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{ HR iMPact }

the Cost oF ContingenCy:

prepAring For Crisis CArries A Cost—
But it’s CheAper thAn the AlternAtiVe

By Liz Bernier

In any organization, proposing budget items is a challenging So when making the business case to
task in a climate of competing priorities and lean operating build in extra padding in the contingency
budget, don’t just present hypotheticals.
expenses. Even expenditures that seem inevitable to the Nail down some less-than-hypothetical
business function or department proposing them may face numbers. What was the estimated fnan-
cial impact to Maple Leaf Foods during
rigorous scrutiny from higher-ups. to stay competitive, adaptive the 2008 listeriosis outbreak? What might
and nimble, companies are more concerned than ever before the expenses have looked like at the CBC
when the Jian Ghomeshi sexual harass-
with keeping excess costs contained. ment scandal broke if 5 or 10 or 15 em-
ployees turned over and a fagship pro-
hen it’s diffcult to account for and an industrial accident being just a few gram was left leaderless for weeks?
eventualities in the budget, how among the many recent examples we’ve It’s also not a bad idea to calculate a
Wmuch more challenging has it be- seen in the media—and you need a PR little further. Assuming the company is
come to plan for the hypotheticals? While frm, legal advice, independent investiga- not adequately funded and prepared, how
every organization is different, as a gen- tors, and a swift overhaul of policies and much would it cost to face a 30% drop in
eral trend, Legal and HR likely need to procedures. All of these things will carry your stock or a 40% decline in revenue?
present a strong business case to win an signifcant costs—but those costs will be How much would it cost if 20 employees
adequate budget for contingencies. much easier to bear if the organization turn over overnight?
So how do you build a business case for has a well thought-out contingency bud- Planning for and mitigating risk isn’t
scenarios that may never come to pass? get in place. just about media training or policies and
How can you justify keeping a law frm, Failing to plan fnancially for a rainy procedures. Budgeting is an essential piece
PR or crisis communications team, or HR day—or potentially reputation-ending of the puzzle—and it’s a piece that’s no
consultancy on retainer, when you may crisis—has added costs above and be- longer the sole purview of Finance. Legal
never once need their services? yond the bottom line. An organization and HR need to have a solid understand-
In a word? Numbers. For HR, at least, left wrong-footed in a crisis is much ing of the potential costs to make a strong
translating business needs into fnancial more prone to making mistakes or mis- business case to guard against risk. ❚
terms is something of a learning curve, handling an already delicate situation,
but it’s certainly a worthwhile one. Pic- and as we’ve learned, in the social media Liz Bernier is a Canadian business journalist and
ture this: the industry undergoes a severe, age reputation is everything. An organiza- the managing editor of HR Professional magazine.
unexpected downturn, necessitating mass tion that makes a mess of a crisis situa- She is a communications specialist with the Hu-
layoffs—and requiring external HR and tion has a lot more at stake than employee man Resources Professionals Association.
legal help to prepare severance packages, turnover, a fnancial hit or a few bad
handle the exit process, deal with media media stories. A severely damaged repu-
messaging and internal communications, tation puts at risk your “social license”
and assist with outplacement services. Or to operate—that intangible factor that
perhaps the company runs into a high- can suddenly become painfully palpable
profle crisis—food contamination, sex- in the form of dried-up business and a
ual harassment allegations, a plane crash dwindling bottom line.

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