Notes on a scandal
In our increasingly regulated world, financial services providers need to know to manage a crisis
Not a week goes by without a story in the media about bribery, an insider trading scandal, a licence being cancelled, allegations of fee gouging or other misconduct in the financial services sector.
One needs to only look at the media release section on ASIC’s website for an overview of some of the well-publicised issues that have rocked the sector.
If you lead a business that has been at the centre of such a maelstrom, you would have quickly found out whether you run a tight ship with a crew that can withstand a crisis.
For larger businesses, separate departments that are not often used to working together have no choice but to find a solution rapidly.
A typical issues management team can involve: Legal (what laws did we breach), IT (find out who leaked it), Media Relations (what should we say) and the Executive level (who should say it).
If the crisis is due to a fundamental business failure, egos need to be set aside and finger-pointing postponed, to resolve the issue collaboratively as soon as possible, considering the 24-hour media cycle.
Large or small, any business leader shows his or her mettle when steering the ship through these stormy waters.
If you haven’t dealt with a major media crisis before, the only way to be prepared for the tsunami of attention that will come your way, is to plan.
Your business plans, whether about business development, continuity or a broader strategy, are probably based on a template.
Media issues management templates also abound; you can get a few for free on the Internet. The trick is to obtain one that is relevant to your industry.
I’d also recommend getting your hands on the crisis management plan from an airline, construction, mining or other company whose worst case scenario is genuinely a life or death situation. They tend to have the most detailed, pragmatic plans that include reactive media plans.
What’s more, they are usually disciplined about keeping them up to date (and have a plan for that too), as well as evaluation methods on how they performed during crises, so they can learn from past mistakes.
For these companies, lives are immediately at stake (as opposed to the less urgent matters of retirement savings or investments) so their crisis management plans have to be first-rate.
The next step is to tailor the template according to your situation. A good starting point for any situation analysis is the oft-used business mnemonic, PESTLE.
A PESTLE analysis for Australia’s financial services sector may include the following elements.
Politics is almost always relevant in financial services as each major party is traditionally perceived as ideologically predisposed to either being for or against a free market.
(It’s never this simple or straightforward of course. For example, David Murray was expected to have taken a more liberal individualist stance with the FSI, considering his political leanings, but surprised banks with a few recommendations that called for the heavy hand of regulation to smack down the invisible hand of the market.)
The economy is always important – investors paid less attention to whether their managed funds were beating the indices pre-GFC, when markets were generally on a growth trajectory.
Social elements should also be considered. For example, are Australians genuinely becoming much better informed about the value of seeking financial advice, as well as becoming better engaged with their superannuation and insurance needs, and demanding improved transparency on fees?
Is it the case that the industry is hyper-sensitive to the issue of fees more because it’s sensationalised in the media, and less due to heightened consumer concerns?
Technology is increasingly important (for example, review sites on advisers and fee comparison sites can potentially make or break reputations). Legal and regulatory frameworks are also important in this highly regulated sector.
Environmental factors are usually not a priority in crises affecting the financial services sector (unless perhaps you finance or insure a company responsible for causing an oil spill). Instead it’s helpful to replace this E with Ethics – see below.
Finally, in any situation analysis for businesses, intel on what your competitors are doing or have done before can be valuable. Examining how they have responded to a similar crisis in the past is a useful exercise. A quick media search will bring up this information.
The media isn’t called the fourth estate for nothing. It’s another check and balance against policy and law. Furthermore, the standards that people and businesses are judged by in the media can be higher than what’s required by the law.
Many people are familiar with the front page test – when confronted with a risky proposition, ask yourself whether you would mind seeing a story on the front page of a newspaper about it, featuring your name and picture.
It’s one way to illustrate that a choice can be based on whether you’d feel ashamed about your behaviour if you were sprung doing it. This simple heuristic is a good first step into considering whether your behaviour is ethical.
Time and again, moral compasses waver in boardrooms when a crisis is being resolved. It’s beneficial to consider a range of options, including those that are unethical – and hopefully these less savoury solutions will be struck out.
Nobody’s perfect and we can deduce from the more protracted financial planning scandals that some crisis management teams have taken the wrong path.
There are many reasons for this, a common one being that the most dominant voices in the room, the people who are ultimately making the final decision, fail to temper commercial pragmatism with ethical considerations.
How can this risk be mitigated? We go back to step 1 – planning. Run hypothetical exercises.
See how the team dynamics play out. Test and learn. Then if a storm were to hit, you’ve got all systems in place.
I can also highly recommend consulting an objective third party, such as the Ethics Centre who can guide you through difficult decisions.
Caroline Regidor is managing director of First Degree PR. She has over a decade’s experience working within the media industry and providing communications advice, often on behalf of financial institutions.
She has a combined Bachelor Degree in Media and Law, a Masters in International Politics and a Masters in Business Administration.
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