Increasing Responsibility of CEOs in Managing Companies’ Risks
A recent report issued by Aon Corporation, a leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting says that the current challenges faced by corporations range from increasing environmental liabilities to the potential impact of bird flu, and these are compounded by the emergence of the increasingly savvy customer, supplier and employee who cares about the type of organisation that he or she does business with.
Commenting on the report, Athene van Mazijk (pictured right), newly appointed CEO of Aon South Africa, says some companies are responding appropriately by ensuring that business continuity management processes are stepped up but worryingly, some are not investing the necessary senior management time, under the ‘false economy’ belief that there is no tangible benefit in establishing a plan for a disaster that may never strike.
She says the problem with this approach is that if a single disaster does hit, it can be critical for business and for this reason alone, business continuity management needs to be on the boardroom agenda. To reiterate this point, a 2007 study of international risk managers published by the Economist Intelligence Unit, shows nearly half (47%) believe that an IT system failure lasting 24 hours or more could jeopardise their entire business.
The ‘Safeguarding Reputation’ survey, published in March 2007 by global communications agency Weber Shandwick, ranks the key factors that can damage corporate reputation. Van Mazijk says top of the list, referenced by 72% of the 950 global business executive respondents across 11 countries, is financial irregularity, followed by unethical behaviour (68%), executive misconduct (64%), security breaches (62%), environmental violations and product recall (both 60%). Factory breakdowns and strikes follow with 59% and 40%, respectively. “The research actually shows that global business executives underestimate the severity of significant reputation threats,” she says.
The report also found that chief executive officers carry the lion’s share of blame when their company’s reputation is damaged in a crisis – nearly 60% of blame is directly attributed to a CEO after a crisis strikes. Many CEOs question how this blame can be reduced. Van Mazijk says there is a basic crisis communications premise that when an organisation is dealing with such a situation, people want to look, see and feel that some type of leadership is being shown. In addition, there will doubtless be differing concerns among company stakeholders and communication must be tailored appropriately to each one.
“There is never a hiding place, so an affected company needs to talk early and often, even when the fact-gathering process is still under way. It is all in the planning and therefore essential that communication is coordinated from a central location with direction taken from a formulated plan, developed in advance to cover any scenario that may become a crisis. This crisis plan takes account of the key personnel and stakeholders in the business, as well as the corporate position to take in any given scenario. To be effective, when the plan is developed and circulated to the key personnel, it needs to be tested regularly,” she says.
“Adopting a planned approach to corporate crises is not only going to save an organisation’s existence, it can also save lives, as well as money. And yet it is the tool that, instead of running alongside a business continuity plan, is most frequently absent from the boardroom agenda, concludes van Mazijk.
