Mark Gibson
Mark Gibson Mar 1, 2016

Seven lessons in crisis management

One important lesson that all bankers learned during the financial crisis was that trust is essential to their success and that once an institution loses that trust in the eyes of its customers, regulators or the public, it’s a long and difficult road to win it back. That’s why the current Volkswagen emissions scandal is so fascinating – and relevant – to us all.

Most of you know the facts. The CEO of VW admitted that the company installed an illegal device on 11 million cars to cheat on emissions tests, that he knew nothing about it and promptly resigned. He did this this several days after the U.S. Environmental Protection Agency (EPA) issued a formal notice of violation of the Clean Air Act on September 18, 2015. Sixteen months earlier, the emissions problem had been brought to the attention of the California Air Resources Board and VW officials.

What did the company do in those 16 months? Did engineers study and question the results of the testing lab? Did Corporate Communications folks dig into the situation and craft a strategy to preserve the trust of customers, dealers and the public (and thereby protect the billions of dollars of brand equity at risk)? Did anyone tell the CEO they had a possible problem in one of their most important markets? Apparently not, because the story deteriorated from there.

Since VW has not demonstrated a sense of urgency or creativity to come up with an acceptable fix and has not effectively managed its relationship with U.S. regulators, the U.S. Department of Justice, on behalf of the EPA, filed a formal complaint on January 4 against Volkswagen, Audi and Porsche for alleged Clean Air Act violations, with fines that have been estimated as high as $48 billion. That’s a lot of Jettas!

How does this relate to banking and what can all of us learn from this unfortunate situation? Quite a bit, it turns out:

Be ethical. Warren Buffet was reputed to have said, “When looking for talent, I want smarts, energy and integrity. And if they don’t have the third, the other two don’t matter.” Cutting corners to get around regulations is never a good idea and you should make sure you have a culture and recruitment program that makes that crystal clear.

Monitor news. Your Marketing department should be monitoring news and social media on a daily basis, using Meltwater, Mention or one of the many available tools and alerting management of any important developments as they occur.

Listen. Your corporate culture needs to invite colleagues at all levels to identify and communicate problems immediately, so that corrective action can be taken. Your leaders do not want to be like the “emperor with no clothes!” No executive likes to be surprised, and the best way to avoid that is for managers to talk to and listen to the troops on a regular basis.

Be ready. You want to have your Crisis Management team identified and scenarios defined and thought out so that your organization has the “muscle memory” to deal with bad news when it comes. Because, inevitably, it will. Many banks focus on technology or systems recovery, but be sure you also prepare for reputation damaging scenarios as well. And be sure that Public Relations and Corporate Communications are an integral part of the team.

Get in front. For serious issues, be proactive with regulators or law enforcement and attempt to issue joint statements whenever possible. In my experience, being proactive and bringing an issue to the regulator’s attention almost always produces a better outcome than them discovering it on their own. And if it’s a serious problem, working and communicating jointly is infinitely better than taking a hands-off approach and “waiting to see what happens.”

Over-communicate. Leaders need to keep colleagues, customers and other important stakeholders informed and stay in front of news developments. After all, people are going to hear about it anyway. The choice is, either you craft and control the message, or an external source who cares much less about your brand, like the media or regulators, will craft the message for you. Again, rely on your communications professionals. This is what they get paid to do.

Be generous. You only have one chance to make a good first impression. And you only have one chance to effectively resolve a problem to the customer’s or regulator’s satisfaction. Don’t be cheap! Come up with a solution that more than makes everyone whole. That’s the way to get bad news behind you and regain customer trust. In fact, we have all seen the research that customers who experience a problem are actually more loyal if the problem is dealt with in a satisfactory manner.

Bad news and crises are never fun, but they do create an opportunity for great companies to shine at the end of the day and make their brand even stronger than before. Be ready when bad news arrives and take the high ground. You’ll be glad you did. 

Mr. Gibson is a senior consulting associate with Washington, D.C.-based Capital Performance Group, LLC. He can be reached at mark.gibson2072@icloud.com

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