Basil Jarrett | Banking on a crisis

THERE IS opportunity in every crisis. You just need to look at where to find it. Take even this global COVID-19 crisis that just refuses to go away. Now, at the risk of sounding heretic, COVID has actually brought some amount of good that I hope will be here long after the pandemic has passed. And no, I’m not talking about the fact that if I’m running late one morning, I can skip shaving or brushing my teeth, given that no one will notice what’s happening under my mask. Specifically, I’m looking at how the pandemic has forced us to become more creative, efficient and innovative, thanks to a greater acceptance of how online and digital technology can improve our lives. Remote work and virtual meetings, for example, have changed the landscape for some, allowing for a greater work/life balance and reduced mental pressure, not to mention fewer road rage incidents associated with early-morning traffic.

Certainly, the shift to an increased reliance on online and digital technology has been warmly welcomed by many. Banks, for instance, have finally been able to shuttle some of their customers out of the branch and on to their websites and online banking platforms. Less traffic in the branch means fewer problems with irate and impatient customers, fewer tellers and staff, and overall lower operating costs – in theory at least. Because, as we’ve seen over the last two weeks, the migration to online services has not removed all of the occupational hazards of operating a bank in this modern era.

HEAD SCRATCHER

It has been a whirlwind two weeks for the banking industry. Just last week, the entire sector came under heavy fire from enraged customers pushing back against the exorbitant user fees being charged, in some cases, for the privilege of migrating online. This is a head-scratcher, given that some of these online or electronic services were meant to reduce overall banking costs. And to compound matters, it was revealed that the average interest rate on savings accounts has moved from 12 per cent in January 1996 to 0.41 per cent in November 2021. I wasn’t even sure my calculator would have been able to compute anything at 0.41 per cent. And just when we thought last week was over and the banks could finally breathe a sigh of relief, here comes another crisis crashing on their shores. In just two days, one of our banks has been plunged into further crisis following allegations of counterfeit bank cheques being circulated, and another has been accused of assigning duplicate bank account numbers to different customers.

So while COVID has forced us to become more innovative in our reliance on online technology, it has certainly not put an end to the reality of incidents, emergencies and crises being part and parcel of doing business in a competitive environment. In other words, for most businesses, it’s not a question of ‘if’ a crisis will occur, but more a question of ‘when’. It’s also a question of how are businesses crisis-proofing their companies to predict, prevent and persevere after a crisis.

Being crisis-resilient is particularly important for businesses operating in a competitive industry with very little product or service differentiation, such as the banking and finance sector. Banks with strong, positive reputations are perceived as providing more value, which often allows them to charge a premium and to attract better clients and staff. Their success is therefore largely dependent on their reputation, because the market believes that such companies will deliver sustained earnings and have greater potential for future growth. They also have higher price-earnings ratios, market values and lower costs of capital. Now, in some instances, a company can have a poor reputation yet remain fairly profitable if they manage to offer good deals that make up for poor client experience. But in an economy where a large percentage of market value comes from hard-to-assess intangible assets, such as brand equity, intellectual capital, and goodwill, these organisations are especially vulnerable to anything that damages their reputation.

To protect this reputation therefore, banks, in particular, must create a robust, comprehensive and codified crisis communications plan as a vital first step in managing the threats to their reputation and limiting any reputational damage. The key to this plan, however, is a thorough vulnerability audit aimed at identifying the pain points where the next big crisis may be latently lurking. Accidents are rarely accidental, and, if done properly, the vulnerability audit will not only reveal the weak links in the chain, but also allow management to address and plug those gaps ahead of an incident. But this is easier said than done, and, invariably, something will go wrong that necessitates the need for a crisis communications response. The next step, therefore, is to establish a crisis communications team, and to assign team members with specific responsibilities as part of that team. It is helpful to then define the various levels of crisis that the bank may face, and what criteria will be used to classify these crises. A monitoring system must also be installed in order to help detect early-warning signals of any potential problem. A list of key emergency contacts must be gathered and spokespersons identified and assigned, in the event of a crisis. The crisis communications plan must then detail the steps to take in the event of a crisis, such as who is to be notified in the event of a crisis, how that notification will be made, and, very importantly, what is to be said to the media, and by whom, as the crisis unfolds.

By far, this is an oversimplification of what a robust crisis communications plan would involve. But given how damaging a crisis can be to a company’s reputation, especially in a competitive sector with such little product differentiation, it may be a good idea to start assessing just how ready your company is for the next crisis; not if, but when it occurs.

Major Basil Jarrett is a communications strategist and CEO of Artemis Consulting, a communications consulting firm specialising in crisis communications and reputation management. Send feedback to columns@gleanerjm.com.