By Chrystin McHugh, manager - strategic marketing

On Nov. 7, I had the opportunity to discuss crisis management with Donita R. Rudy, CTP, MBA, owner of Donita Rudy & Associates Inc. and principal at Compass Advisory Partners. Rudy has spent the past 25 years assisting clients from a variety of industries and business sizes with financial, strategic, and turnaround management services. Rudy explains that crisis management is a process whereby you maintain control when the uncontrollable happens.

What have been the biggest business crises of 2016?

Wells Fargo – where employees opened millions of false accounts in real customers’ names to up their own take home pay – and Samsung – where a product defect caused millions of devices to catch fire and be recalled.

Wells Fargo and Samsung are large companies with deep pockets. What about the types of challenges smaller businesses face?

Dealing with crisis in smaller businesses is where my expertise is strongest. Smaller businesses have limited resources, and therefore, no choice but to develop a proactive approach for maintaining control when the unthinkable happens.

Tell me about your first-hand experiences in crisis management.

I was the COO at a bank when an internal embezzlement fraud scheme occurred. An employee who reported to me was committing the act. Another employee was the first to find the fraud, and when she divulged what she found she was visibly shaken. I immediately isolated and removed the whistleblower from the situation and stopped the outflow of money. I built a team to work over the weekend to determine just how bad the fraud was. It was determined that we needed to contact the FBI immediately. The FBI investigation included a phone call and in-person meeting with the embezzler, where I had to wear a wire. I was close to this person, so the emotional side of the crisis was intense for me. When the press ran with the story we had to develop a corporate communication response plan to address internal and external concerns. At the time of the embezzlement, the company did not have a crisis plan in place. Because of this situation, we developed a clear process for crisis management and changed our procedures.

Another experience in dealing with crisis occurred when I was the CEO of a small, family-owned retail company. During business hours, a domestic situation occurred between an employee and her significant other inside a store. The immediate impact of the crisis was on the victim (employee), other employees of the store, and the customers. There were no resources in place for the store employees to deal with this on their own, and they had never been trained beyond dealing with an irate customer. I was called into the situation. The aftermath of this incident was that we lost customers and our other employees were understandably upset. We developed a plan for diffusing situations like this in the future and looked at risks from a greater level, such as rethinking our closing procedures.

Either of these situations – embezzlement or a violent episode – could happen to any company at any time.

What are a few key action steps to take when proactively preparing for crisis management?

• Step back – the focus on day-to-day tasks and making money are often at forefront, but they shouldn’t always be.
• Identify the unique risks and “what ifs” relevant to your company.
• Think about it strategically. Take the time to get a variety of people from inside the company together to discuss the risks that are unique to your business and then rank them as high, medium, or low. Threat examples include business interruptions – such as a natural disaster or cyberattack – the loss of a business owner, or fraudulent activity.
• Determine the hard and soft impact of these risks. Examples of hard impacts are those which affect the company financially, negatively affect the cost of labor or the supply chain, cause the loss of a sale or customer, and the costs associated with addressing the situation such as research, court time, and rebuilding your reputation and brand. Soft impacts would include the effect on employees and internal and external communication.
• Peel off the high and medium risks, and then work all the way through them. Ask yourself: How would we handle this, who would handle it, what resources do we need to handle it, and who needs to be trained on it?
• Develop written policies and procedures and periodically test them.
• Train your employees. You can have the best procedures in place, but if people aren’t trained to enforce them, what good are they?

To hear more on crisis management from Donita Rudy, attend the Decision Makers Conference on Dec. 12 in King of Prussia or via webcast.