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.

Social Intelligence Mitigates ‘Risks Businesses Fear Most’

We recently reviewed Deloitte’s ‘Exploring Strategic Risk’ study which surveyed over 300 C-level executives and found social threats to corporate reputation is now of paramount concern. Now we look at a survey by Aon, which lists the ‘Top 10 Risks Businesses Fear Most.’

Aon details the growing complexity of the risks and crises facing businesses. Of the Top 10 risks Aon ranks, four are deeply rooted in social media and can often be detected, identified and tracked using advanced social intelligence and threat detection capabilities.

No. 7: Business Interruption: This can present to a corporation is a wide array of forms. Aon’s study cites examples like natural disasters, power outages and terrorist attacks, however more common disruptions ranging from consumer boycotts, activist protests and even employee sabotage can wreak massive havoc on business operations. These types of threats are commonly organized and detected from all corners of the open social universe.

No. 4: Damage to Reputation: This echos Deloitte’s study indicating reputation is among the greatest concerns for executives which can come in all sorts forms that companies are often ill-prepared for. Among the common issues damaging reputations and revenues for companies are threat of employee sabotage, brandjackings (impersonating or takeovers), denial of service attacks and activist campaigns. As Aon states, “Since reputational events often arrive with little or no warning, organizations are forced to respond in real time while the firm’s economic losses are mounting.” This is exactly why corporations are relying on real-time social threat detection services.

No. 3: Increasing Competition: While controlling competition is impossible, understanding the market reactions to competitor actions to drive strategic response is critical to managing and mitigating these risks. Social intelligence is a major factor in achieving this by understanding the attitudes and behaviors related to one’s competitors across millions of shoppers and consumers.

No. 2: Regulatory Risk: As the government places increased regulations across an array of industries, from financial services to food & beverage to pharmaceuticals, many regulators are taking to social media to communicate and campaign . Smart companies are tracking the activities of regulators, litigators, journalists, consumers, activists and influencers to gain deep understanding of regulatory and industry issues and where these issues are reaching tipping points that can damage their businesses.

As the focus of crisis management and enterprise risk shifts towards this social dimension, the need for enhanced detection and tracking of these threats on a real-time basis has increased dramatically for corporations and brands.

Related Resources:

Aon’s ‘Top 10 Risks Businesses Fear Most.’

Deloitte /Forbes ‘Exploring Strategic Risk’ Survey

Corporate Compliance Insights: Understanding Enterprise Social Risk