Gary W. Patterson
More than Just Public Relations! How Prepared Are You For When Public Embarrassment Strikes?
Ignore the perils of Susan B Komen, West Texas Fertilizer, and BP at your own risk.
Disasters continue to impact both major nonprofit and for profit organizations of all sizes. For far too many organizations in a cash strapped mode, a future embarrassment is more of a When, not an IF.
Regardless of your mission or the background of the Trustees and Directors, almost everyone has heard about the West Texas Fertilizer (Westco) organization tragedy, apparently causing $100 million of damages and killing fifteen people. What you may not have heard of are the similarities to your nonprofit organization.
More Than Just Public Relations
As you read this article, consider where your organization is exposed to the issues below which led Westco astray.
- Longevity. The company has been in business since 1962. Possibly long enough to be complacent about the way things have always been done here.
- Organizational size. Annual revenues were estimated at $4 million. Possibly small enough to think enterprise risk management is just for large organizations.
- Geography served. Most of their clients are local farmers, using the chemical products created. Possibly thinking how they operated was acceptable in the community.
- Adequacy of liability insurance. Westco carried one million dollars of liability insurance. Possibly all the expense they felt their budget permitted.
- Access to dangerous situation. Purportedly, ammonium nitrate was stored on site. Possibly not anticipating an external situation affecting what previously worked for employees and clients (see number 7).
- Ignoring a seemingly unlikely event that could destroy or bankrupt the organization. Most articles suggest Westco will be force to file bankruptcy, becoming an ignominious footnote in history. Possibly not investing the time to strategically contemplate somewhat unlikely events that would put the entire organization at risk, IF they occurred.
- At risk from non-employees or non-clients. It appears that the explosion was caused by criminals stealing anhydrous ammonia, a liquid that can be used to cook methamphetamine for the illegal drug market. Possibly not understanding how much exposure dishonest people could create.
What mistakes do you now think may have been made by this small, locally oriented Westco organization? Now, truthfully address how often your organization is exposed to each of the seven points above?
Do not skim over these points too quickly. Normally it does not take very much effort to truthfully see aspects of several of the preceding points in most organization. After all, it is a lot less expensive to acknowledge issues and solve them before something goes wrong.
Since things can happen, no matter how well prepared your organization, consider adapting the following rainy day seven-step emergency plan checklist for dealing with potential risks:
- Commit to contingency planning . Organizations that organize and practice any version of contingency planning, or even better, enterprise risk management have much less exposure to becoming “deer in the headlight” stories in local or regional media.
- Establish a risk-tolerance framework . Determining risk levels is a key element of any enterprise risk management (ERM) program. Best practices require organization create these levels under calm timeframes.
- Identify potential risks that your organization may be up against . Schedule and complete an off-site strategy session to identify ten potential situations to monitor. More than ten can easily be overwhelming. Fewer than ten is ignoring reality.
- Review those top ten risks for liabilities or contingencies that are not included in your financial statements. This is not a process to audit the auditors. It is a process to improve your opportunities, viability and existence. Auditors are concerned with GAAP – Generally Accepted Accounting Procedures. You want to apply YUAS – Your Uniquely Applicable Situations to improve your organization.
- Evaluate both possible crucial and worst-case risks . A list of ten reasonably likely risks to occur can be prioritized from 1 to 10, with particular emphasis on numbers 1, 2, and 3.
- Ensure a coherent action plan exists which has the approval of your executive team. Think of this as a dress rehearsal practicing under a calm timeframe for an event you hope never occurs. This is an insurance policy of effort you never want to collect on.
- Implement a proactive media policy . Anyone who has heard or seen the ad that says some version of “pay something now, or pay a lot more later” should quickly realize the value for arranging a proactive media policy as one of those crucial, yet not urgent actions which successful leaders consider seriously.
After all, the goal is to control your organization’s financial destiny with adequate procedures and timely information.
Capitalize on apparently invisible high-return opportunities, while at the same time limiting exposure to major risk. Otherwise, the cost of what Westco did not know appears to have been the organization and innocent employees and first responders.
BP survived its catastrophe due to an incredibly strong balance sheet. No one has come forward to rescue Westco, a smaller organization that doesn’t have BP fortress balance sheet strength. And it is extremely unlikely that anyone will come forward to help.
Use this article as an inexpensive way to self-test your organization’s ability to (a) reduce the likelihood of being next month’s public embarrassment, (b) gain time to solve a potentially embarrassing situation, or (c) end a practice that is not worth either time and money invested to continue or is not worth the risk.
In this ever litigious world, well intended, socially concerned board members are now more at risk than in the past, both financially and reputation-wise. The legacy that may be saved by applying parts of this article may be your own.
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