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How to Implement a Crisis Management Plan

Lily Yan Hughes Vice President & Associate General Counsel

March 21, 2013

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■ My goals for today – How can you as chief legal officer help your organization

prepare for and manage a crisis? – Framework for an effective crisis management plan

■ Guiding principles to managing chaos Solid foundation Strategic planning Effective communication Principled leadership

Agenda

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Never a good time…

“I don’t have time for a crisis this week, my schedule is too full”

Henry Kissinger

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“You know, I’d like my life back.”

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Cruise line in crisis…

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C-suite in crisis…

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ENRON

Red Bull

What kind of crisis are we talking about…are you ready for them?

Compliance

Natural disasters

Tort/accident/workplace (employee misconduct, harassment, violence)

Environmental crises

Source: ACC 2011 poll of ACC Committees

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ACC Poll, Oct 2011

Does your organization have a written disaster/crisis plan?

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ACC Poll, August 2011

Does your organization have a formal PR crisis legal review plan in place?

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■Guiding principles to managing chaos Solid foundation Strategic planning Effective communication Principled leadership

Agenda

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• Walk the walk • Not just talk the talk

Code of Conduct

• Demand transparency • Expect problem solving Sunshine Rule

• Chief compliance officer • Regional compliance officers

Right tone at the TOP

Build a solid foundation for your company with a robust compliance program

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Strengthen your company’s solid foundation of legal & ethical compliance with continuous training

Code of Ethics

Anti-Corruption/Gifts & Entertainment

Financial Reporting

Insider Trading

Sexual Harassment

Export Compliance

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■ Anti-corruption/anti-bribery ■ Whistleblower/hot line reporting ■ Data privacy ■ Environmental ■ Conflicts minerals ■ Iran Threat Reduction Act ■ Dodd-Frank & similar legislation outside the US ■ SEC/NYSE/NASDAQ

Proactively understand how new & emerging laws affect your company’s businesses

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■ New business models & geographies ■ Understand financial levers that affect your company ■ Financial accounting changes affecting your industry ■ Legal trends

– Patent trolls – Shareholder activism – M&A disclosure lawsuits – Executive compensation disclosure lawsuits

■ Objective: legal team trusted to be asked to be at the table when evaluating risks with the business team

Seat at the table to help evaluate risks

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■ C-Suite, Board, Board advisors ■ Internal business teams

– HR, IR, Corporate Communications, Finance, Treasury, Tax, Operations, IT, Risk Management, Security, Sales, Marketing, Credit, Accounts Payable, etc.

■ External business partners – CLOs & in-house counsels with key partners – Suppliers, customers, banks, etc.

■ Team of “go-to” experts – outside counsel; consultants ■ Government regulators

Build relationships BEFORE the crisis

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■Guiding principles to managing chaos Solid foundation

Strategic planning Effective communication Principled leadership

Agenda

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■ Crises tend to share common elements of chaos: – Lack of control and reliable information; panic; anxiety

■ Advance planning provides a path to manage chaos: – Address safety concerns – Protect the company’s reputation while maintaining credibility – Mitigate litigation and other damages Civil and criminal

Shareholder value – Return to normal business operations as soon as possible

■ CLO in best position to prevent silos with big picture

Strategic planning considerations

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■ Defines and assigns the crisis management team ■ Outlines roles and responsibilities of the crisis team ■ Details the steps to take in a crisis event ■ Indicates who to contact, resources that are available

and procedures to follow ■ Provides a platform for training, testing and

improvement

Crisis management & communication plan

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■ What’s the right timing of disclosures? Required disclosures for public companies Form 8-K event? Regulation S-K?

Voluntary statements – “Now” by public relations versus “Wait” by legal team – Prompt response shows transparency and responsiveness – Duty to update the market

■ Aim for positive, caring and consistent messages and emphasize remedial measures when appropriate

Strategic considerations

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■ Communicate duty to preserve ■ Document preservation protocol ■ Forensic collection of electronic data ■ Maintain chain of custody ■ Anticipate scope of document review and production

Preservation of documents

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■ Will the company conduct an internal investigation? ■ What is the proper scope and scale of the investigation? ■ Who will lead the investigation?

– Independent law firm? – Independent committee of the board with advice from an

independent law firm? – Forensic or other consultants? – CLO and team’s involvement?

■ Establish appropriate processes to show unbiased review and sharing of independent conclusions

Will an internal investigation be needed?

