Nipping It In The Bud
When it comes to the numbers of crises faced by U.S. businesses last year, 2004 proved to be a relatively calm period compared with other recent, more scandal-wracked years,
according to the annual Institute for Crisis Management (ICM) "Crisis Report".
Larry Smith, president of ICM, says study raises some interesting (if not earth-shattering) questions.
"Based on our research, the majority of crises start out small, and companies should be able to spot them. Last year's lower numbers could be because of luck or because
business leaders are paying more attention and are actually preventing some smoldering fires from becoming full-blown crises," he says. "We've been hammering home that nearly
three-quarters of all business crises could be averted if companies would only pay attention to what's going on."
ICM denotes a business crisis as "any problem or disruption that triggers negative shareholder reactions that could impact the organization's business and financial strength."
It tracks 16 broad crisis categories, including "hostile takeovers" "environment" and "catastrophes." In 2004, the study points out, every kind of business -- retail,
manufacturering, pharmaceuticals, banks, insurance companies, health services -- suffered some kind of crisis.
"We have a lot of very bright, qualified people running our businesses, and they do a lot of dumb things, but they are not completely clueless," Smith says, adding that because
of the rash of corporate scandals in the last few years, businesses are starting to change their practices.
As far as predicting future trends, Smith adds, "More managers are saying, 'We need to be more ethical and run our businesses better. Then we'll be more successful.'"
Regarding potential crises, Smith voices concern about the return of class-action lawsuits. "The category peaked in 2002, dropped in 2003, and now it's coming back again," he
says. "And that's going to be one of the biggest headaches for the business world. Lawyers are making a good living out of class-action law suits, which will continue to be a real
problem for a while."
CONTACT: Larry Smith, 502.891.2508, [email protected]