Organisations Are Least Prepared for Crises that Pose the Greatest Risk, According to FTI Consulting-Sponsored General Counsel Survey
More Than Two-Thirds of Surveyed Organisations Do Not Conduct Crisis Scenario Drills Based on Learnings from Past Events
About 60% of GCs Surveyed Reported Being More Involved in Organisational Crisis Management Strategy
Close to 70% of Surveyed Organisations Lack a Cross-Functional Crisis Response Team or Pre-Selected External Advisors
London, 15 October 2024 — Organisations are least prepared for crises that pose the greatest risk to their business and are slow to implement lessons that would improve their ability to respond to future events, according to a recent study sponsored by FTI Consulting (NYSE: FCN).
Economist Impact’s role of the general counsel in a crisis survey canvassed 600 primary legal decision makers across North America; Europe, the Middle East and Africa (“EMEA”); and Asia Pacific. When asked to select crises that pose the greatest risks to their organisations, reputational or operational crisis events were cited among the top three out of 12 types of crises by nearly 30% of the surveyed GCs. Reputational or operational crisis events are also among the top three crises that their organisations are least prepared to manage, according to about 30% of GCs.
More than two-thirds of organisations surveyed did not incorporate lessons from past crises into trainings and crisis drills. This gap will leave many organisations vulnerable to the impacts of a crisis or black swan event, particularly against a backdrop of a series of disruptive external events, such as cyber attacks and data breaches, macroeconomic shocks, political disruption and geopolitical conflicts.
“In my experience the companies that are the most engaged with crisis rehearsals, who take them seriously and run through scenarios without questioning their viability, are the ones that are most likely to be managing their risks appropriately,” said Kate Brader, a Senior Managing Director in the Strategic Communications segment at FTI Consulting. “There is a culture and a mindset that anything can happen, so risks must be taken seriously, and these organisations always consider the ‘what if’ scenario in case situations escalate. In companies that lack senior sponsorship for crisis plans and preparedness, there is often a disconnect, with business continuity teams responding independently and sometimes in conflict with executive decisions.”
With the increasing frequency, complexity and unpredictability of crisis events over the past five years, about 60% of all GCs surveyed reported being more involved in their organisation’s crisis management strategy. However, their involvement is not uniform across the globe. A higher share of GCs in North America (64%) and EMEA (60%) are more involved in business continuity and financial contingency planning compared to their peers in Asia Pacific (42%). Similarly, close to twice as many GCs in North America (63%) compared to Asia Pacific (33%) are more involved in monitoring and analysing the impact of early-warning signs beyond the legal remit that affect the organisation’s reputation or brand.
Artificial intelligence (“AI”) or machine learning (“ML”)-based modeling can be particularly powerful in delivering comprehensive, granular and precise crisis impact assessments. Yet, more than half of surveyed organisations are not deploying AI or ML-powered modeling for crisis management. One possible reason is a gap in skills needed to run impact analyses and utilise technology solutions, which was cited by 3 in 10 GCs as one of the top five challenges preventing their organisations from being more prepared for crisis events.
Close to 70% of surveyed organisations lack an identified ad-hoc, cross-functional crisis response team or a pre-selected list of external crisis response advisors that can assemble easily when a crisis arises. When asked to select the top priorities of their legal department to better prepare for the next crisis based on learnings from past events, 42% of GCs cited the creation of a well-rounded crisis response team among their top three priorities. Increased spend on crisis preparedness activities, tools, technology enhancements, external advisors or vendors (40%) and adopting more advanced technologies for crisis monitoring and impact analysis (33%) were the other two top priorities.
Lars Faeste, EMEA Chairman of FTI Consulting, added, “The stakes have never been higher when it comes to the navigation of crises and black swan events. The fact that this report reveals that a significant majority of organisations are not incorporating lessons from past crises into their contingency planning is a concern. Leadership teams often recognise what needs to be done but are yet to take timely and decisive action. Others lack the tools and resources that provide a comprehensive understanding of emerging risks. General counsel play a vital and ongoing role in helping their organisation close these crisis preparedness gaps, enabling them to become more informed, agile and effective in managing future events.”
Additional key survey findings include:
- More than two-thirds of GCs in financial services, banking and insurance have expanded the scope of their early-warning monitoring and analysis exercises across strategic partners beyond legal, compared with less than half across all surveyed organisations.
- GCs in manufacturing are more involved in managing crises and their impacts (72%) than their peers in financial services, banking and insurance (68%), IT/technology, media and telecommunications (64%), energy, oil and gas (63%), retail (62%) and healthcare and life sciences (54%).
- Nearly 40% of respondents said they did not have a contingency plan in place for a cyber attack or a supply-chain failure.
For additional findings, view the full report: Turbulent waters, trusted anchors: The general counsel’s evolving role in navigating crises.
Demographics and Methodology
FTI Consulting sponsored the research for Turbulent waters, trusted anchors: The general counsel’s evolving role in navigating crises, which was conducted by Economist Impact. This survey-based study explores the perspectives of primary legal decision-makers on the nature of the crisis landscape today, their organisation’s crisis preparedness, and how their roles have evolved in managing these events.
The survey field work was conducted online and by telephone between April to May 2024. It covered a total of 600 primary legal decision makers across North America (25%); Europe, Middle East and Africa (50%); and Asia Pacific (25%). All respondents worked in organisations with annual revenues of more than $1 billion.
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Source: FTI Consulting, Inc.