While many companies have a written plan for dealing with a crisis, fewer than one in five have a proactive strategy for managing emerging risks, according to a report from Economist Enterprise and FTI Consulting.
The report – Steady Advisers for an Unsteady Age: Realising the Full Potential of the General Counsel in a Polycrisis – found that, while 70% of companies have a written crisis plan, just 17% have a proactive and continuously tested approach for identifying and addressing emerging threats before they become full-scale crises. More than 80% of organisations also wait too long to engage external crisis support.
Part of the challenge is that while GCs have seen their crisis management remit grow, governance structures have not kept pace, meaning GCs lack the decisional capabilities to match that expanded remit, the report noted.
Waiting too long to act is also partly because fewer than half of organisations surveyed use advanced tools – such as third-party risk intelligence, predictive analytics and scenario modelling – to scan for new and emerging risks.
Steven Gunby, chairman and CEO at FTI Consulting, said: “The successful management of crises rarely sits neatly within one part of a company or one jurisdiction. They cut across legal, regulatory, operational and reputational considerations, often before leaders have all the facts.
“A written plan matters, but real preparedness means recognising the signals early, bringing the right experts together, determining what is really happening across multiple layers of an organisation and making difficult decisions while there is still time to shape the outcome. General counsel are increasingly central to that effort.”
While waiting too long to respond can expose organisations to increased legal and financial risk, raising the alarm on matters that end up not being an issue can create challenges for GCs the next time they flag a potential risk. Some 40% of GCs said false alarms reduce the credibility of future warnings, while 42% said worries about overreacting or credibility loss made them reluctant to sound the alert on emerging risks.
Against that backdrop, only 57% said they proactively engage with boards on framing the crisis issue and outline the options and trade-offs. In some cases, that lack of engagement is not because they are worried about raising false alarms, but because they only have limited direct access to the board, according to the report.
Jean-Werner de T’Serclaes, EMEA co-chair at FTI Consulting, said: “When the stakes are high and the facts are still emerging, the GC is often one of the first people that leaders turn to and one of the few expected to answer the most difficult questions. That is why GCs need a seat at the table, working alongside management and the board to assess risks and make informed decisions when it matters most.”
The report was based on a survey of 1,100 general counsel and legal decision-makers globally.
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