Effectively Managing Legal and Reputation Risk in Times of Crisis

March 15, 2018

A crisis can have a major impact on a brand’s business and reputation. Joseph Lewczak, partner at Davis & Gilbert LLP, led a discussion on how to effectively manage in times of crisis to minimize damage. Ruth Kim, general counsel, SVP, and senior partner at Fleishman Hillard, and Peter Verrengia, president of and senior partner at Communications Consulting Worldwide, shared perspectives from a public relations and legal point of view.

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Moderator Joseph Lewczak, Partner at Davis & Gilbert LLP: How does a crisis start?

Ruth Kim, General Counsel, SVP, and Senior Partner at Fleishman Hillard: It could be a defective product or service, an accident, or a bad judgment call by one employee. There could be fraud or the appearance of an ethical failure as well.

Peter Verrengia, President of and Senior Partner at Communications Consulting Worldwide: We’re seeing more customer dissatisfaction turn into crises because there is no process in place for uncovering patterns in the information coming in through the customer service channels. Government investigations can become a crisis, and range from regulatory inquiries to public court cases. There is also a demand for company values to be on display.

So when a crisis happens, what do you do? Who’s on your team, and what are the first steps?

Kim: The important thing is to figure out who your internal team is. Who is involved from management, legal, or PR? You should know in advance of a crisis who your external experts will be as well. Who is your outside law firm? Who is your go-to crisis communication firm? Are there auditors, specialists, or investigators whom you can rely on?

Verrengia: One way to organize yourself in the initial stages is to consider who your audiences are. Think about constituents, people who have the ability to act, people whose interests intersect with your interests. Think about your employees, the supply chain, the people who sell the product, and regulators. How soon do you need to tell them about the crisis, and what do you need to tell them about the crisis at hand?

Should in-house counsel be taking steps to prepare in advance of a crisis?

Verrengia: Yes. I suggest doing a vulnerability audit and scenario exercises, and determine the roles and the back-ups to those roles. Most major companies have these processes in place, but they should be continually updated and refreshed.

The crisis has hit, you’ve assembled your team, now what happens? What’s the process and who will manage the process?

Verrengia: The CEO or general counsel should be the quarterback. There needs to be a crisis manager who considers the business aspects, the legal aspects, and the communications aspects. In a very serious crisis, you’ll have three meetings a day. The first is to discuss strategy, the second is to discuss workouts, and the meeting at the end of the day is to discuss progress updates and expectations for the next day. Also, internally you need people from each business channel to bring up the information you need clearly. When conducting your vulnerability audit, identify who in the operating units will have the information you need. In the midst of a crisis you don’t have time to track down these key people.

Kim: You need to identify people’s positions to know who is responsible for what to reduce redundancy and miscommunication.

Verrengia: Also, consider who the endorsers of your brand are. Who can talk about your safety process or your commitment to high standards? In the midst of a crisis you can’t go “make a friend” and ask them to speak on your behalf to the media or testify for you. That requires years of relationship-building.

How do you know if a crisis requires you to “drop everything?”

Verrengia: If something happens that directly conflicts with your company values on a large scale, that’s a crisis. A crisis is also something that prevents you from achieving your business objectives in a reasonable period of time. If it will be a problem for a week, perhaps it’s not a crisis. If it’s a problem for a month, and it will cause you to miss goals, that could be a crisis.

If you are not managing your reputation, some else is. — Ruth Kim, Fleishman Hillard

At the start of a crisis, you’ll want to think about whether this crisis is important enough to have the outside law firm hire the PR firm to maintain attorney/client privilege.

Kim: Many clients don’t think about that. They think, “We have a PR firm; we’ll just go to them with the crisis.” As outside counsel, suggest that it may be helpful to set up attorney/client privilege with the PR firm.

Peter, would you like to address the Framework for Response?

Verrengia: The first question you ask is, “Where does this crisis fall in relation to the company values?” This is the biggest change for companies today; their values are on display. Step number two is acknowledgement. Let your constituents know you are looking into the issue to demonstrate you’re not ignoring it and you’re not denying it.

Kim: Many times lawyers will be reluctant to do or say anything that could be seen as an admission. Being apologetic or expressing regret for a bad circumstance is not necessarily an admission that you did something wrong. How you word that statement is critical. That is where the PR person and the legal person may have a healthy debate.

News travels fast, especially due to social media.

Kim: It’s important to respond to show that you’re attentive, and you have a well-intentioned company that cares about doing the right thing. If you are totally silent, people will fill in the blanks. If you are not managing your reputation, someone else is.

Verrengia: Acceptance is the next step in the process. Accept that you are responsible, if that is the case. Then move on to accountability and how you will deal with being accountable. You need the endorser network to come into action and remind the public of your organization’s best qualities. They can say things that are difficult for a company to say about itself.

Before making a statement, think about whether or not this speech could be regulated in some way. It’s important for legal to review public statements.

Kim: A lot of times in the heat of the crisis you want to get your statement out there, and you don’t think about the longer implications or consequences for your brand.

Ruth, would you share your story about how you worked with a brand in crisis?

Kim: I was the general counsel of a firm that provided health care services to variety of industries, including the correctional health care industry. We had an employee who did marketing for us, and she called me crying. She explained that a reporter wanted to run a story on the work the company is doing for disadvantaged communities, including the incarcerated population. She let them interview a few patients, and she was concerned the story would not reflect well on the company. I called our outside counsel, and they agreed this was not a good situation. The story that came out two weeks later was a 12-page color spread titled “Death, Neglect, and the Bottom Line.” The outside counsel helped to mobilize the company in the aftermath of the story. We needed to communicate with employees, government agencies who award us contracts, patients and their families, and to the media about why we were a good company. We did get a justice department inquiry, and the justice department did not find any constitutional violations of health care. My only counsel is that I wished we had thought about handling a crisis before the crisis happened. When you counsel your clients, remember that counselors can help clients get through some of the worst times in their careers. If you have the right team and you take the right approach, you may be able to withstand the crisis and come out on the other side.

What lessons have we learned from experiencing crisis?

Kim: You cannot know what crisis will happen. There are things you can do to reduce your risk of crisis, but humans are unpredictable and just one person at your organization can cause an embarrassing scandal for your company. It’s important to create an organizational culture that cares about doing the right thing. There needs to be training and reinforcement to create this culture.

Not every company has those ethics. How can we communicate the need for company values to the senior leaders of the company we counsel?

Verrengia: The general counsel often has the opportunity to have a conversation that others don’t want to have. Look at what’s happening to other brands, and get ready to survive what may happen to you.

Kim: For outside counsel, periodically touching base with your client on recent court decisions that directly affect their business allows the in-house counsel to approach their management team in a smart way. For general counsel to serve their clients in a meaningful way, they should work to understand their clients’ business and their risk thresholds.

CLE Materials

Source

"Effectively Managing Legal and Reputation Risk in Times of Crisis." Joseph Lewczak, Partner at Davis & Gilbert LLP; Ruth Kim, General Counsel, SVP, and Senior Partner at Fleishman Hillard; Peter Verrengia, President of and Senior Partner at Communications Consulting Worldwide. 2018 ANA Advertising Law & Public Policy Conference, 3/15/18.

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