The costs of major corporate crises often make headlines. For instance, Volkswagen paid a record $30 billion for Dieselgate. Wells Fargo paid $1 billion for charging customers extra fees on auto loans and mortgages, and that’s in addition to the $185 million the bank paid for its fake accounts scandal. Target’s costs for the 2013 holiday hack totaled $202 million.
Those costs are easy to quantify, just like the cost of an hour of IT downtime (more than $1 million) or the average cost of a data breach ($3.86 million). But they aren’t the only costs associated with crisis. Though more difficult to quantify, the oft-hidden, reputational costs of a slow or uncoordinated crisis response can be just as significant.
And, because of social media, crisis response times are no longer measured in days. They’re measured in hours, even minutes. A study by law firm Freshfields Bruckhaus Deringer revealed that, in 28 percent of crises, news of the incident spreads internationally within just one hour. If companies don’t respond swiftly, they’re subject to judgment in the court of public opinion. A slow crisis response can further damage the company’s reputation because it leaves the general public wondering why the company is taking so long and whether company leadership knows what to do.
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