By King & Wood  Mallesons’  Compliance Group

Through reviewing the performance and effectiveness of crisis management during recent food safety events, we were reminded of our comments relating to the Revised Amendment to the PRC Food Safety Law and importance of crisis management for multinational companies. Our reflections on recent events are focusing on the following topics: response time; response attitude; internal public relations (PR) team and official press conference.

• Reflection No.1: In terms of “Response Time”, the companies did not seize the opportunity to respond to the crisis in the initial stage, and their response was so slow that public opinion worsened.

• When a crisis event occurs, it is crucial to combat negative public opinion during the “Golden Four Hours” (the four hours following the occurrence of the crisis event). However, after an event was exposed and the media reported this event for almost 24 hours, then some companies would start to release their first statement on its official website. Analytically, their response speed was relatively slow, and they failed to disseminate positive information to restore their image under pressures from the first wave of public opinion.

• Reflection No.2: With respect to “Response Attitude”, certain companies have tended to avoid important information in their responses and displayed a lack of sincerity in addressing merely trivial matters.

• Response attitude on the companies’ official website was often frustrating to both the media and public. In one such statement, it was mentioned that “the company management was appalled by the event…”, and did not include an apology or explanation regarding the crisis situation. This kind of attitude is rarely enough to overshadow the negative public opinion surrounding a company that has been impacted by a crisis. If an apology or a commitment is too late, and if the crisis is left unaddressed, a mere apology or commitment will be insufficient to make up for the poor response made in the initial stage. Further blunders could occur if the press conference, which could be a redeeming good public relations opportunity, failed to respond to key issues which inevitably exacerbated the companies’ already degenerating image and reputation.

• Reflection No.3: The absence of an internal public relations (PR) team and a public opinion management system;

• Some companies have been active in the Chinese market for several years, but they maintain a low profile and have never received media or public attention. Often, there is no public relations department in those companies, which means that should a crisis occur, there is not a dedicated person or team knowledgeable about crisis management. If there is no specific internal PR team or public opinion management system, companies will fail to combat a crisis effectively.

• Reflection No.4: Poor social repercussions resulting from the inadequate official statements and press conferences.

• At a press conference, the companies should make sincere apologies, and also give explanations on specific misconduct or matters of executives who were involved in the crisis. Further information should also be given as to how the company will compensate customers for any losses incurred due to the crisis. However, in relation to several recent crisis events, companies only issued statements with words about the company being “shocked and puzzled” about the crisis, without further explanatory information. It is not wise to merely make apologies and reorganization plans at the press conference, as the public is more interested in punitive measures against parties involved, and how the company is taking effective self-regulatory measures to prevent similar crises from occurring again.

• While making reflections on these companies’ problems in crisis management, we suggest that multinational companies should own a complete set of contingency plans, in order to be prepared to fight any potential crisis. Multinational companies should also note the following:

• First, a company must have the courage to bear responsibilities when they are at fault. Most importantly, the company spokesperson should be a strong and supportive face in a time of crisis, sharing the pain with the injured parties, and making sincere apologies;

• Second, a company should actively develop alternative solutions tailored to the crisis at hand, whilst implementing effective self-regulatory measures to prevent reoccurrence of a similar crisis. The most important step to save the company’s reputation and image is to take active measures to combat the crisis;

• Third, a company should invest in an internal dedicated PR team as soon as possible so that timely responses to crises can be achieved. The PR team will ensure the company building a strong public opinion management system in order to enhance public response monitoring capabilities, and thus allow the company to make informed judgments regarding public opinion during a crisis.