Thomas Cook’s Reputation

I have written recently about the reputational risk.

The story of Thomas Cook and the death of two children due to a faulty gas supply is a classic example of how not to do it.

What happenned to those two children was something that could and should have been prevented and all sorts of risk management lessons could be drawn from the detail of the case.

However, my point here is that however bad it was, Thomas Cook’s senior management and their spokespersons made mit many time worse by the way they handled the story.

  • First they refused to apologise.
  • Then they refused again.
  • Then they gave a half-hearted apology.
  • Then they gave a fairly decent one.
  • Then they completely failed to justify their receipt of compensation from the other company involved.
  • The latest step is the announcement that their boss is to donate her massive bonus to charity.

At each stage they seem to have shown no understanding for the way ordinary people would judge their actions, or lack of.

The words “Too little and too late” come to mind, regarding the apology(ies).

This just underlines my point that whatever goes wrong in your business, you can always make the damage many times worse by inept and insensitive handling of the press.  Manage the whole risk, not just the initial problem!

 I do not know who was advising Cooks but I hope I never find them “helping” me in a tight spot!

Nine Tips To Manage The Risks Your Sales Force Create.

I have written previously that risks do not only come from the production side of your business but also from your sales force.  The thing to bear in mind is that they are often working alone and away from the supervision, support and the sort of controls that reduce risks in other parts of the business.

Here are some tips on minimising the risks without reducing your sales.

  1. Have clear policies and procedures against mis-selling and make sure you provide training so your salespeople know them. Frequent updates and refreshers will be worthwhile.
  2. Have clear rules about levels of authority for negotiating discounts or other benefits, otherwise your sales people could be selling your products at a loss out of the desire to get a sale at all costs – to you!
  3. Check driving licences and insurance certificates of all people who use their own vehicles on your business or you could find yourself liable for accidents they may cause.
  4. Set realistic targets and programmes so you will not be held to be the cause of any accidents due to drivers being too tired or driving for over-long times.
  5. Issue appropriate Health & Safety advice to people working alone.
  6. Issue rules and guidelines for the use of IT and social media, whether the kit is provided by the business or not.
  7. Have procedures for handling complaints which involve independent review to ensure fairness to both customers and employees.
  8. Make sure members of the sales force do not handle money or invoices to guard against fraud and protect the innocent from false accusations.
  9. Try to get out there and see what is happening in reality, do not just rely on reports on paper or online. Meet customers and salespeople occasionally at the front line.

Remember that in all these things rules are no use unless taught and enforced.

Are You Managing The Right Risks Or are You Unsure Of Your Objectives? Learn a Lesson From 1794.

Are you sometimes disappointed at the results you get from Risk Management or indeed from any other management technique?

Do you seem to have followed all the right steps and not got the result you wanted?

There can be many reasons for this, but I want to look at one of the most important and easiest to overlook.   It concerns knowing the difference between your targets and your real objectives.  It is illustrated by the difference in thinking between some at the Admiralty and Admiral Lord Howe in 1794.  Such differences can be seen today all too often, and not just in the Navy.

In 1794 Britain was in the second year of the war against France following the French Revolution.  It was not going well.  There was great fear of invasion.  Admiral Lord Howe was in command of a division of the fleet sailing off the South West of England, aware that the French had assembled a fleet in the port of Brest in Brittany

Throughout the Eighteenth Century both navies had fought by keeping their ships in a “line-ahead” formation, resulting in very few decisive outcomes of sea battles.  Howe had seen that whenever there was a British Victory, something had happened to cause the lines to be broken and allow, or even force, captains to use their initiative, so he worked out a plan for defeating the French by breaking their line.

In May 1794 Howe was informed that a convoy of merchant ships was bringing grain to France from the Americas.  Both countries were trying to use attacks on merchant shipping to disrupt each other’s economies and especially to reduce food supplies.

He received orders:

  1. to keep the French Fleet blockaded in port
  2. to intercept the grain convoy.

In fact the French managed to slip out of port evading the British, partly due to the weather reducing visibility.  Howe attacked on the First of June, using his new tactics, resulting in one of our most decisive victories over the French at sea for a long time.  The grain convoy reached France, but most of the French Fleet was either captured or sunk, significantly reducing the risk of invasion for many years.

The news was welcomed by most British people as a great relief, a big uplift in morale, causing the battle to become known as “The Glorious First of June”.  However some criticised Howe severely for disobeying his orders and failing in his two objectives in that

  1.  the French Fleet got out of harbour
  2.  the grain convoy reached France.

Fortunately for Howe, his critics were silenced in the jubilation that we had won a battle for a change and were safe from invasion.  The people at the top saw that winning the War was our real aim.  Howe had placed that above his immediate objectives of blockading the French Fleet in port and intercepting the grain convoy.

What has this to do with your business? 

I have too often come across situations where people were so obsessed with their immediate objectives that they lost sight of their real aims.  Targets and Action Plans can make this mistake more likely if they are not always interpreted in the light of something bigger.  This can apply to all aspects of management, but you can certainly apply it to Risk Management.

