If 2022 has taught businesses anything, it’s the importance of having an effective crisis communications plan for when the unexpected happens.
Crisis for brands and companies come in many forms. 2022 was the year of Cybersecurity and this does not look like going away anytime soon. What happened with Optus last year will be studied at universities in years to come — in case you missed it, a great timeline of events can be found here.
The biggest take away from a communications perspective is that stakeholders expect immediate action and transparency. Optus was too slow to tell its customers what was happening and what to do. Even if you don’t have all the answers you need to tell them something and do it quickly.
It’s clear that too many companies are unprepared, and leaders need to anticipate and plan for the possibility of an unplanned event. IMPACT has learned from the many issues and crisis situations it has handled that preparation is key, and how you respond will determine how well you recover. And because crises tend to follow a similar pattern, no matter what the cause, you can prepare for it.
There are a number of issues that not only cause disruptions to your operations, but also damage your reputation and, in some cases, destroy shareholder value. Top of the list may be cybersecurity and cybercrime, but there are other risks.
Think shareholder or consumer activism (in 2022, Mike Cannon-Brookes’ Grok Ventures engaged with AGL’s stakeholders to successfully change the company’s climate transition plan), leadership (we saw a slew of leaders behaving inappropriately and issues around a lack of diversity and inclusion derailed a number of brands last year), product failure or quality issues (from fruit and veg to toys and weedkiller last year – it could happen to anyone). Globally FIFA was putting out fires left right and centre over its decision to hold the world cup in Qatar (as was David Beckham by association), Balenciaga was too slow to respond to the ‘bondage bear’ saga, and Twitter is in a world of pain following its purchase by Elon Musk.
Cutting corners can be costly
Media and marketing reporter for the AFR, Sam Buckingham-Jones reported this week that the Optus brand suffered a $1.2 billion blow after last year’s cyberattack, plummeting down the rankings of Australia’s most valuable brands:
“Optus was on track for one of its biggest years of growth in brand value before a cyberattack in September resulted in a serious customer data breach. The attack meant that instead of growing from its $4 billion brand valuation in 2022 to a forecast $4.5 billion, it instead fell to $3.3 billion.”
There’s also evidence that companies that experience a significant crisis can lose up to 19 per cent of their stock value. After hackers stole data from Medibank in October, its shares fell 15 per cent in one day after a week-long trading halt. The company initially estimated the cyberattack would cost it between $25 million and $35 million before potential remediation, regulatory, or litigation impacts. In the wake of the fatal accident at Dreamworld on the Gold Coast, shares in parent company Ardent Leisure fell by up to 22 per cent the next day, slashing about $200 million from market value, and have never fully recovered.
But the speed and effectiveness of a company’s response can make a difference. In the US, companies that responded within hours typically experienced a 4 per cent decline in stock price value. Those that responded within days saw a 10 per cent decline, while waiting weeks resulted in a 14 per cent fall.
Effectiveness – as measured by the impact on sentiment across media articles and social media mentions – appears to be more important in the long term. Companies that responded within hours, but did so ineffectively, saw a 1 per cent uplift in stock price. By comparison, those that responded within several weeks but did so effectively saw a 9 per cent stock price rise.*
If you would like to get your house in order for 2023, please reach out to one of our team and we will take you through our approach and costs.
* Hot Paper Lantern, 2019