How Best to Manage in the Crisis Situations Where Risk Abounds - Essay Example

 Goodwill and CSR Introduction The case studies presented identify situations in which businesses were called upon to extend goodwill and support when a local emergency situation occurred. The main question in both cases was whether or not there would be extended liability as a result of offering such support, due to any number of issues from loss of market-driven revenues to the public image being presented to the community at large. The question was asked as to how these situations should be handled, taking into consideration the needs of the community and the business. This paper describes how best to manage in these crisis situations where risk abounds. The Situation at Hand Currently, there are absolutely no industrial policies or labor laws for commercial businesses that mandate a formalized disaster management plan that covers their obligations in the event of crisis scenarios (Bhatt, 2002). This means that it is left up to the management and leadership teams of commercial enterprises to determine whether such policies and procedures require development and how to effectively cope in the midst of a crisis situation that relies on the business extending a goodwill gesture for community support. Kyoto University (2007) offers that successful business operations are irrefutably linked with trust-building efforts with community citizens and stakeholders. Therefore, lack of legal backing and the undeniable truth that business success is linked to trust somewhat forces management and leadership to consider the value of corporate social responsibility when making goodwill decisions such as those proposed in the case studies. In the event that a situation occurred where a business is dependent on market stability and customer interactions as part of their supply chain, crisis scenarios in which the business is called upon to extend physical support such as using the facility as a disaster triage center represents considerable risk. In the case involving Kaspa Financial Services, there were concerns over potential liability claims for disaster victims who might choke on their food offerings as well as lost revenues from disgruntled shareholders (to name only a few). The financial and reputational risks to the business were significant if the company decided to offer the facilities to the disposal of disaster management personnel and victims of the disaster. However, an even broader problem existed in terms of how the company might be viewed by the media, broader society, and the disaster management teams if they refused support due to self-centered concerns toward protecting the business as first priority. “CSR is not about crisis management. What a lot of companies overlook in a crisis is the way they handle things from a communications perspective” (Kirby, 2010, p.40). Businesses with a well-defined risk management team and legal team will often attempt to remove media influence in crisis situations to avoid reputational damage. Lentini (2009) offers that companies which fail to communicate will appear uncaring and inconsiderate to the general public and other stakeholders if they attempt to exclude news media when bad news is publicized. In the case study, these were some of the initial concerns, involving predictions regarding their perceived, long-term reputation as active participants in the disaster response effort. Trust is a key factor for ensuring successful business operations and failing to comply with requests for assistance could erode this trust not just in the short-term, but in the long-term as well which could lead to reduced customer revenues and client supply. In this case, the facility should be offered as a community support center with an approach by which senior managers are ready to respond to media inquiry so that the general public understands their generosity and also their position for protecting business interests. Excluding media in this effort would be a long-term strategic failure and it also represents a positive public relations opportunity to improve community standing and perceptions of CSR. Under stakeholder theory, those that contribute to a company’s success are suppliers, customers, partners and various social actors (Post, Preston & Sachs, 2007). Under this disaster scenario, all of these individuals would be impacted from government, investors and clients that rely on the operation to fill their financial service needs. A responsible organization has risk mitigation and contingency plans in the event of crisis situations and should be equipped to respond appropriately to satisfy all parties involved. The best method in this case, since liability is the main concern, is to make contact immediately with legal advisors and insurance agents to understand the potential risks. In times of disaster, volunteers should sign waivers and liability documents while managers inquire about their insurance coverage for this type of scenario (handsonnetwork.org, 2008). All of these activities can be kept transparent from the community while still ensuring that the liabilities on the business are addressed and minimized. It is likely that people working in disaster situations are familiar with the obligations of liability reduction and will likely comply with the effort if presented with such forms. In the case studies, market drops as a result of uncertainty over disaster situations is uncontrollable and a product of shareholder and community concerns. This should not be the primary consideration since it cannot be affected by management or leadership efforts at any level. The goal is to maintain a positive image, still be able to conduct the majority of business, and avoid negative perceptions of a self-oriented company without sympathy for victims and responders. Conclusion Taking the opportunity to provide support when it is requested in the event of disaster, such as those provided by the case studies, is a positive opportunity to improve public perception of the business despite potential liabilities. It is a short-term effort with considerable long-term potential for public relations improvements. It is possible that new customers will be developed from those affected by the crisis situation or even responders as an appreciation for their support and due to trust in their responsible business behaviors. Though no manager would want to provide such support when so many risks are present, with careful consideration and contact with insurance and legal teams liabilities can be substantially reduced. The key, however, is not to exclude media from this decision-making as the damage it could cause might cause strategic problems far into the future for failing to act responsibly. References Bhatt, Mihir R. (2002). “Corporate Social Responsibility and Natural Disaster Reduction: Local Overview of Gujarat”, University College London, p.19. Retrieved November 13, 2010 from http://www.karmayog.org/relateddocumentsoncsr/upload/22908/csr_gujarat.pdf Handsonnetwork.org. (2008). “Top 15 Things to Know when Managing Volunteers in Times of Disaster”, Hands-On Network, p.2. Retrieved November 13, 2010 from http://www.wcdr.gfdr.org/imgs/pdfs/White_Paper_on_the_Corporate_Community_Interface__CCI_.pdf Kirby, Jason. (2010). “Crisis Management: When Things get Messy, Can Corporate Social Responsibility Help Clean up a PR Disaster like the one Caused by BP’s Oil Spill?”, Maclean’s. 123(23), p.40. Lentini, A.R. (2009). “After it Hits the Fan”, Risk Management. 56(5), pp.42-48. Post, J., Preston, L. & Sachs, S. (2007). “Redefining the Corporation: Stakeholder Management and Organizational Wealth”. Retrieved November 12, 2010 from http://www.sup.org/book.cgi?book_id=4304%204310%20 Read More