As weathering corporate storms becomes almost a daily fact of life for big companies, BT's legal chief Dan Fitz and Leigh Dance outline the crucial steps that legal departments must take to make sure they are fully prepared for the worst

Has the corporate crisis become almost business-as-usual for large companies? What does this mean for the role of the general counsel? The evolution of media and the internet, increased transparency and greater Government intervention in business combine to trigger crises far more frequently in companies today. Every week we read of another corporate crisis and of new regulation designed to address the last crisis. A GC must always be on the look out for a potential crisis – some start small and mushroom over time; others arrive fully formed and out of the blue, requiring our immediate attention.

It is clear that crisis management is a skill required of in-house legal leaders today. A GC can't perform the job without the ability to spot and avoid potential crises, as well as deal with those that arise. The company must rely on the legal team to help move forward during a crisis and take immediate steps to lessen the long-term negative impact. 

There was a time when most general counsel thought 'I hope it never happens to me'. Now the better mindset is not to wonder 'whether' a crisis will emerge, but to plan what to do 'when' one does. These days companies especially value crisis-management experience and it counts heavily in favour of candidates for the GC's job.

Preparing for the unexpected

There are no correspondence courses or training manuals that come remotely close to the value of actual experience. Each crisis is unique, bringing its own lessons, and by weathering each one you learn that you can get through it. You also learn how you and the company can better manage the next one. You develop resilience and that is of real importance.

In this article, we share two areas of best practice – planning and communicating – which can improve your performance in handling a crisis, whether small or large.

Planning is an important prerequisite for handling a major crisis from its very start, and for identifying issues that have the potential to become crises. Effective communication helps contain issues, calm the stakeholders and keeps the legal team focused on the everyday work that drives revenues. 

As you would expect, planning and communicating are closely linked, as planning helps you identify early who your stakeholders are and framing messages helps you identify what plans are needed.

Every kind of potential crisis, whether a data breach or a safety incident in a subsidiary, will have legal ramifications for someone. A regulatory or compliance issue with broad media coverage or strong public opinion can become a crisis. Corporate incidents or crises frequently invite governmental investigations or inquiries. 

The proliferation and globalisation of regulation means there are more ways than ever for employees, agents and affiliates to fall foul of the law, and more ways to lose one's reputation. 

Recognising a potential crisis is an important skill and an important first step since it guides when an in-house legal leader must move from oversight to action. Sometimes the issue arises from bad facts, or the appearance of bad facts. Potential harm is magnified when one or more senior executives or directors is personally involved or threatened. 

Planning

In laying the groundwork to deal with a crisis, each GC needs a standing protocol that works for their client and the type of situation. These may vary based on their professional style or employer's industry. A protocol that is used at BT and many other companies is to:  

1. quickly pick someone who will project manage the company's response and clarify his reporting lines;

2. identify a team to work on it for the duration; and

3. get everyone else to carry on with the ordinary course of business.

The objective here is to shorten the chain of command very quickly, empower people to address the crisis and encourage everyone else to get on with the day job. This accelerates the creation of a new status quo for the duration of the crisis. The GC can oversee this team and, in some circumstances, be part of the team. Whichever is the case, they must free up their schedule by delegating other daily tasks to capable colleagues in the law department. 

Members of the crisis team cannot have a level of personal risk in relation to the issue; it can inhibit their ability to perform objectively. Likewise, there should be no confusion in the law department about who the client is: it is the company and its owners, not the directors and its officers individually. This can be difficult to manage, and the best approach is to get separate representation for a director or officer who has a significant diverging interest to that of the company.  

With global companies, a crisis can arise anywhere in the world. One of the GC's toughest jobs (consider the BP oil spill in the Gulf of Mexico) may be looking at remote areas of operation and finding the right advisers and people whose skills you know and trust to work on the crisis team. 

It is an ongoing responsibility of the GC and his direct reports to identify law firms and other key advisers that could be called on during a crisis. Local advice must often be weighed differently based on cultural perspectives and bias, and it is wise to have a mix of individuals on the crisis team.

Many companies benefit from holding 'Black Swan' exercises, where the operational and functional teams rehearse what would happen if a particular issue developed. For example, if political turmoil erupts in a key country, internet access is blocked and sanctions are imposed, what would we do for our employees and customers in the first 24, 48 and 72 hours, and how?   

These scenario-based exercises are led by the risk management function. Simply gathering the team that would manage the real-world version of the scenario and walking them through it as a group generates a much better understanding of both the potential harm and what steps would be necessary to prevent or mitigate that harm. They are far more valuable than a manual (and often lead to significantly improved crisis response plans).   

Communications

When communicating with employees, the community, customers and a wide range of stakeholders, there is a delicate balance to be struck during a crisis. If too much information is put out there from too many different sources, it will sow confusion, create the impression of disarray and magnify the crisis. If too little information is forthcoming, the press and commentators may write your story for you, speculation and rumours may proliferate and this may also magnify or worsen the crisis.  

It is important to define and control the communications channels and messages in a crisis, with particular focus on identifying stakeholders and putting out a clear and consistent message. It is vital to monitor all channels, including blogs, Twitter feeds, etc. 

Messages, and how they are conveyed, probably need to be tailored to the distinct stakeholder groups so that our messages get through. Question and answer documents can be helpful. Voice communications can be useful with employees and the community, as the strong and calm voices of the executive team can build confidence that the situation is being handled effectively. 

Input into communications is one of the chief extra demands on the GC's time during a crisis, and this is another reason to delegate routine tasks to others. The GC must set aside extra time to communicate internally (often at all hours), since directors and officers and other key stakeholders will want to speak to them personally. The typical explanatory email or written briefing will rarely suffice with executive leadership. Conveying a calm, level-headed demeanour and using words consistently and clearly are valuable habits for the GC to develop.  

Key internal stakeholders may need a lot of reassurance during a crisis. When something personal is at stake – perhaps their own liability or reputation – the fear factor comes in and people may behave less rationally. It is important for the GC to be alive to that situation and react responsibly.  

You will want to assure key stakeholders that no one has their head buried in the sand. It is also for this reason that you may bring in trusted external advisers to take a look. You want to assure directors and officers that the facts are as presented. Since you often don't have all the facts you want to be candid about that, and communicate progress regularly. With your trusted team you will navigate through the storm.

Focusing today on planning and communicating can help the GC perform effectively in a crisis. If the plan is good enough to make sure the right initial steps are taken, you will be in a significantly stronger position. If the communications are clear and consistent from the start of a crisis, there will be less chance of unpleasant side effects. 

Whatever the situation, remember to look after your team and yourself; you are of little use if you don't get enough rest and maintain your health. These are demanding times, and you will learn that you can get through it.

Dan Fitz (pictured, top) is group GC and company secretary for BT and Leigh Dance (pictured, bottom) is executive director of the Global Counsel Leaders Circle and a legal management consultant.

• Related event: Corporate Governance & Risk Forum 2013