Confidence of executives in crisis management vastly exceeds actual readiness

05 July 2018 Authored by Consultancy.uk

Few executives are following the advice that crisis management shouldn’t start with a crisis, a new survey from Deloitte reveals. The Big Four firm found a huge chasm between the confidence of leaders in their ability to overcome a crisis, and their actual level of preparedness. The adoption of a smart crisis management strategy is crucial to improving resilience, the firm concludes.

‘Test, don’t assume’ is the mantra of Deloitte’s latest crisis management survey. Aptly titled ‘Stronger, fitter, better’ the report is based on a survey of over 500 crisis management, business continuity and senior risk executives. Despite brimming with confidence that they could rise to meet a crisis, the researchers found that few executives have put their faith to the test.

The gulf between confidence and preparedness comes as a majority of leaders believe their organisations are facing more crises than ever before. The authors of the report – Peter Dent (Canada), Rhoda Woo (US) and Rick Cudworth (UK) – argue that, while confidence is an asset, preparedness is more important for surviving a crisis when it hits. 

“With the rapid pace of change facing companies worldwide, and with crises on the rise, it is critical for organisations to be ready to respond with skilled leadership and plans that have been tested and rehearsed,” said Dent, global leader of Deloitte’s crisis management practice. “Organisations that are adept at crisis management take a systematic approach to steering clear of potential crises and managing those that do arise with an eye to both preserving and building value.” 

Mobilization of crisis management teams

Dent and his colleagues found that 80% of the executives surveyed said their organisations – all of which have annual revenues in excess of $1 billion – had deployed crisis management teams in the past two years. Cyber threats and safety incidents were the most common reasons for mobilisation, followed by security and performance issues.

Cyber is of particular concern among executives concerned with protecting client data. Cybersecurity challenges are a growing phenomenon and a key reason why 60% of senior risk executives believe that their organisations face a far greater number and range of potential crises than they did ten years ago. 

Crises come in all shapes and sizes but Deloitte found one common denominator. Executives consistently express more confidence in their ability to handle one than their actual level of readiness would suggest was reasonable. The most glaring example is with corporate scandals. The authors found that 88% of leaders believed they and their firms were equipped to deal with a major scandal. Yet just 17% had conducted any kind of simulation exercise to put that theory to the test. 

A majority of those surveyed had carried out exercises to mimic a crisis caused by systems failure or cyber attacks, which are relatively easy to simulate. But while just 53% had conducted a cyber attack simulation, 87% expressed confidence that they could cope with the real deal. 

Confidence levels versus simulation activity

For other crises, such as industrial action, policy changes, or product recalls, only small minorities had performed simulations. Yet, for every kind of conceivable crisis strong majorities expected that they possessed the strategic and organisational wherewithal to successfully overcome the emergency. “Crisis management shouldn’t start with a crisis – at this point it may already be too late,” said Dent in response to the findings. “The ability to prevent a crisis can be fortified by looking at the entire life cycle of a crisis instead of just readiness and response.” 

“Successful crisis management also requires overcoming any biases to ensure that the board and senior management look closely at risks. Even those, and perhaps especially those, they believe aren’t likely to happen.” 

Leveraging crises

Deloitte – one of the few consulting firms to have a specialised global center for Crisis Management – advises clients on how to access the ‘unforeseen advantage’ that a crisis can provide. This is best illustrated by the firm’s crisis management life cycle which demonstrates how organisations can leverage a crisis to become stronger and more resilient, learning from mistakes rather than being devastated by them.

“Crises aren’t inevitable” points out Rhoda Woo, Deloitte Global’s crisis management leader in the US. “Many of them are avoidable, which is why smart business leaders invest in crisis management capabilities. These strengths can help their organisations avoid costly, and sometimes irreparable, damage to finances, employee morale, brand, and reputation. Truly effective crisis management goes beyond being reactive and simply protecting existing value. It also enables resilience and powers future performance, thereby enabling an organisation to emerge stronger.”

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