Author(s):
Lawrence E. Ritchie
Oct 27, 2014
Even the best preventative risk management programs will not root out all threats, so companies should remain prepared for a matter than can evolve into an unforeseen crisis at any time. The following are key steps to managing a potential crisis:
- Identify the actual problem. While this seems obvious, it is not always simple to understand what the real issue is. Many times, the quickest path is to find the origin (e.g., whistleblower, regulator, press, litigant) and work from there.
- Report. Board members, like executives and shareholders, do not want to be blindsided. Make sure to report to the Board early in the process. Not only does this provide some defensibility, it also includes the Board in the decision-making process, which can minimize impact for all stakeholders.
- Understand the risks and potential consequences. Even a seemingly simple issue can create any number of downstream risks. It is crucial to gain a quick understanding of the impact on the company, including regulatory compliance, reputation, potential lawsuits, finances, and customer and supplier relationships.
- Leverage your experts. In most instances the company should immediately retain outside counsel, but any number of additional steps should be considered.
- Is an internal investigation necessary?
- How should the press be handled?
- Has the Board been made aware?
- Does the audit committee need to be involved?
- Will the company have to restate financials?
- To what extent do regulators need to be informed?
- Should steps be taken to isolate the specific bad actors (or their superiors)?
These questions, among others, should be asked and answered by the general counsel, the Board of Directors and senior management as well as the company’s outside counsel and other experts.
- Investigate, report, act. Don’t hide—or hide from—a crucial issue. Be sure to uncover what happened, keep all stakeholders informed as required, and take action to solve the problem and ensure it does not reoccur.
Osler’s Risk Management & Crisis Response team has produced a free white paper titled Building a Proactive Risk Management Program.
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Osler is a leading business law firm practising nationally and internationally from offices across Canada and in New York. Our clients include industry and business leaders in all segments of the market and at various stages in the growth of their businesses.
Led by Practice Chair Lawrence E. Ritchie, Osler’s Risk Management and Crisis Response team draws on the experience of national specialists across a broad range of expertise and offers innovative cross-disciplinary solutions to proactively prevent and, when necessary, respond to legal, regulatory and third party threats and related challenges.
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