Top 10 crises executives are worried about & why
By Alex Liddington-Cox and James Fitzpatrick
Crisis can hit from any direction. But chief executives have a keen eye for certain disasters.
Crisis Shield has aggregated the latest reports on crises that executives are concerned about. Here’s the top 10.
Cyber security incidents are the nightmare scenario to executives in Australia and around the world. A breach in the security of an organisation’s systems, networks, and programs can halt day-to-day operations. Most commonly, it can damage stakeholders’ trust because it often results in confidential information being leaked.
As reported by Crisis Shield, several large organisations such as British Airways and Perth Mint have faced data breaches in the last year. In the last twelve months, organisations like Telstra, Under Armour, PageUp People, Nova Entertainment, Austal, GeoScience Australia, GoGet, as well as Airtasker and Baker’s Delight (via the Typeform data breach) and even ride-sharing behemoth Uber, have been affected.
Moreover, Australian agencies, businesses and not-for-profits with turnover of more than $3 million are now required to report data breaches to the Australian Privacy Commissioner under the Notifiable Data Breaches Scheme.
The latest data from the Australian Information Commissioner says there were 245 notifications in the three months to September 30. Of those, 57 per cent were malicious or criminal acts and 37 per cent were down to human error.
Unplanned IT and telecom outages
Unplanned technical issues can literally shut your business down as customers are unable to access your organisation’s services. As reported by Crisis Shield, Optus’ exclusive coverage of the 2018 Soccer World Cup ran into a technological outage that lasted throughout the first weekend.
IT outages have also caused major problems and attracted significant negative media attention for companies including Optus’ main rival Telstra, as well as Virgin Airlines and all four of the big four banks (NAB, Commonwealth Bank, ANZ and Westpac) in the last year alone.
Interruptions to supply, utility or transport networks
An outage to water, gas, or electricity can cause disruptions to a city and organisations. Despite having activated emergency reserves, the recent hot weather in Victoria caused blackouts across the state as the Australian Energy Market Operator (AEMO) ordered load shedding across the grid, forcing stores and offices to close early.
Adverse weather and natural disasters
Extreme weather or natural disasters such as hurricanes, fires and floods can shut down businesses and cities for long periods of time. Even the best-laid contingency plans can go awry when faced with a natural disaster, with prices for materials and goods skyrocketing due to diminishing supplies, and some businesses needing to permanently shut their doors.
Acts of terrorism
Acts of terrorism attract the most amount of media coverage and are almost impossible for organisations to predict. Customers may avoid the area until the fear has worn off, and the increased security may hinder activities.
Organisations must respond appropriately to claims and complaints of sexual harassment from their employees.
Apart from being the right thing to do, failure to respond can alienate customers and public stakeholders. However, as reported by Crisis Shield with the Google employee walkout, your greatest danger in these scenarios is disquiet amongst staff.
Product issues and recalls
Product recalls can undermine your entire brand, especially in situations that cause injury or death. The tragedy at Dreamworld looms as one of the clearest examples in recent Australian corporate history of poor crisis management.
Immediately after four Dreamworld customers lost their lives following a ride malfunction, shares in the parent company, Ardent Leisure, plunged 22 per cent. Then-chief executive Deborah Thomas bungled the response and lost her job, and the company is still being subject to negative media coverage thanks to the Royal Commission into the tragedy.
The most common cause of a share price plunge that mobilises shareholders to call for management to be dismissed is a significant asset devaluation. These can come about from investments gone bad or macroeconomic factors. In extreme scenarios, these write-downs can be a catalyst for a company insolvency or bankruptcy.
However, Deloitte’s latest report indicates that businesses are much more prepared for crises arising from financial difficulties.
Corporate malfeasance or white-collar crime can attract significant media attention and shatter belief in the organisation, especially when customer privacy is being breached by an employee utilising their privileges or corruption. It might take a significant amount of time to rebuild brand image and regain trust.
The Royal Commission into Australian banking is the clearest recent example of companies being punished for compliance failures.
Companies are struggling to manage the transferal of power to their customers and staff with the advent of social media. It has also weakened a company’s ability to keep HR disputes in-house, as demonstrated by the Google walkout.
While it has given staff members and the general public an avenue to air well-founded criticisms, it has also given rise to false accusations of malpractice and fake news.