Crises are no longer the exception, but the rule. However, instead of focusing on crisis prevention, companies usually act on the spur of the moment and can at best mitigate the damage, according to a global study. The recommendation: more preparation.
If companies neglect crisis prevention, they are quickly left out in the cold, so to speak, and the damage is often greater than necessary.
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After the crisis is before the crisis. This statement is a hackneyed truism. And yet most companies are often unprepared for emergencies, even though the world has been in permanent crisis mode for years.
This is the finding of the Economist Impact Study commissioned by FTI Consulting, which surveyed around 600 decision-makers, primarily in the legal sector, in North America (25 percent), EMEA (50 percent), and Asia-Pacific (25 percent) in 2024. All respondents worked in companies with annual revenues of more than US$1 billion.
Emergency Plans are Often Lacking
According to the study, only around 56 percent of companies surveyed worldwide have an emergency plan for corporate crises such as cyber attacks, 58 percent for supply chain failures, and 54 percent for takeover attempts by investors.
How well companies are prepared for emergencies varies significantly depending on the region of the world. While American companies have a good overview of risks, Europe, the Middle East, and Africa (EMEA) lack the necessary prevention measures. For example, 65 percent of US companies have an emergency plan for cyber attacks, while this is only true for 56 percent of companies in the EMEA region and Europe.
When it comes to aggressive investors, 70 percent of respondents in North America are prepared. In Europe, this is only true for 53 percent of respondents. The differences in crisis preparedness are also evident in areas such as executive misconduct related to compliance (America: 70 percent | Europe: 56 percent) and dealing with geopolitical risks (America: 67 percent | Europe: 54 percent).
American companies are also more self-critical: 41 percent cite unclear responsibilities in crisis management as an obstacle to being better prepared for unexpected events. In EMEA, only about one in four companies (26 percent) recognize this problem.
More Governance, Prevention, and Business Continuity Management
Based on these findings, the authors of the study formulate recommendations for action in three main areas to improve crisis management:
More governance in crisis management: Only when executives understand the costs of potential crises can they set and communicate crisis management priorities based on that understanding. The role of general counsels (GCs) should also be expanded beyond legal functions to gain a holistic view of the crisis landscape through their analytical skills and legal expertise. A robust risk culture is needed in which all levels of the organization feel responsible for identifying and addressing warning signs.
Preventing crisis events: Companies should invest in tools and systems that enable crisis drivers to be identified in a timely and comprehensive manner, such as real-time warning signal notification software and AI/ML-based crisis modeling. At the same time, there must be a learning curve from past crises. Crisis simulations and exercises based on these events are helpful in this regard.
Responding to crisis events: Regularly updating emergency plans that cover a wide range of internal and external crises helps to limit the impact of an event and protect business continuity. Crisis teams have proven their worth in this regard. A crisis communication strategy for internal and external stakeholders that enables real-time responses also minimizes damage and mobilizes support.
Risk Prevention to Respond Quickly to Crises
According to the study's authors, these recommendations are intended to help companies not only limit damage but also take advantage of growth opportunities to recover more quickly. “One-off crisis events can cause considerable damage, especially for companies in a weaker financial position. This can weaken them in the long term or even threaten their existence. It is therefore high time that European companies also intensify their risk prevention measures and draw up concrete emergency plans,” warns Stefan Heissner, Senior Managing Director and Risk and Forensics Expert at FTI Consulting.
This is a partly automated translation of this german article.
