The delay in addressing the report in 2018 that found "major structural damage" at the Florida condo that collapsed last Thursday is a wake-up call for business leaders to act quickly to help prevent crisis situations for their organzations.
While the cause of the building’s collapse has yet to be determined, a best crisis management practice is to address any problems or issues before they can spiral into a full-blown crisis. Don’t wait to find out too late what you should have done that could have prevented a disaster, scandal or other emergency.
Crisis Audits
No matter what type of corporation or organization you have, conduct an annual crisis audit to identify and update a list of the most likely emergencies, disasters, scandals or other crisis situations that could happen to your business. Ask key members of your staff—including HR, IT, PR, financial, and legal advisors—for their insights and perspectives.
When the audit is completed:
- Determine what should be done to reduce the likelihood of the identified potential crisis situations. Check back with members of your team for their recommendations.
- As necessary, reach out to qualified experts and consultants for the help you need to mitigate potential crisis scenarios and situations; contact your industry’s trade associations for their guidance and suggestions.
- Set priorities, deadlines and milestones for addressing the issues.
- Assign responsibilities to ensure steps are taken to address any concerns.
- Follow-up as needed to confirm the required actions were completed; notify all members of your team about the status of those actions.
Some crises, such as lawsuits, can strike any company.
Three Types Of Lawsuits
Elisaveta Dolghih is a partner at Lewis Brisbois Bisgaard & Smith where she handles complex commercial, employment, non-competition, and trade secrets litigation in state and federal courts around the country.
She noted that, “The three major types of lawsuits that businesses deal with are: (1) breaches of contract; (2) employment; and (3) negligence/breach of some duty. Anyone running a business should have people that are responsible for… each type of lawsuit. HR usually handles the employment issues, and, if trained correctly, can handle most employment disputes pre-litigation.
“Breach of contract lawsuits can be prevented by a careful review of agreements before they are signed to ensure that contracts have adequate termination clauses and a clear description of what the business is committing to deliver in terms of goods and services.” She noted that, “... negligence and tort lawsuits can be warded off by designating a person who is in charge of compliance and who understands the legal consequences of the failure to comply. “
To discourage violations of company policies that could result in a lawsuit or other crisis, consider conducting periodic training sessions to ensure all employees and vendors know the lines they should not cross—and the consequences for crossing them.
Advice For Business Leaders
A Board’s Fiduciary Duty
Dolghih advised that, “When an organization is governed by a board of directors, they have fiduciary duties to the organization, and should appoint or hire qualified individuals to advise them regarding the issues that may affect the organization, including actions that the board should take to prevent future lawsuits.
“The directors have a fiduciary duty to act with the care an ordinary prudent person in like position would exercise under similar circumstances, which means that [they] have to take action based on the advice of the qualified individuals if such action would be prudent to take,” she counseled.
Always On The Agenda
Kunal Sawhney, the CEO of equities research firm Kalkine, advised that, “In every board meeting, legal compliance must always be on the agenda. Litigations are expensive, cumbersome, and carry the risk of hampering business continuity if not handled carefully.
“The best approach is to ward off legal tangles even before they knock on the company’s door. Every business, big or small, needs to have at least one staffer dedicated to handling legal and other regulatory compliances. What top executives and the board sometimes overlook is how expansive the field of law is,” he concluded.
Don’t Procrastinate
C. Scott Schwefel, an attorney with Shipman, Shaiken & Schwefel, said, “A company needs to be proactive in managing disputes before a problem turns into litigation. Employee oversight plays a large part in this mitigation. When confronted with a problem, oftentimes employees will procrastinate in addressing it or, in some cases, will flat out ignore it. Kicking the can down the road almost always transforms small problems into larger ones. Employees should be trained to address small problems before they turn into larger problems and should be encouraged [to] seek help from management when necessary.”
“Well-drafted policies and contracts reduce misunderstandings with clients. Make sure most agreements are reduced to writing in some form. While not all aspects of business require a formal signed contract, it’s good practice to have even the smallest agreements reduced to writing, in any form. Even a short and simple email confirmation can eliminate costly misunderstandings,” he said.
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