[Viewpoint] Flunking crisis management

These last 12 days have been terribly long. Since the naval warship Cheonan went down the night of May 26 after a mysterious explosion near the sea border with North Korea, our ears and eyes have been on the news to learn the whereabouts of 46 missing sailors. We prayed they were alive. We were glued to the TV the first two days. We were on edge, desperately hoping they would come home safely.

But yearning slowly turned to despair and anger as underwater search and rescue efforts added casualties instead of saving any lives. This country is among the world’s largest economies, a technology powerhouse, and this year will host the G-20 Summit. But somehow we were powerless in finding and rescuing young sailors trapped in the depth of our waters.

We looked to the president for answers. We waited and waited, but he was not to be seen. There was news that the president called for emergency security meetings several times and ordered the military to do their utmost and mobilize whatever they could for the rescue mission.

Of course, the president could not have changed anything by just appearing on TV. Some say it is outdated to look to the president whenever an emergency erupts. Still, I think he should have addressed the public even if he could utter no more than “We will do our best.” The first couple of days are crucial in times of crisis.

Public anxiety and unrest peak during that period. The president could have eased the situation by offering words of comfort and assurance.

The first rule in corporate risk management is that those at the top are in charge. Entrepreneurs are warned not to take the backseat and let the chief risk officer take command at times of crisis. Everyone waits for words and action from the chief executive. The first 24 hours are most critical when a crisis occurs. Only the CEO can relieve the uneasiness. History tells us that a company with an assertive and aggressive CEO can emerge even better after a crisis; one with a low-key CEO rarely comes through. The best corporate risk management precedent was set by Johnson and Johnson.

In 1982, the pharmaceutical company suffered a major crisis when seven people died after bottles of Tylenol were found to be laced with cyanide.

Upon discovery, then-CEO James Burke quickly took control and maintained a high profile, talking to the press constantly to alert the public about product tampering and swiftly pulling Tylenol off store shelves. He dealt with the situation with sincerity and urgency. Exxon Chairman Lawrence Rawl will be remembered for being on the other side of the axis in the management of a crisis.

When the company’s tanker spilled millions of gallons of oil in Alaskan waters due to crew error, its chairman didn’t fly to the scene for many weeks. He instead sent a crisis management team and acknowledged the spill a week after the accident. Credibility and confidence in the company was shattered as a result.

Effective crisis management applies not only to companies but governments as well. When a country is in crisis, the president must be omnipresent and seen at the helm. The public is hungry for leadership, particularly at times of crisis, and a sincere leadership posture is the only way to assuage the public’s anxieties and gain their support. Otherwise, the leader will lose public confidence. President George W. Bush saw his approval ratings plummet due to his distant response to Hurricane Katrina in 2005.

The No. 2 rule in risk management is honesty. No information must be kept from the public or watered down. There should be no excuses or evading of responsibility. When there are, the situation gets worse and risk management flops.

Exxon was an example for failed risk management in the Valdez crisis. The company tried to dodge responsibility by finger-pointing at coastal guards and public officials.

But Ashland Oil acted completely different. In 1988, one of its oil tanks collapsed, sending millions of gallons of diesel into the Ohio River. Within hours, the company announced the spill and assured the public that it would take full responsibility for the cleanup. The company was forgiven and its managers were lauded as cool thinkers.

In the recent test of crisis management, the government and military flunked. It is understandable that the military cannot be fully open about details due to security reasons.

Still, it explained poorly how a fishing boat, not the Navy, found the location of the warship stern. It kept changing the time of the blast that halved and sunk the ship. Its ambiguity bred and spawned rumors and conspiracy theories. If the military had been up front about the case from the beginning, deep confusion and mistrust could have been avoided. A backlash against its ill management will likely take a toll on the government and military.

It was a tragedy, but tragedies happen. But what’s important is to learn from mistakes and become wiser and more prepared next time.

*The writer is senior business news reporter and editorial writer of the JoongAng Ilbo.
Translation by the JoongAng Daily staff.

By Kim Yeong-ook