Crisis of the Week: Lumber Liquidators Fights Flooring Foes | WSJ

Lumber Liquidators was the subject of this week’s crisis, as the company has seen its stock price take a wild ride down and back up after allegations raised in a ’60 Minutes’ story. The story alleged the laminate-flooring material sold by the company didn’t meet emission standards for the chemical formaldehyde. The story prompted one U.S. senator to call on federal agencies to investigate, and the company’s stock plunged as a result of the negative coverage.

Vincent Schiavone, executive chairman, ListenLogic: “Rule number one: Don’t make things worse! That is exactly what Lumber Liquidators did by agreeing to an on-camera interview. Lumber liquidators is experiencing an attack crisis in the digital world where consumers, media, activists, lawyers, regulators and politicians are aligned as stakeholders on an issue damaging to the reputation and value of the company.

“While the strategic goal driving stakeholders, short sellers and tort lawyers seems to be financial in nature, the enabling trigger issue is the health and safety of ingredients in the product. The core issue driving the conversation is corporate profits at the health risk of the customer.

“Lumber Liquidators chose to participate in the ‘60 Minutes’ story, something they should not have done. Often putting senior executives on the spot in an interview puts the company at greater reputation risk than issuing a statement. A written statement would have been less damaging. If a company is going to respond to an attack issue they need to be prepared to answer the key question: ‘What did you know and when did you know it?’ That answer determines if you can or want to apologize, take responsibility, reassure that all is OK and promise it will never happen again.

Read the entire piece here.

Do Deflated Balls Take Air Out of Pats’ Reputation? WSJ

This week the crisis experts looked into the comments from the New England Patriots and how they are handling the controversy over deflated footballs. The team’s coach, Bill Belichick denied any knowledge of deflating game balls, then held a second press conference in which he talked about the science of deflation and made a reference to the 1990s comedy “My Cousin Vinny.”

Vincent Schiavone, executive chairman, ListenLogic: “[This] is not really about under-inflated balls…it’s not even about the larger questions: ‘Did the Patriots and coach Belichick get caught cheating again?’; ‘Does nice guy Tom Brady cheat?’; ‘Do all teams and all quarterbacks prepare their balls outside of the official rules?’ All communications from all involved parties are focused on one thing–the Super Bowl. The Super Bowl is big business, the most watched and most valuable sporting event in the U.S.

“All parties are handling it the best they can under the circumstances. The number one rule of all crisis communications is to not say anything that will make the situation worse. Any admission by Mr. Brady, Mr. Belichick or the Patriots would force the NFL to do something about it before the Super Bowl. The driving strategy for this crisis communication is ‘Do not do or say anything that may impact the Super Bowl!’

“Mr. Belichick’s response that he had nothing to do with the balls and ‘You will have to talk with Tom” was not so good. Neither was his response he looked into the process and then presented plausible explanations as to why it could happen. The coach is seen as distancing himself from the crisis and throwing his [quarterback] under the bus.

Read the entire piece here.

Study Confirms Social Risk a Top C-Suite Concern

Deloitte and Forbes recently released an executive survey titled ‘Exploring Strategic Risk.’ According to the research gathered from over 300 C-level executives, social threats to corporate reputation is now of paramount concern. In fact, 40 percent of the surveyed executives cited reputational risk as their top concern, compared to only 27 percent who cited competition.

This increase in concern for reputation protection is significant, growing 14 percentage points since 2010. The dramatic shift in focus towards reputational risk and away from economic, competitive and model risks is driven in large measure due to the explosive growth of social media, which allows for immediate, widespread engagement, making it nearly impossible for companies to address and manage the influential attacks on their brand, reputation and ultimately revenue without sophisticated detection an tracking solutions.

As Henry Ristuccia, Deloitte Global Leader, Governance, Risk and Compliance, explains, “The time it takes for damaging news to spread is quicker, it goes to a wider audience more easily, and the record of it is stored digitally for longer. Even in an environment where economic conditions remain tough and technology threatens business models, this is why companies place reputation at the top of their strategic risk agenda.”

As the focus of risk shifts towards this social dimension, the need for enhanced detection and tracking of these threats on a real-time basis has increased dramatically. To address this growing concern 52 percent of surveyed executives have increased the budget for and frequency of monitoring risks, with a focus on social threats and 43 percent have started to monitor and manage this aspect on a continual basis, realizing that social threats do not have business hours. These brands in large measure are moving away from narrow first-generation keyword tools and are shifting to sophisticated, big data, model-driven command centers.

Related Resources:

Deloitte / Forbes Exploring Strategic Risk Survey

SecurityWeek: Social Threats of Greatest Risk Concern for Executives

ListenLogic Business Intelligence Command Center Overview

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WSJ: Critical Lessons In Managing Social Threats

As enterprise social risk grows exponentially, industries, corporations and media outlets are trying to understand and gain visibility the complex threats emerging from billions of daily social media posts. As such, The Wall Street Journal commissioned ListenLogic’s Business Intelligence Command Center to analyze the mold crisis Chobani yogurt has been dealing with across the nation and open social universe. A primary goal of this WSJ initiative was to uncover critical learning for brands and corporations on the complex spectrum of threats emerging from social media and to also illustrate the power advanced social intelligence and threat detection provides in helping to protect enterprises.

Below is a review of five major lessons from the Chobani crisis that every corporation should pay close attention to in order to better understand the array of emerging social risks to protect their revenue, reputation, organization and customers.



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Protecting Enterprises Against Social Risk

Chief Strategy Officer, Mark Langsfeld, discusses the myriad of social risks and threats facing corporations and how enterprises are strategically protecting themselves with the world’s largest and most advanced business intelligence command center.