EmploymentLaw/Management. Damage limitation exercise

Courtroom dramas aside, more lawyers in general, and in-house counsel in particular, are becoming involved in crises as advisers.

The combination of increasing regulation, proactive consumers and product liability intensifies the need for organisations to have workable crisis management schemes and to know how to use them.

Horror stories of the damage caused by an inability to handle problems abound. Dick Jennings, formerly of Guinness and Roundtree and now of Ford & Warren, Leeds, points to the Perrier case of 1989 as a classic example. A product with a formidable reputation for purity, Perrier suffered permanent damage when allegations of filtering problems were not seriously and promptly considered.

Jennings says: “Fast-moving consumer goods businesses, such as the food and beverage industries, rely on repeat business and public confidence. The value of the brand is wrapped up in the promise of quality.”

Businesses with dangerous products are also particularly vulnerable to crises. “Within the chemicals industries, public trust in companies is paramount,” continues Jennings. But others should not be considered immune. “For those in heavily regulated industries, the loss of a licence can destroy their business,” he warns.

Most companies need a coherent, well-considered plan and trained personnel to deal with crises. Risks must be assessed so that the way a crisis arises, the organisation and composition of a team to respond to it, and the means of dealing with it, are understood. Staff must be trained and have access to properly set out manuals and contact lists. External relations strategies for dealing with the media, suppliers, customers and emergency services are also needed.

Crisis management advisers point to the desirability of having people with a range of disciplines involved in devising and supervising crisis management plans. “No single discipline should dominate the process,” says Richard Fenning of Control Risks Group, which advises on crisis management strategies. “It is a balancing of many different interests – some people may be too frightened of litigation, or too dominated by public relations concerns.”

Susie Flook, Guinness' new general counsel for intellectual property, says: “All kinds of disciplines should be involved in crisis management. Lawyers should definitely be part of the team – they are the best people to protect organisations' interests in handling product liability, personal injury, breach of safety regulations, and dealing with outsiders such as insurers, the police and the press.”

Flook claims in-house counsel are well placed to be involved in crisis management and to consider the social and moral responsibilities of organisations. “They give an objective assessment of the threat of the crisis not only to the company but also to the community at large,” she explains.

Although the assessment of legal issues is one of the most important factors in devising plans, lawyers can bring other benefits to the table, including their knowledge of the company, its day-to-day operations and its business organisation.

According to Jennings, small companies may lack in-house counsel and need external counsel to assist, but some knowledge of crisis management is required. “Unless you have studied what actually happens, you don't realise how easily a crisis can spin out of control and the difficult decisions which can be involved,” he says.

The most important starting point for crisis control is a willingness to accept that a problem exists. Fenning says: “You can have emotional obstacles to things such as product recalls, but accepting there is a problem frees up energy to deal with it.” Companies with inflexible management cultures fare worse in managing crises due to the need for speedy decision making and delegation, he adds.

Lawyers can assist in the 'What if?' exercises which show what can go wrong, and they can assist in formulating plans to minimise damage. Fenning claims: “It is essential to analyse how the event will affect each part of the business.”

But once you have a strategy, you must test it. Jennings stresses: “It's important plans are implemented from time to time so that they are 'live' and well-rehearsed.”