Managing risks in an era of stakeholder capitalism
This year at Davos the 50th anniversary of the world summit is dedicated to stakeholder capitalism. In the Davos Manifesto 2020, the World Economic Forum urges leaders to focus on creating value for more stakeholders in an effort to strengthen global social cohesion and sustainability.
In Latin America and the Caribbean, businesses have been responding to this call to action by seeking to both create value and protect value for their broader universe of stakeholders. Technology is providing solutions never previously imagined, and this is proving especially effective in crisis management.
In Colombia, for example, Empresas Públicas de Medellín started using WhatsApp, a multi-platform messaging software. The company customized distribution lists to communicate river alert levels with local communities, employees and media following heavy rains, landslides and a tunnel burst. In Chile, AES Gener, the sponsor of the Alto Maipo hydroelectric project, began to use Facebook to release information related to the project for its stakeholders and broader community. And in Mexico, WhatsApp came to the rescue of those without food and shelter during the 2017 earthquake by directing users to help.
Engaging stakeholders, specifically local communities, through digital technologies can mitigate risks and prevent crises. IDB Invest’s Sustainability Week platform is highlighting how companies can adapt quickly and use technology creatively.
Here’s what we’ve learned so far:
1. Listen to mitigate
The best way to manage a crisis is to first prevent one. To mitigate, businesses must understand their risk factors and stakeholders. Listening to them can transform a one-way stakeholder relationship into a two-way dialogue.
Reading the news and social media allows companies to see how their work is viewed from the outside-in and the inside-out. Technological software, such as RepRisk, TrackMaven and Brandwatch, can allow firms to hear from a broad range of stakeholders, flag sensitive issues and raise project concerns to management in quantifiable ways.
Software like this complement community meetings and in-person and web-based grievance mechanisms. By listening to more project constituents, companies have more information on project realities and public perception, both equally important in crisis management.
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2. Decide on decision-making
Research shows that unprepared teams are more likely to make poor decisions or ones that increase recovery time. Nothing can slow down a crisis response more than wondering who should be involved and who has final say. In a crisis, thoughtful decisions by the right people need to happen fast.
As marketing expert Jennifer Davis wrote in a 2018 column in Forbes, “Crises are solved through operational decisions not PR bandages.” This suggests that multi-disciplinary and geographically diverse teams tend to make better decisions. Further, when operations sit alongside communications teams, decisions and actions can accelerate, allowing digital tools to communicate project updates and management decisions in real-time.
At IDB Invest, we created a crisis management role and a crisis approval plan for sensitive projects. The plan outlines who prepares what information, who signs off and which channels to use. For example, the CEO approves press releases, however, he doesn’t need to review each Tweet. We also tested the approval plan. Doing so, uncovered ways to improve the quality and timeliness of our reaction.
3. Build digital trust
The right to information is a human right. There is even an International Day for Universal Access to Information by UNESCO. In the absence of information, the risk is that stakeholders generate their own stories. Social media channels like Facebook and Twitter have made it easier to steer a conversation whether it be to share facts or public perceptions.
Responding to every stakeholder comment is often an inefficient and ineffective use of company resources. On the other hand, silence may raise more concerns as well. Building trust means analyzing the trade-offs between silence and transparency.
According to trust expert Stephen Covey, a few of the behaviors that strengthen trust include creating transparency, clarifying expectations, confronting reality and righting wrongs. To establish this dialogue, consider a counter-information campaign.
Social media channels are useful platforms for companies to share what they do know, clarify project timelines and publish client studies. Counter-information campaigns avoid editorializing and provide relevant facts in real-time. Collaborating with influential members of the community, such as academics, to share their views can further legitimacy. Digital media solutions can allow influencers to engage swiftly and exponentially across broad audiences.
The success of technology deployment in an era of stakeholder capitalism will depend largely on its transparency, authenticity and trust. Using the digital tools at our disposal to listen better, engage early and respond swiftly is allowing business to mitigate opposition, promote stakeholder inclusion and correct course, if needed. Ultimately this strengthens the private sector’s license to operate and creates value for the long term.■