When a crisis hits, the stakes are high and so are the financial consequences. But while many companies scramble to contain the damage, the true differentiator is how quickly and strategically they communicate. Proactive communication isn’t just about damage control; it’s about safeguarding your bottom line.
Rina Foster Photo by: Courtesy
Getting ahead of the narrative during a reputational crisis can not only protect your company’s reputation, it can also prevent costly financial fallout. Proactive communication plays a pivotal role in mitigating financial damage during a reputational crisis. By fostering trust, managing public perception and demonstrating accountability, companies can reduce the financial fallout of a crisis and safeguard long-term financial stability.
Immediate and long-term effects
When companies fail to communicate proactively, there are negative financial and reputational consequences. Companies can feel both an immediate and a long-term financial loss after a crisis. Immediate impacts may be revenue loss, loss of contracts or donor funds, and a shrinking talent pool as fewer people may want to work for the company. Longer-term effects of a crisis can lead to diminished market value, revenue decline, difficulty securing investments or donations, and lower brand sentiment.
When a company fails to promptly acknowledge and inform its affected stakeholders, customers, employees, vendors and others are left on their own, seeking other sources for information. In the age of social media, rumors and misinformation can easily develop and a quick response can disarm any potential for incorrect narratives.
Communication in action
Last year, when a train derailed in East Palestine, Ohio, resulting in a hazardous chemical spill, residents were concerned about environmental and health implications. Norfolk Southern, the company that operated the train, issued its first public statement 13 days after the incident and initially downplayed the severity of the spill. Because of its lack of communication and the substance of its communications—among other missteps—Norfolk Southern faced public and government backlash, loss of consumer trust and ultimately financial impact, with its stock price dropping along with significant clean-up costs.
Prompt communication and corrective actions may reduce lawsuits and regulatory penalties, which can be costly to both finances and reputations. Additionally, proactive communication shows that your company is acting in good faith, which may lead to more favorable outcomes during investigations and regulatory reviews.
When was the last time your bank, health care provider or anyone else who has your information communicated proactively to you about how they are protecting your data? Imagine if you received an email about the safeguards they had in place to protect your information and later they happened to experience a data breach? Would you be more inclined to give them a little benefit of the doubt? Research indicates that companies that communicate proactively with their stakeholders before a crisis are more likely to earn their trust and goodwill, leading to more forgiveness and resilience during a crisis.
These examples underscore the importance of a thoughtful approach and smart messaging, because no company is immune to a reputational crisis. When you can quickly provide transparent, timely communications to your stakeholders, your company can not only survive a crisis but emerge stronger and more trusted.
These actions will ultimately ensure financial stability in the long run:
• Communicate regularly with your stakeholders. Don’t wait for an ensuing issue or crisis to reach out to those who matter most to your business. You should be building reputational capital with them consistently. These regular deposits of engagement in the bank build trust and help you when you’re facing a crisis.
• Swift acknowledgment. Being the first to address the crisis allows your company to control the narrative, reducing rumors and misinformation. In fact, organizations that react to a crisis within the first hour are 85% more likely to maintain public confidence, according to a recent report by the Public Relations of Society of America.
• Prioritize and focus. Amid a crisis, it’s easy to get caught up in the pressure to issue media statements or respond to media requests immediately. Remember to prioritize communications based on your key stakeholders. If you’re a nonprofit, donors may be your most critical stakeholder group. You may need to calm their concerns first with transparent, proactive communication, which reduces the likelihood of donation droppings and financial instability.
• Have a plan. A well-written communications plan with prepared messaging to your key audiences demonstrates to stakeholders that you are proactively addressing the crisis, reassuring them and fostering trust.
Proactive communication prevents financial fallout by preserving trust, loyalty and corporate reputation—all of which are essential to sustaining long-term profitability.
Rina Foster is a crisis communications expert and accredited public relations adviser at 84 Communications.
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