Preparing your company for the unthinkable

Here was Lehman, a 158 year-old firm with one of the best reputations on Wall Street, filing the largest bankruptcy in US history to the tune of $600 billion dollars.

The Lehman bankruptcy set a chain of events in motion that almost took down the American financial system and ultimately led to a global recession. Surely no one was expecting that. But in today’s business environment, where fraud and corruption is rampant, regulations are constantly changing, sophisticated hackers attack corporate data systems on a daily basis and natural disasters seem to happen more frequently than ever, it pays to expect the unexpected.

Corporate secretaries should consider how they would help their company survive an unthinkable tragedy, a ‘Lehman Brothers moment’ that could potentially bring the company down. Most companies have a risk plan or risk strategy in place, but has it been updated lately?

Risk strategies need to be reassessed regularly, and adjusted appropriately in conjunction with company goals and changes in economic climate and industry conditions. New threats can emerge at any time but, often, they must be uncovered by careful analysis and a healthy appreciation for imagining worst-case scenarios. Once uncovered, strategies to mitigate the damage to the business can be developed.

Governance professionals we’ve talked to give the following advice that could help your company survive an unthinkable event:

– Review your risk assessment process. Make sure several aspects of risk are covered (such as financial risk, reputational risk, and so on). Have people with varying perspectives and experiences on the risk assessment team to help identify vulnerabilities. Make sure the risk strategies developed are appropriate for the company’s size and are in line with performance goals.

– Develop contingency plans for disasters. Operational plans for unthinkable natural disasters will help the company mitigate losses. If the firm cannot continue operating, what will happen until things are up and running again?

– Develop disaster policies for all stakeholders. When disaster strikes, a company must have a plan that addresses the needs of everyone with a stake in its success – this includes shareholders, employees and customers. How well you deal with each of these groups in a time of disaster could determine the survival of the company.

– Review your communication strategy for the worst of times. Keeping the media, your employees, shareholders and customers informed about your efforts to deal with tragic events is critical to the company’s success.