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■ Multi-agency investigations ■ International or cross-border government investigations

or lawsuits – Data protection laws – Statutes that block production of documents – Cultural differences – Privilege

International or cross-borders dimensions

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■ SEC and other federal or state regulators – Voluntary disclosure to one or more government agencies – Benefit of voluntary self-reporting requires careful timing – Settlement documents with the government are public

■ Congressional inquiries ■ Clear, complete, balanced reports ■ Oral versus written reports

Reporting to the government

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■ Preserving attorney-client privilege for your company ■ Maintaining credibility with the independent audit firm ■ Oral versus written reports

– They may take notes that could become part of their work product

■ Section 10A Notification ■ Crisis affecting company’s ability to file periodic reports ■ Setting up reserves for liability

Company auditors & finance team

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■ Do we need to notify our insurance carriers? – D&O? – Which insurance policies? – What locations? – How often do we need to update them?

■ Balance between sharing information to maintain insurance coverage and waiving of privilege

Insurers

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■ Reductions of lines of credit? ■ Liquidity concerns? ■ Potential increased cost of funding? ■ Effect on debt ratings? ■ Covenant compliance? ■ Waiver of covenant compliance required? ■ Duty to report “material adverse effect” ■ Trigger of “material adverse effect”? ■ Trigger any events of default?

Banks, bond holders, rating agencies & other financial or business partners

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■ Your legal team ■ Your internal audit team ■ Your Board & their advisors ■ Your CEO and C-Suite ■ Your management team ■ Your employees ■ Your shareholders ■ Institutional shareholder advisory firms ■ Plaintiffs bar

Other interested parties

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■Guiding principles to managing chaos Solid foundation Strategic planning

Effective communication Principled leadership

Agenda

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■ STEP 1: Verify the Crisis Situation ■ STEP 2: Notification and Assignments ■ STEP 3: Assess the Communication Crisis Level ■ STEP 4: Communication Management ■ STEP 5: Develop Messages ■ STEP 6: Approve and Publish Messages ■ STEP 7: Monitor and Provide Feedback

Seven Steps for Crisis Communication

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■ WHAT happened and where? ■ WHEN did this happen? ■ WHO is involved? ■ HOW did it happen? ■ WHAT is currently being done?

STEP 1: Verify the Crisis Situation

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STEP 2: Notification and Assignments

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STEP 3: Assess the Communication Crisis Level

LEVEL COMMUNICATION CHARACTERISTICS

4 HIGHLY INTENSE

• Media have immediate and urgent need for information about the crisis. CEO may need to provide opening statement of empathy/caring.

• One or more groups or individuals express anger or outrage.

• Broadcast and print media appear on-site for live coverage.

3 INTENSE

• Crisis causes growing attention from local and regional media.

• Media contacts non-Crisis Communication Team staff for information about the crisis.

• In addition to the media, shareholders and community partners are present at site.

• Affected and potentially affected parties threaten to talk to the media.

2 MODERATELY

INTENSE

• Crisis situation may/may not have occurred; the situation is attracting slow, but steady media coverage.

• External stakeholders receive media inquiries. • The public at large is aware of the situation/event but it

is attracting very little attention. 1

MINIMALLY INTENSE

• Crisis attracts little or no attention. • Pre-event information requests are received. • Public and/or media are virtually unaware of crisis.

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■ Message Management – Schedule regular internal communication updates – Identify key audiences – Start crisis inquiry log from public and/or media – Select and/or assign spokesperson(s) (site and/or corporate)

■ Communication Logistics – Identify main on-site contact – If necessary, establish communication operation center – Address other logistics

STEP 4: Communication Management

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■ Craft your press release(s)/internal communications ■ Develop a script for conveying key information points ■ Develop or refer to a list of questions that could be asked by a

variety of audiences about the crisis ■ Modify pre-scripted messages or develop new messages ■ Be prepared to address the company’s record for the relevant

crisis situation (i.e. financial integrity, treatment/safety of employees, etc.)

■ Identify the best methods for delivery of key messages ■ Monitor crisis and update messages based on the crisis ■ Approved spokesperson(s) should be prepared for interviews

STEP 5: Develop Messages

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IR/Corp Communications (Finance, IT, HR, Operations, etc.)

Legal

Legal CEO/COO/CFO

STEP 6: Approve and Publish Messages

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■ Review crisis coverage ■ Identify story trends ■ Identify public and key stakeholder issues ■ Identify your Lessons Learned

STEP 7: Monitor and Provide Feedback

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■Guiding principles to managing chaos Solid foundation Strategic planning Effective communication

Principled leadership

Agenda

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■ How can we help to showcase our company’s and leaders’ values in action?

■ Potential conflict between the “best” legal advice and the principled way to manage a difficult situation

■ Take a risk and seize the opportunity with principled leadership

Transformative power of principled leadership during a crisis

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“The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger--but recognize the opportunity.” John F. Kennedy

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■ Lily Hughes contact information: lily.hughes@ingrammicro.com 714.382.2018 Ingram Micro Inc. 1600 E. St. Andrew Place, Santa Ana CA 92705

Any Questions?