Such a scenario—known as crisis contagion—is one for which companies need to be prepared, “as the negative consequences of crisis contagion can be significant when customers make assumptions of guilt by association,” stated an academic paper published earlier this month by the managerial journal Business Horizons.
The paper, written by Daniel Laufer, an associate professor of marketing at the School of Marketing & International Business at Victoria University of Wellington, New Zealand, and Yijing Wang from the Erasmus School of History, Culture & Communication at Erasmus University in Rotterdam, Netherlands, analyzes four risk factors that can put an organization at higher risk of crisis contagion. It also looks at ways companies can mitigate their risks, and how to respond should they find themselves in a situation they did not cause.
Mr. Laufer discusses the paper and its ramifications in an interview that was edited for length and clarity.
How can companies structure their crisis response plans to incorporate the considerations of what happens if contagion occurs?
Mr. Laufer: A section to the plan can be added which covers the risk of crisis contagion. For example, a common crisis contagion risk factor is industry. What happens if a competitor faces a crisis? Should the company be concerned? How should the company respond?
How do they do this?
Mr. Laufer: First: Do consumers view the company as similar to the company experiencing the crisis? If the company shares other similarities with the company experiencing the crisis--in addition to industry--this increases the likelihood of crisis contagion. These risk factors include country of origin (for example, Bavarian Motor Works and Volkswagen); organizational type (Trump University and for-profit universities); and positioning strategy (Starbucks Corp., Caribou Coffee Co. and corporate social responsibility positioning).
A good example to illustrate this point is the mass shooting in Las Vegas. The gunman had multiple guns and ammunition at a casino. Should other casinos be concerned that consumers may infer that lax security is widespread in the industry? Consumers are more likely to assume this may be the case in Las Vegas as opposed to Macau; location is linked to the country-of-origin factor. Therefore, the risk of crisis contagion is much higher for another casino in Las Vegas.
Second: Is there evidence of crisis contagion? This can be assessed by tracking the mainstream and social media for answers to the following questions: Is the company being linked to the crisis? Are people speculating about possible spillover effects? And, is the crisis being described as an industry issue? A good example of this is the Harvey Weinstein crisis. The crisis is being associated with a “casting-couch culture” in the mainstream media that suggests the risk of crisis contagion is high for the Hollywood industry.
Third: Preparing a response. If the risk of crisis contagion is high, it is important that the company issue a response. A denial should include an explanation of why the crisis wouldn’t happen at the company.
How does a company's response differ if the contagion is caused by accessibility (companies in the same category) as opposed to diagnostics (something about the category related to a crisis)? What makes these responses different?
Mr. Laufer: It is important that both accessibility and diagnosticity occur in order to generate crisis contagion. If they don’t occur simultaneously, the company should not issue a denial.
What steps can companies take with their third-party partners to ensure they are not doing anything that may cause a crisis that can spread to them?
Mr. Laufer: Comprehensive external audits are very effective in that regard. For example, if a company positions itself around corporate social responsibility, it is a good idea for the company to hire a reputable external auditor to audit its CSR operations.
From the article: “For example, in the case of a crisis involving not fulfilling CSR promises such as a coffee chain not providing fair compensation to coffee growers in developing countries, it is important to demonstrate that the company is fulfilling its CSR responsibilities. Stating that the company issues an annual CSR report which discusses compensation to coffee growers, and is audited by an independent third party, would be an effective way to refute the accusations. Issuing a denial without providing an explanation will not sufficiently satisfy skeptical consumers. An effective denial by the company will greatly assist in combating the risk of crisis contagion.”
What should they consider when deciding whether to issue a comment?
Mr. Laufer: Before deciding to comment, the company should consider the following. First, is there a high risk for crisis contagion based on the risk factors--industry, country of origin, organizational type and positioning strategy? Second, they need to track mainstream and social media for the following issues: Is the company being linked to the crisis? Are people speculating about possible spillover effects? Is the crisis being described as an industry issue?
If the answers to both questions are yes, then there is a high risk of crisis contagion and the company should issue a statement. This denial should include an explanation of why the crisis is not related the company.
However, if the risk of crisis contagion is low, the company should not issue a statement. From the article: “Issuing a denial when it is not necessary could draw attention to the company, and cause some people to believe that there may be reason to be concerned.”
Write to Ben DiPietro at firstname.lastname@example.org, and follow him on Twitter @BenDiPietro1.
Source : https://blogs.wsj.com/riskandcompliance/2017/10/23/when-another-firms-crisis-becomes-yours-how-to-combat-crisis-contagion/Thanks for visit my website