Are you managing the real risks?  Or are you too focussed on your specific immediate ones?  Above all, think about this when carrying out a review of your Risk Management strategy.  Yes.  The one you were meaning to do sometime soon.

 

How many lines of defence against risks do you have in your business? How many do you need?

Risk Management professionals recommend that businesses have three lines of defence against their risks.  These are:

  1. The individual manager.
  2. Risk Managers, Inspectors, Health and Safety Officers and similar advisors within the business.
  3. Independent persons such as auditors and non-executive directors.

 

What if you cannot achieve this?  What if you are the only line of defence in your business?

Then it is all the more important that that one line is robust.  You need to be sure you are managing your risks actively.  Perhaps you cannot afford a full-time risk manager, but what about using the services of an external one, at least once a year, just to give you an independent view?  Or how about getting someone in your business trained in Risk Management?

Why You Need Not Miss an Opportunity In Your Business For Fear Of Risk.

You may think Risk Management is all about minimising risks.  That is not an unreasonable assumption but if you do think so, I believe that you are wrong, and that such a wrong understanding could be preventing your business being as successful as it could be.

I have had the experience of being consulted by managers about certain proposals, to which I responded by asking a series of questions about the risks involved and the control measures in place or to be introduced.  All too often the response has been to regard my advice as “negative” and for the plans to be put on hold, or else for the project to go ahead without conducting the sort of exercise I recommended, depending on how popular the idea was with senior management.

Why do I disagree with the idea that Risk Management means minimising all risks?

Firstly, there is the matter of Balance.  It is important to recognise that one risk often affects another, so that to reduce one may mean increasing another.  Increased security could reduce the risk of theft but could also increase the risk of damaging your reputation or even losing customers, depending on how reasonable the measures were perceived to be.  If a corner shop had security like an airport it would not retain many of its customers, whereas if an airport had security like a typical corner shop, it would soon become victim to terrorism or crime.  Risk Management is about balance: balancing one risk against another and balancing the effectiveness of control measures against their cost.

Secondly, there is the concept of “positive risk”.  What this means is that an opportunity can be considered as a risk, but one with more benefits than costs.  Whilst I take issue with the terminology, as we all talk of the risk of losing a lot of money but not the risk of making a lot of money, I agree with the concept.

People may be afraid to do something which could be profitable, such as develop a new product or service, or change the way things are done, because the change involves risks.

The advice a good risk manager should give in such circumstances is:

  1. identify all the risks including the potential gains,
  2. evaluate the probability and the potential cost of each outcome,
  3. examine possible control measures for each risk,
  4. make a decision in the light of all these considerations.

A likely result of this process is to go ahead with the desired project, but only with the appropriate control measures in place.  This is usually preferable to either taking risks blindly or being unable to change anything for fear of the risks.

It is important to look out for “positive risks” or risky opportunities to see if they can be managed so as to enable you to make a profit, as well as looking at the negative risks to see how they can be controlled.

Perhaps your business is being held back by undue fear of taking risks.

 

Shock Election Result? I’ve Seen It All Before! Always Be Prepared!

Most of us were surprised at the Election results, but I remember previous upsets when Labour won in the opinion polls and lost on the Day.  In 1992 almost everyone  thought Neil Kinnick would be Prime Minister, either the outright winner or with some sort of deal with someone., buit John Major won.  In 1970 all the discussion in the media was about why Harold Wilson was so successful and why Edward Heath was not.  Then Heath won.

What has this got to do with risk management or any aspect of managing a business?

  • Do not rely on your Business Plan materialising.
  • No planning tools are infallible.
  •  Always ask “What If?”
  • Always have a Plan B.

Risk Management is about managing risks, including, especially, the things you thought were not going to happen!

What risks are you NOT planing for?

How can you manage the risks to your reputation?

Things are bound to go wrong sometimes.

Often the damage to your reputation is out of proportion to the actual harm done.

I have often found when handling liability claims that the way people react to the claim can make a big difference to their reputation, regardless of the rights and wrongs of the claim itself.

The words “own goal” come to mind.

So here are some tips on saving your reputation.

DO:

  • Act fast to respond to any incident or allegation. Time is seldom on your side.
  • Liaise with your insurers, BUT don’t let them dictate to you.
  • Admit the facts if you know them.
  • Apologise without accepting blame.
  • Empathise, but not sympathise, with the claimant/complainant.
  • Question assumptions made by others.
  • Take care how you word things.

DON’T:

  • Admit liability unless you have been given professional advice.
  • Lie or cover up. The truth will out in the end
  • Hide behind an enquiry. At least promise to provide information when it is known, and do so.  The truth is seldom as bad as people will imagine if they don’t know.

Unless you are very certain, DON’T:

  • Blame the victim.
  • Blame anyone else.
  • Allege fraud.

Finally, consider using a public relations consultant and/or a claims-handler, but don’t be too long in considering, (see above!).