Crisis Prevention: How to Do it, How to Make it Work

Crisis prevention costs little or nothing, yet it is one of the most overlooked steps in crisis management. It can pay big dividends.

With the global financial crisis swirling around us, crisis prevention is more urgent than ever. As the new shock waves unfold about the Madoff meltdown; job losses; and Wall Street abuses, they join the parade of earlier crises, including Hurricane Katrina, the Enron collapse and others. And it is clear they all have one thing in common: EARLY WARNINGS IGNORED.

While each case is unique, there were early warnings which simply were ignored. In the Madoff case, for example, what were the auditors doing? And who were they? And why, as one investor reported, did no one question the murky monthly statements? Or why did no one listen to the Enron whistleblowers? Or the report that warned that New Orleans could not survive a major hurricane the force of Katrina? And the global financial crisis? As the analyses unfold, we will find an array of early warnings ignored, not least of which were those clues lost in the halls of the SEC.

“If only we could have prevented the crisis,” is the cry we often hear.

Well, we can, in many instances, prevent crises.

As we enter what is bound to be a new era of accountability and transparency, it is time to begin the urgent task – for the private sector and for government - of learning how to tune in to early warnings and prevent crises. Surely some crises are already prevented as a result of diligent attention to early warnings. We just don’t even hear of those non-events for they are just that: non-events. And that is the best kind crisis – the one that never occurs. We need more of these non-events.

But what will it take?

It will take a fresh commitment throughout government and the private sector to understand that the pain of hearing and responding to an early warning is far better than the pain of response to a full-blown crisis.

Human nature being what it is, we have, among the business and government leaders, many who look for ways to find quick ways to make or save a dollar; a disdain for bad news; or an attitude that says if I deny it, it will go away.

Well, we are in a different world, complicated by globalization and the difficulty of watching over far-flung locations in one company or industry. But we also are in a different world in which it is easier to speak up and be heard with early warnings.

Transparency and accountability and strict and well-financed government regulations are surely going to help. But that is not all. If there is a ray of practical hope, it also rests with the boards of directors of companies and with government oversight committees on the national, state and local levels. If those responsible for private and government governance do their jobs the right way, they will recognize that early warnings are part of their responsibilities. They will learn to ask the right questions. And they will assure that the right procedures are in place to give full attention to early warnings. And to take necessary actions.

Some simple steps:

Commit to listening. Listening is central to spotting early warnings – from customers, employees, suppliers, communities. There is a distinction between hearing and listening. Hearing means you have perceived the sounds or words. Listening, the higher skill, means that you have made an effort to understand and absorb what has been said.

Keep the listening systems simple. High-tech methods can work – especially use-friendly, secure Web sites. But the old-fashioned suggestion box and slips of paper work well too. Whatever the methods – and organizations often can apply several – everyone should feel that they are being encouraged to suggest or criticize or expose problems

Ask questions. If there is scant information, probe and find out more. Is this a safe risk? Is this a safe investment? If I am using other people’s money, what if I treated it like my own? Would I do it?

Have a structure in place for checking out the early earnings. Not all early warnings will be significant or even accurate. But you cannot ever know unless you have a system for checking them out and discovering the meaningful ones

Reward, don’t punish. The employee who saves the day with a winning idea could receive a cash reward – but that is not always necessary. Some organizations reward with a VIP parking spot for a specified time; a long weekend; company products or services, etc.

And finally…

Commit to at least one full crisis simulation each year. You will be surprised – among other benefits – that you discover the equivalent of an early warning that can avert a crisis.

The modern-day version of piracy, where small bands of bold pirates board ships in vast open seas, has reached a crisis stage. In 2008, 39 vessels were hijacked in the Gulf of Aden, taking 889 crewmembers hostage. Their intent? Steal valuables and hold ships for ransom. Somalia’s coast, which runs 2300 miles, has been the most vulnerable. An unstable government in Somalia contributes to this lawlessness and makes it all the more difficult to control.

Most of the incidents occur in the Gulf of Aden, which is the shortest route between Europe and Asia. More than 20,000 ships and nearly 12 percent of the world’s petroleum pass through the Gulf of Aden every year. Unlike other regions which may affected by piracy, The longer ocean route, around the entire continent of Africa, would require as much as 2 weeks more time for journeys of commercial and cruise ships; adding more fuel and other costs to any voyage. The pirates, sailing small skiffs (small flat-bottom boats) with outboard engines, generally are armed with automatic weapons and rocket-propelled grenade launchers. Most attacks, if successful, are completed within 20 minutes. Because they operate from small vessels and at modest speeds of up 14 knots, their attacks are limited to vessels with accessible decks, or accessible freeboard – i.e., the distance from the water to the deck. Tankers are especially vulnerable, as their freeboards are approximately 12 to 15 feet, making them accessible by ladder. Tankers are also especially vulnerable because many are not capable of speeds of more than 15 knots, enabling the pirate skiffs to keep pace with them.

Several US and other naval vessels now patrol the area, and have provided some deterrent. Ships in the area, when approached by pirates, have employed some relatively simple countermeasures, including the completion of transits at night, frequent changes of course, the use of fire hoses sprayed at the pirate vessels, use of barbed wire on the sides of vessels, and long-range acoustic devices which causes pain and injury. Most flag states prohibit the carrying of arms on vessels.

The cruise ship Seabourn Sprit used an acoustic devised successfully to deter a 1995 pirate attack.

If piracy continues or expands, there is speculation that insurance rates will be affected. And if Islamic factions in Somalia gain strength in the government, piracy could become intertwined with the terrorist agenda. And finally, if a ship carrying oil or hazardous materials is damaged in a piracy incident, the odds of environmental damage increase.

On February 5, 2009 the US Congress Subcommittee on Coast Guard and Maritime held a hearing on piracy. The witnesses, from the US Coast Guard and a number of maritime organizations, all reported that progress has been made with the presence of several naval ships and the agreement by the government of Kenya to prosecute any pirates that have been apprehended. It was clear, too that the problem, shows no signs of going away in the near future. While the witnesses did not go so far as to predict the future of piracy, it is reasonable to assume that, as the pirates grow more ambitious, have access to more resources, they will find ways to achieve their goals, despite the methods used to deter them right now.

If you are a potential piracy target, remember to:

Have a vessel piracy plan in plan – and conduct a drill – involving all crew and a test of deterrent devices to assure they are accessible and in working order. While most ships are as well prepared as possible, estimates are that as many as 30% of ships entering the area are not as prepared as they should be. Excellent materials are available to assist ships, and these include the booklet prepared by the Oil Companies International Forum (OCIMF).

Avoid complacency. Just when you think you’ve done all you can do defend or avoid, keep thinking. The pirates are unrelenting and they will keep looking for ways to outsmart you. So think like the pirates and think of what they might do to gain an advantage.

Be ready to communicate quickly and smartly with the pirate leadership should they board one of your vessels. This will take special skills. Resources are available to train your senior vessel leadership.

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Crisis Communicator is a publication of The Biegel Group, Inc., Washington DC. Len Biegel, President of The Biegel Group, is an internationally recognized crisis management and communications expert. His experiences range from the Tylenol tampering crisis to the events of 9/11 and Katrina. His work spans homeland security, the environment and travel, from outer space (for NASA) to major airlines; to the cruises and maritime industry. He is the author of Never Say Never: The Complete Executive guide to Crisis Management (Brick Tower Press, 2008).

We welcome your inquiries and comments.. Please visit our Web site at www.thebiegelgroup.com or email us directly at lbiegel@gmail.com