Companies in Crisis

From 2018 to 2019, fög implemented a research project in collaboration with Prof. Dr. Monika Roth (Lucerne University of Applied Sciences and Arts) entitled: "Companies in Crisis - Influence of Crisis and Compliance Management on the Reputation and Perception of Integrity of Companies". The project was supported by the KBA-NotaSys Integrity Fund.

The project investigated to what extent proactive and transparent action in a crisis helps prevent reputational damage to a company or even become a reputational gain. The findings provide new insights into the question of how corporate crises can be better mastered through appropriate crisis communication and compliance management. The findings also provide answers to the question of how concrete action and communication measures affect the reputations of companies affected by crises.

Based on corporate reporting in the Swiss media (approx. 250,000 news items on the 125 largest Swiss companies), more than 600 crisis cases between 2008 and 2018 were systematically identified and described. The 308 cases related to compliance issues were then analyzed in depth. For this purpose, overarching characteristics such as industry affiliation and crisis type as well as various crisis and communication response strategies of the company were recorded. The media coverage (14,581 news items) of these crisis cases was examined in depth by means of a manual content analysis. Amongst other things, the assessments of the companies, the influence of corporate communication on the coverage, the attention in different media types and the references to social media communication were analyzed.

The results of the large-scale diachronic study show that the sectors of the Swiss economy are affected to varying degrees by compliance crises. The banking industry is the most affected, while the pharmaceutical and commodities industries are also affected by compliance crises with above-average frequency.

Measures that go beyond purely communicative measures, i.e., that start at the action level and have a connection to compliance and the damage caused by the crisis, prove to be an effective crisis management tool in compliance crises. The revision of compliance guidelines (prevention of future damage) and compensation for those affected (repair of past damage) have been statistically proven to have a mitigating effect on the course of the crisis. Both measures lead to more attention from the perspective of the affected company, but at the same time also to a more positive assessment of the events. By means of active and transparent communication, companies can also achieve less negative assessments in the media.

Measures with high news value, such as the dismissal of employees, lead to more media attention, but are usually not able to reduce the criticism in the form of negative evaluations. Statements by high-ranking company representatives, namely the board of directors or CEO, also regularly lead to greater attention in the event of a crisis, but without having a positive influence on the rating. Such strategies should therefore be used with caution.

Overall, the research project has brought to light various important and novel findings that provide important indications for business practice, especially for those responsible for communication and compliance, on how to deal sensibly with compliance crises in order to avoid, prevent or at least not increase reputational damage.