Five takeaways from PwC's corporate crisis management study

06 April 2020 Consultancy.in

Most large businesses in India have faced a corporate crisis of some sort in the last half a decade. Despite the major impact it has on financials and operations, a new report by PwC has on a positive note found that in some cases, business can in fact come out of the crisis in better shape.

The Big Four accounting and advisory firm’s survey is set against the backdrop of the ongoing Covid-19 crisis, as businesses scramble to activate their crisis response mechanisms. Nearly 70% of the respondents were from large organisations, with the overall pool of respondents spanning 25 sectors.

Responses have boiled down to five key insights, according to PwC. The first is that no organisations are safe from a crisis, irrespective of their size and capabilities. This is evident from the fact that 80% have faced one corporate crisis at the very least in the last half a decade, with two crises being the average.

Crisis triggers from the past and expected in the future

The number of crisis situations appears to be directly proportional to the size of the organisation, although no businesses are safe. Prior to Covid-19, a sea of regulatory and technological changes were posing direct challenges to business operations, and constantly evolving market factors are expected to create similar conditions in the future.

This is not taking into account the current Covid-19 crisis, and the chain reaction of challenges that it is expected to pose to the business environment going forth. More than 95% of respondents to PwC’s survey expect that a crisis will hit home in the future, indicating the level of awareness among businesses.

What makes a crisis ever more inevitable is the fact that it can come in all shapes and sizes. Crises are diverse, and vary in their impact. This is the second key insight derived by PwC. The Covid-19 crisis, for instance, might have benefited some online retail and tech businesses, but it has been decidedly devastating for the travel and hospitality sectors, among others.

The report also illustrates the immediacy of a crisis. For instance, while many assume that broader market factors such as tech disruption and regulatory changes have a significant part to play in crises, executives report that day-to-day obstacles to operations are the primary cause for crisis. Tech disruption and cybercrime follow closely.

Ancillary impact of crisis faced

What about the next crisis?
Potential causes for future crises are also diverse. Executives are concerned about the increasingly tense geopolitical scenario across the globe, with internalising trade relations, protectionism and conflict. As a result, geopolitical factors have been rated as the biggest reason for issues in the future.

Fraud, ethical issues and corruption are the second biggest issue anticipated by executives, followed by competitive ad marketplace disruption and cybercrime. According to the authors, these disruptive factors are likely sources, but the very nature of a crisis is that it comes from an unpredictable direction.

“Leaders seem to be looking at the ‘known unknowns’. While their prediction of future crises is based on their current and past experiences, the real threat to their existence could come from anywhere – that is, the ‘unkown unknowns’” explains the report. The unanticipated and unprecedented arrival of a global pandemic is one example of such an ‘unknown unknown’,” state authors Gagan Puri and Vishal Narula.

PwC’s third key insight is the layered impact of a crisis. Irrespective of the part of the organisation directly affected by a crisis, it inevitably has repercussions throughout the organisation. Executives suggest that each crisis affects business relationships, reputation, financial strength, workforce, operations, not to mention prompting legal action in some cases.

This is described as a ‘chain reaction’ by PwC. As a result, ancillary factors that often escape the purview of daily inspection could be the source of a crisis that could bring down the entire organisation. The fourth insight relates to where the buck stops when a crisis does hit.

Owning crisis management

Most executives are willing to help respond to a crisis, but few are wiling to “own” it, according to the survey. This is not only in terms of taking responsibility for the crisis, but leading the response mechanism as well. “The absence of a designated leader could be a cause of concern as there needs to be clear communication, coordination, fact finding and decision making in the midst of a crisis,” explains PwC.

Stronger post-crisis

The last insight identified speaks of more than 40% of businesses that have emerged stronger than ever from a crisis faced in the recent past. These organisations not only emerge more resilient, but also appear to be generating more revenues that before. Three factors appear to be key in achieving such a response.

Developing a clear and documented crisis response mechanism is the first of these, followed by clear and comprehensive communication with all stakeholders involved in a crisis. Lastly, organisations that rely on gathering all the relevant facts and analysis them appear to come out a crisis better off than before, as it exposes vulnerabilities in an organisation.


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