Page 93 - Crisis Communication Practical PR Strategies

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7 74 Crisis Communication
companies nearly every serious crisis today is an incipient financial
crisis.
But there is more. Financial crises have a damaging ripple effect.
They can open a second front in the original crisis or spark a new one
in its own right. In a culture where financial news has entered the
mainstream, notably through the impact of the internet and blogs,
reports of a company’s weakening stock price can convince the public
that the marketplace has spoken and that the disease must be as
serious as its critics charge. Finally, important changes among institu-
tional investors, perhaps the most important financial constituents for
a public company, have made such investors agents of restructuring
and, in this sense, abettors of crisis.
In short, today’s financial crises are especially insidious and ubiqui-
tous, in many ways unique among the categories of crisis treated in this
book. It is essential that management first appreciate the new
dynamics of financial crisis – specifically how they are part and parcel
of all types of crisis and what, in a global marketplace, the forces are
that encourage them. Next, they need to assess whether the organiza-
tion is prepared – by way of organizational structure and spokesperson
preparation – to successfully navigate the critical opening phases of
any financial crisis. Finally, they must focus on preventive measures
that can be taken now, at a time when financial communication is
perhaps more complicated than ever, to strengthen the organization’s
reputation with key financial audiences. These are the themes that we
will address in this chapter.

Understanding financial crisis

The new dynamics

If we were asked to define financial crisis, most of us would probably
point to the accounting scandals that drove companies such as Enron,
WorldCom and Tyco out of existence. Here the dots connected quite
nicely: the company did something egregious financially and it suf-
fered commensurate financial consequences.
But it should be plain that, as Nike’s ‘unsuccessful’ boycott demon-
strates, financial crises are not always so clear-cut. Many financial crises
are stock-driven and, as the boxed text below demonstrates, declining
stock price, when it attains sufficient velocity, depth and duration, rep-
resents a crisis in and of itself.
We may understand instinctively that jittery investors sell on bad
news of any kind. But it is not always clear why exactly this happens –