Imperial College London Entrance

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We are all versed in crisis. Whether gazing through the news upon a capsized ship off the coast of Giglio, or putting out fires in our own personal and professional lives, the human of the twenty-first century encounters crisis on a daily basis. Crisis isn’t just familiar. Crisis is relentless, indiscriminate, and potentially devastating, ending careers and lives around the world; it defines our very existence.

It can also present opportunity. On October 5th, Dennis Flynn, CEO of Crisis Solutions and formerly an officer in the British Army, led the Imperial College MSc Management brigade in a crisis management workshop. A gripping lecture was delivered on crisis indicators, decision making, communications and response capabilities, before students were given the chance to apply their knowledge to two crises that have horrified and fascinated business leaders in recent times – the sinking of Costa Concordia that cost 32 lives in 2012, and the ongoing Volkswagen emissions scandal.

Mr Flynn emphasised the humility required to acknowledge the value of planning for crises long before they come to fruition, an acceptance that has been amiss in many of our leaders. While CEOs cannot pre-empt every so-called “black swan event”, how those in charge respond to crises will define their legacies as leaders. The recently-departed Volkswagen CEO Martin Winterkorn will not be remembered for the company’s EBITDA in 2013, or the VW Golf’s new coffee-holders. He will be known for presiding over a moral dereliction of duty that misled authorities and consumers in the United States over emissions standards, which has necessitated the recalling of 11 million cars and caused a share price fall of almost 40%. Indeed, Mr Flynn said that crises which cause entirely avoidable losses in brand, reputation and finances, have a tendency to be caused by failures in ethics and values, rather than shortfalls in process or risk management.

Offering anecdotes from his time as a commanding officer (where he was once advised by his crisis team to “go and have a cup of tea” as his most useful input into a crisis response), Mr Flynn identified the ‘Intent’ (what are we ultimately trying to achieve?) and the ‘Main Effort’ (what is the current top priority?) as the backbone of a crisis response. The effective co-ordination of your team, a strong communications strategy, the management of swathes of inconsistent information and unflinching decision-making are key components of an organisation’s response to a crisis, and can make or break a company.

I say “make”, because companies can, and often should, improve their economic and consumer standing in the aftermath of a crisis. The graph below, drawn from Knight and Pretty’s study, The Impact of Catastrophe on Shareholder Value, highlights the share price gains that are to be made through an effective response to a disaster, with companies that managed their crises well seeing a 7% rise above analysts’ expectations in their share value. Companies such as the much-maligned cruise operator Carnival, that floundered in their approach to a crisis, saw a 15% fall in their share price. Without wishing to sound crass, there is serious money to be made, and even more to be lost, from a crisis.

The workshop closed with students devising their own crisis plans for the Volkswagen scandal, with emphasis on the rebuilding of trust, transparency and readiness for further crises being common themes among the syndicate teams. The groups’ efforts drew strongly from the workshop and their own experiences, and represent an encouraging development towards a moral and humble approach to business, led by great minds open to review and due diligence. It is this philosophy that will steer our society through the humanitarian and economic crises that await the leaders of tomorrow.

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