In the past, you’ll have seen we’ve written about averting cash flow crises and other financial crises. This time though, having watched the aftermath play out on TV of the tragedy that occurred at Dreamworld, I thought it might be time to talk about planning for a more general business crisis.
According to a stack of both industry and university driven research, if you own a business, it’s not IF a crisis will hit your business, it’s when. The statistics on surviving a crisis are somewhat horrifying.
- Christchurch NZ 2010 and 2011 earthquakes claimed around 11% of the city’s businesses. But EVERY business inside the quake zone had to close at least temporarily for around 16 days. Yes, three working weeks.
- When the World Trade Centre was bombed in 1993 more than 40% of those businesses went out of business. The ratio was significantly higher after September 11, 2001.
- Four out of five companies don’t recover after a major fire
- It’s often worse if that crisis is caused by or appears to have been caused by, at least in part, the organisation itself. In that situation, publicly traded companies that are seen to mishandle their crisis experience suffer a 10% stock decrease in the first week.
And this is what happened to Dreamworld’s parent company, Ardent Leisure. Their share price instantly dropped 22%. It did rebound a little later, but to a point 14% lower than where it had previously been trading.
If you’re a company that handles the crisis well, you’re only likely to experience a 5% drop.
Now that’s in the first week. Where it really starts to bite is what happens over the next year. Great companies that handle their crisis well generally rebound to where they were before. Those that don’t handle their crisis well, are likely to still be trading about 15% lower than before the crisis happened.
It has to be said that from the outset Dreamworld appear to have handled their crisis badly.
- Planning on reopening a park where people had been killed just 2 days afterwards seemed too soon to be appropriate.
- Forgetting Dreamworld was in fact now a crime scene and that meant having to consult with the police about reopening the park and potentially having the crime scene disturbed prior to all investigations being finished. All of which led to a botched reopening – stopped by police and a further swathe of commentary about both the timing and its appropriateness.
- Making statements to the media outlining how they’d gotten in touch with the victims’ families to offer help. Unfortunately for Dreamworld they hadn’t actually made contact at that point and the truth was exposed for all to see via live broadcast and live twitter commentary from the families. #caughtout
- But worst of all must be that claims were made and posted on line for all to see in the lead up to the tragedy suggesting awful accidents were likely to happen. And of course those people were only too happy to come out of the woodwork in the aftermath.
As one of the solicitor’s interviewed about the case mentioned, these aren’t accidents, they’re very preventable problems – if the company pays attention.
When it comes to managing a crisis like this, it’s much like managing your business. It’s all about being prepared and paying attention.
A crisis manager friend of ours suggests all business owners adhere to the following crisis management rules;
Have a crisis plan in place BEFORE bad stuff happens. Really look at all the potential things that could go wrong and think about what you would do in the event of any of those things happening. Listen to staff/customer complaints – they often foretell of the really bad stuff that might be coming your way. Better still, fix as many of those problems as you can to stop the disaster from happening in the first place.
When crisis really hits, don’t go it alone. Get some help – in the form of a crisis management expert. They won’t necessarily make the crisis stop, but they might stop you from making the crisis even worse. Research shows that communities are prepared to forgive all sorts of mistakes and disasters. Where they get really angry and give companies hell is when they lie, don’t play nice or avoid taking responsibility. A good crisis manager is the cool, calm face of reason in an otherwise turbulent nightmare. They can prevent you from making those sorts of mistakes in the aftermath – when let’s face it, everyone is shocked, stressed and not thinking most clearly.
If we can better help your business think through any issues it’s facing, financial or otherwise, or you’re looking for business advice, we’d be delighted to help. You can call Kerry on 6023 1700 or get in touch via the form below.
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