In-House Concerns When Handling A Major Crisis

July 31, 2020

There are several reasons why companies find it harder and harder to handle major crisis. These days, because of the internet, companies have to get out in front of a crisis, or the bad PR will kill them quickly. It used to be companies had time to react and get out front. Now they don’t. So, if companies don’t have a strategy in place to address the crisis, it’s hard to get out in front. In fact, by most accounts, a company has twenty-four hours to put a crisis management strategy in place once it becomes aware of the underlying event. This twenty-four-hour period is sometimes referred to as ‘the golden hour.’ If a company isn’t prepared, twenty-four hours is not long enough to think things through. Of course, In-House counsel have to understand their roles in a crisis as well. They have to manage legal liability and balance it with business considerations. They also have to help the PR team educate the public on the issues and make certain all legal regulations are followed. Normally, the In-House team hasn’t really thought about its role and responsibilities in the event of a major crisis. This can be a problem.

Another issue is that sometimes Management refuses to acknowledge the existence of a crisis until it is normally too late. Remember, a crisis unfolds in a series of stages and not in a vacuum. First, there are early indications of a crisis brewing followed then by actual warnings of a crisis followed by the crisis exploding and overwhelming management. It is at this stage that most companies try and resolve the crisis, but it is usually too late. The crisis morphs, PR gets really bad, the impact of the crisis deepens, the stakeholders and shareholders get very worried and upset. The key to properly managing a crisis is to acknowledge the existence of a crisis at the beginning and to have a crisis management plan in place. Legal needs to be heavily involved with Management to help resolve the crisis at this stage.

The major problem with handling a crisis is that communications play an important role. When you look at the timeline of the average crisis: a company not only has to determine what need for communications exist (internally and externally) but also must have the communications drafted and ready to go within twelve hours of the start of the crisis. Within twenty-four hours, Management should have a plan in place including a communications plan and should be talking to the media or have a third party talking to the media for it. If you don’t have a crisis management plan already in existence before the event, you probably won’t get your hands around it in time. Legal must also know what to do and when.

As In-House Counsel What Should Concern You?

Ask yourself the following questions:

-What happens if one of the machines in your company’s main manufacturing line breaks down? How long would it take to come back online? Or, what happens if as a major service provider you are unable to provide the service you are obligated to provide?

-Can you cover by finding alternative sources of supply, how long would that take to do? How long to cover the losses? What about the supply agreements?

-If you lose productivity and can’t supply customers on time you could lose everything. Are you able to absorb the losses? What obligations do you have under your supply agreements?

-Who should be the crisis manager?

-In case of a crisis do you know all of the relevant insurance policies and the appropriate notification deadlines? Or is this left up to the insurance department?

-If a crisis involves regulators, are you aware of the basic time frames in which to notify and/or involve the regulators? And, who are the appropriate regulators? Do you have contacts with them?

-From an in-house perspective have you thought about how to mitigate civil liability?

-So how do you minimize civil liability and perhaps criminal liability too?

-Are you prepared for litigation?

-What steps should you take to mitigate liability?

For In-House counsel in companies that could experience a major crisis, it is vital to have a plan in place. Think about the questions above. Ask more questions too. Be prepared.

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