Protecting your brand in times of crisis
A reputation and brand are among the
most valuable assets of a company. They
define the company and help it stand
out in a crowded marketplace.
And, as observed by Paul Schiavone, the
London-based global chief underwriting
officer special lines, Zurich General
Insurance at Zurich Financial Services,
brands are becoming even more
important in today's world of tight
credit and bank funding.
"Banks, for example, are now also
lending based on the intangible assets
of companies, one of which is brand. In
an uncertain world, a strong brand gives
a sense of comfort."
But many years of happily spending on
public relations executives, marketing
managers and advertising gurus to
strengthen and maximise a brand or
reputation can be undone very quickly.
As Warren Buffett once observed: "It takes 20 years to build a reputation
and five minutes to ruin it." This is even
more true today.
Almost daily, we read about unexpected
reputation and brand tarnishing events
in the newspapers - from executive
scandals, rogue traders and fraud to
product recalls and malfunctions, online
security breaches or IT system collapses
and environmental or safety accidents.
And, with the rise and rise of social
media, it can take just one disgruntled
customer or just one tweet, Facebook
posting or blog tirade to spark a
"What used to be called the 24 hour
media cycle is now the 24 second
social media cycle," says Ian Davidson,
Aon Risk Solutions' placement director
for crisis management. "As a result,
negative as well as positive comments
can spread with huge virility in a very
short period of time."
The costs to companies can be huge,
including lost revenue, customers voting
with their feet, compensation payouts,
litigation, clean up expenses, dented
staff morale and a lower share price.
The costs of managing the crisis can
also be staggering. BP, for example, is
believed to have spent around $300
million on a combination of advertising,
lobbying and PR towards restoring its
reputation in the wake of the Deepwater
Horizon oil spill in the Gulf of Mexico.
Thus it's not surprising that brand
and image has retained its ranking as
businesses' most important risk concern
for the fifth consecutive year in the Aon
2011/2012 Australasian risk survey. It has
also come up tops in seven out of the
past 10 surveys.
According to Davidson, brand and reputation risk is really an effect risk as
opposed to a causal risk - that is, it will
typically be triggered by another event
or risk which then has a knock on effect
on the company's brand and image.
Increasingly, companies expect a brand
or reputation damaging event to occur
even though some don't prepare for
it. Indeed, Burson Marsteller & Penn
Schoen Berlan's 2011 Crisis Preparedness
Survey found that while 79 per cent of
business decision makers expect a crisis
within 12 months, only 54 per cent had
a crisis management plan in place.
Given these findings, Schiavone says the time was right to develop a product
around brand and reputation and
thus Zurich began working with Aon
and WPP, a world leader in marketing
communications services, a year ago to
develop a new insurance risk transfer
offering and to really understand what it
was that companies needed.
Since then, Munich Re and Chartis have
released their own policies which are
also available through Aon.
Davidson says all three offerings provide
different alternatives for clients to
transfer some of the losses that can
result with these risks. "The Zurich
policy and the Chartis policy provide
strong pre-crisis escalation assistance to
the Insured. They have a strong focus on
planning, prevention and the mitigation
of risks. The Munich Re policy is unique
in that it will reimburse the client for loss
of gross profit."
The new products recognise that
companies cannot be too prepared
for a crisis and will need far more than
a manual on the shelf to deal with
it. Not being able to forecast exactly
what could hit them, companies need
to anticipate different scenarios and
even "Black Swan" events, put in place
flexible processes and protocols to
tackle them and conduct simulations for
different circumstances. They also need
to recognise that most crises require
attention within the first 24 to 48 hours
of a threat emerging.
As a result, the Zurich and the Chartis
policies offer access to world-class
reputation and crisis communications
professionals before, during and after
a reputation damaging event as well
as coverage for costs associated with
avoiding or minimising the potential
effects of negative publicity.
"There's enough anecdotal evidence to
show that companies that haven't done
the planning and preparation before
an incident, or who don't respond fast
enough when they first become aware
of an incident, will not do as well those
that do," says Davidson.
So, for example, after taking out
cover under the Zurich policy, crisis
communication consultants from
WPP will come in and do a brand
and reputation threat analysis, review
a company's plans and processes,
provide advice on how it can plug up
its weak spots and provide training and
preparation for its board and executive
team. And, once it becomes aware of a
threat against its brand, they will step
in immediately to help it manage the
situation before it escalates into a full
blown crisis. After the event, the team
will also work with the company to help
restore its brand.
According to Schiavone, the product
covers whatever the company needs
to restore its brand including public
relations, media relations, advertising
and even political relations.
He expects different companies to buy it
for different reasons. "Some will like the
fact that there is cash ready for a crisis
which they don't have to suddenly find
from somewhere else. Others will like
the pre-crisis assistance and the access
provided to a top communications firm.
And some will be attracted to the fact
that there is money available to restore
the brand after the crisis because it's
very hard to make a funding case to the
board or CEO when the crisis has fallen
off the front pages of newspapers."
For those taking out the Chartis
policy, similar reputation and crisis
communications services will be offered
by Burson-Marsteller and Porter Novelli.
"Even if you have your own internal
or external consultants whom you are
happy with, having recognised crisis
communications consultants available to
do a review and help with preparation
and to provide a second opinion at the
insurer's expense is always attractive," says Davidson.
Each of the insurers takes a different
approach in the cover it offers. All three
policies offer a broad and flexible cover.
Zurich's policy, for example, responds
to 20 insured events although clients
may have additional events that aren't
included. In contrast, rather than
define insured events, Chartis' policy
simply refers to a reputation threat or
attack - the publication of anything that
could be perceived by stakeholders as a
material breach of trust and could have
a material effect on the brand.
Munich Re offers financial loss cover
which Davidson hopes will be extended
to the other policies.
"All of the wordings are quite technical
and require a fair degree of analysis to
ensure it is suitable for a particular client,
its size, what it is trying to achieve and
whether it is covered elsewhere for a
certain risk," says Davidson.
However, he adds: "These are new
and emerging products and we
are still working with insurers to
further enhance the coverage."