REGULATORY: Government Relations; Environmental: Crisis Management: Risks and Strategies

by King & Spalding
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The King & Spalding Energy Forum on Crisis Management took place in Houston on March 28, 2013, and was broadcast live via webinar. Tracie Renfroe, a partner at King & Spalding’s Houston office, moderated the panel discussion held among King & Spalding lawyers Eleanor Hill, Cynthia Stroman, Jim Vines, and Former Congressman Michael Andrews; Dan McGinn (CEO of McGinn & Co., a communication firm specializing in crisis management); and Katharine Newman (Senior Counsel, ConocoPhillips).

The panelists began by identifying four stages of crisis management strategy: (1) prevention; (2) preparation; (3) response; and (4) recovery. Prevention consists of the identification, periodic assessment, and monitoring of future threats and risks, and implementation of enhanced internal controls.

The next step—preparation—necessitates the establishment of key relationships in advance, both within and outside a company, and the preparation of crisis response and communication plans. A key to a successful crisis management strategy is to plan well beyond a company’s regulatory obligations. Mere compliance with regulatory obligations does not generally suffice to avoid crises. Companies need to define a tailor-made approach based on existing best practices in their sectors. Coordination with contractors and subcontractors also constitutes an essential step in defining a crisis management plan.

Drawing on unique experience dealing with terrorist threats and attacks, Eleanor Hill insisted on the necessity for companies—especially those operating abroad—continuously to seek the most complete intelligence and most accurate information relating to threats to their activities. The U.S. Government plays a crucial role in that respect. For example, the Overseas Security Advisory Council (“OSAC”) was created in 1985 under the Federal Advisory Committee Act to promote security cooperation between American private sector interests worldwide and the U.S. Department of State. Today, OSAC shares critical non-classified intelligence with U.S. companies operating abroad while the Federal Bureau of Investigation provides a similar forum for exchanging information on domestic threats. Companies operating abroad should remain in close contact with the Department of State and with U.S. Embassies located in the countries where they operate. Assistance from U.S. diplomats constitutes a significant advantage not only when seeking information on threats overseas but also when dealing with foreign governments and local authorities in times of crisis.

Former Congressman Andrews shared insights on the importance for U.S. and foreign companies to develop and maintain close relationships with local elected officials in their places of operation. In his experience, developing close and personal relationships with local congressmen and senators comes as a tremendous help in times of crisis, both in terms of securing governmental support and in mitigating the risk of adverse official statements when a crisis arises in their communities. Local congressmen and senators can also offer invaluable assistance in guiding a company through a congressional investigation or advocating a company’s position, even if they are not members of the relevant investigative committees. The panelists noted that because these congressional investigative committees have proliferated and become increasingly important, a company involved in a major crisis connected to the United States is today almost certain to end up before a congressional committee.

Dan McGinn, a crisis communication specialist, emphasized the crucial importance of the first media statements from company executives or their spokespersons when facing a crisis situation. These statements constitute a perilous exercise because they are often made while the company is under considerable pressure to respond immediately to media inquiries while not having been afforded the time to ascertain the entire scope and magnitude of an ongoing crisis. A cardinal rule in that respect is to be absolutely certain that information being relayed is accurate, even if it requires not giving out as much information as one would like to.

Lending a corporate perspective to the discussion, Katharine Newman elaborated on a necessity of being consistent and keeping in mind potential future legal positions when communicating on an ongoing catastrophic event or its aftermath. In that respect, the principal lesson to be learned from the recent Macondo explosion in the Gulf of Mexico, for example, is that the subsequent trials started at the very moment the well blew up. From that moment onwards, all internal and external statements from the interested parties were subjected to intense scrutiny both in and out of courts. Crisis management teams must be trained to operate seamlessly, with each member knowing his or her role and relationship with the other team members. The panelists also discussed the increasingly important role played by social media on crisis communications strategies. Social media, especially Twitter, often constitutes the first line of information in times of crisis. If social media constitutes a useful tool for companies communicating on a crisis, Twitter coverage from employees or third parties, especially if incomplete or erroneous, can be particularly harmful to a company’s ongoing crisis management efforts and subsequent legal strategy.

Eleanor Hill agreed that response and communication efforts can prove more damaging than the event itself if a company does not appear completely truthful and trustworthy when communicating on a crisis. A crisis management team always needs to check the facts to be communicated to governments, the media, or the public. Similarly, a company responding to a crisis must balance the urge to document its responsive efforts with the need to be fully accurate and consistent. Failure to do so exposes the company to considerable legal and reputational risk. Ms. Newman added that a company, and its executives and spokespersons, must strive to control the pacing of their crisis communication and to resist the—often considerable—pressure to provide immediate answers before being able to verify the underlying facts. The panelists confirmed that when responding to a crisis, the most important thing is to remain truthful, even when subjected to the pressure and emotions accompanying an unfolding crisis situation.

Crisis recovery efforts generally involve dispute resolution and/or insurance claims procedures. The aftermath of a crisis also constitutes an opportunity to prepare or improve existing prevention and response plans. With regards to governmental scrutiny that generally follows a catastrophic event, the panelists discussed the opportunity of appointing an independent investigator instead of conducting an internal investigation. While recourse to an independent investigator may sometimes be advisable or even necessary in order to establish or reinforce the company’s credibility throughout an investigatory process, this process is not exempt from risk and may turn against the company. This is especially the case if the selected investigator has limited industry-knowledge. In that respect, the panelists advised companies generally to consider industry experts with a solid track record over better-known political or legal figures who would lend immediate recognition to their efforts but might prove insensitive to a company’s specific circumstances throughout the investigative process.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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