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  • July 2016 Client Newsletter banner

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When to Invest in
Consequence Manangement

Over the last few years, Kenyon has activated for a number of different crises, ranging from total loss aviation accidents to terrorist incidents. After providing our clients support in these events, we have often been asked when is the right time to invest in consequence management.

Consequence management is exactly what it sounds like: managing the consequences of a crisis. Far too often, companies attempt to manage the crisis itself - what just happened - and pay little attention to the consequences of that crisis until it is too late. While you can invest in crisis prevention, there are so many aspects out of your control that true prevention is impossible. Investing in consequence management means you take that impossibility into account and you prepare your organization to focus on the aspects of a crisis you can control.

While it’s obvious that investing in consequence management after the incident would be too late and would be of no help to the organization, there are still an alarming amount of companies that do exactly that. Recent events should prompt businesses to rethink their approach to both preparedness and managing the consequences of disaster. Companies should no longer believe that a crisis will never affect them.

In a study conducted by FM Global, Hurricane Matthew was discovered to have interrupted 38% of normal business operations and 26% of businesses lost customers as a result of the storm. Clearly it’s difficult to predict the market’s reaction to your business after a natural disaster, but you can do something to limit the damage and prevent the consequences getting any worse.

The situation is very different after a mass fatality incident. The families and public may forgive that accidents happen, but they will never forget a poor response and your market share will reflect this. Experience tells us that prolonged and expensive litigation is often the result of rage at the response, not that the accident occurred.

Kenyon commissioned a study with Oxford Metrica to examine the toll of mass fatality incidents on company value. The Oxford Metrica study shows that businesses have roughly 60 days after an incident before the market splits – you either recover or you don’t. In many cases after a good response, market share is often higher than before the incident occurred.

Even companies who have crisis management plans in place may not be as prepared as they think they are. A study conducted by Deloitte revealed that 76% of the 300 board members surveyed believed their companies would respond effectively if a crisis struck the very next day, but only 49% of board members said their companies engaged in monitoring or internal communications to detect trouble ahead, and only 49% said their companies had playbooks for likely crisis scenarios. Even fewer (32%) said their companies engaged in crisis simulations or training.

Don’t wait until you’ve had a crisis to invest in preparing your staff to manage one.

In fact, you may not have to expend extra resources to invest. Many insurers offer a bursary for training, so it’s worth checking to see if your company is entitled to this. To learn more about the insurance bursary, read this issue’s Ask A Kenyon.