shortage caused by state sanctions or labour shortages? Or is it perhaps a state-perpetrated cyberattack sparked by great power competition?
  • As a crisis manager, know the business. Be intimately familiar with how and where the business operates. Establish a strong working relationship with the company’s intelligence analysis unit. Leverage current geopolitical analyses and risk assessments to run company leadership through a tabletop exercise – and invite members of the board to observe. Doing this will have the added benefit of giving your function heightened exposure and increased understanding by company leadership.

By elevating the role of crisis management in today’s corporate world, not only will individual businesses make resilience their strategic advantage, but they will also make society better for it.

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Notes:

  • This blog post represents the views of its author(s), not the position of LSE Business Review or the London School of Economics.
  • Featured image by NOAA on Unsplash
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About the author

Lorraine Schneider

Lorraine Schneider is the Executive Director of The Resiliency Initiative, a global consulting firm focused on crisis and risk mitigation planning. Previously she served as a Crisis Manager for The Walt Disney Company and the University of California, Los Angeles (UCLA).

Posted In: LSE alumni | Management

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