We live in an increasingly viral world. Information is consumed and spread at an unprecedented rate, and the new media landscape has spread the online influence between traditional media and "citizen journalists." In a sense, everyone engaged in social media is a content producer. Publishing or commenting on blogs, as well as sharing information on Facebook, Twitter and YouTube, gives content a boundless audience. While the Web 2.0 world gives financial firms unprecedented opportunities to engage with media and key stakeholders, the risks they face to their reputation have never been greater and more capable of escalating out of control.
In response to these threats, American International Group Inc. (AIG) -- a company all too familiar with negative publicity -- launched ReputationGuard, which provides insurance coverage for policyholders to pay for the costs of outside counsel in the wake of a PR crisis. This, however, is a reactive approach that only manages the response to a single crisis, rather than develops long-term strategies to best prepare for a one before it even happens.
There was a time where PR crises were infrequent and would quickly fade away after a solitary negative article. While a single call with a reporter used to suffice, the new "PR" in crisis management is preparation and response. With financial firms under greater scrutiny in traditional and social media, research shows that, how you prepare for and respond to the next crisis will ultimately determine how it affects the bottom line.
The 2011 Burson-Marsteller Crisis Preparedness Study found that 59 percent of business decision makers have experienced a crisis in their current or previous company. Among those involved in a crisis, 32 percent experienced a drop in revenue and 24 percent were forced to make cut-backs or layoffs. To further illustrate the imminent threat, 79 percent of business decision makers believe they will experience a crisis within the next year. Controversial company developments, online security failures, logistics difficulties and intense regulatory scrutiny of the company were listed as the main reputation threats.
While the threat is understood, and very real, preparation still lags. The same study found that just over half (54 percent) of companies have a crisis management plan in place. Those financial firms who do have a crisis plan will be in a far better position to weather the storm than those that do not. Rather than utilize a reactive approach to only focus on the response post-crisis, firms should work with their PR partners -- experienced in both preparation and response within the financial industry -- to proactively develop a plan that addresses the threats and rapid-response implementation.
The speed and nature of today's threats to financial services firms has created a bad news/good news situation. The bad news is that the window to respond to such a crisis is small, but the good news is that having the proper plan in place will expedite the response and mitigate the damage. To build a comprehensive communications campaign in today's landscape that's solely focused on positive media and not accounting for potential PR crises is a myopic approach that can have lasting negative repercussions.
Think back to elementary school when they would run organized fire drills so that everyone knew what to do and where to go in the event of a real emergency. Financial firms need to adopt the same approach by implementing strategies and procedures to respond to a variety of potential crises. The best communications partners are those who understand the threats to your company and industry and are able to rapidly mobilize resources to respond across multiple communications channels. As with any emergency, the level of preparation is directly correlated with the effectiveness of the response.