IVCA Feature: Highlights of Education Luncheon, ‘How to Use Communication Planning to Mitigate Franchise Risk’

IVCA Feature: Highlights of Education Luncheon, ‘How to Use Communication Planning to Mitigate Franchise Risk’

May 11, 2016

The IVCA 2016 Education Luncheon program kicked off with an important topic that catches most firms and portfolio companies off guard...“How to Use Communication Planning to Mitigate Franchise Risk.”

Four expert panelists spoke about the importance of impact planning for a crisis to protect the value of that investment. The panel covered portfolio company experiences including: worksight injuries, lawsuits and personnel issues.

The luncheon was sponsored by Edelman Chicago, a financial communications and investor relations group.  Jeff Zilka, Executive VP and General Manager of Edelman Chicago served as moderator.

  • Bob Fealy, Founding Managing Director at Limerick Investments
  • Andy Liuzzi, Executive VP, Crisis & Risk Management Expert at Edelman Chicago
  • Mark Tresnowski, Managing Director & General Counsel at Madison Dearborn Partners
  • Kim Vender Moffat, Principal at Sterling Partners

Jeff Zilka said for a number of VC and PE partners, there are three things that we suggest:

  • First, during due diligence, when you’re mapping the value chain for that particular company, also look at it from the point of view of reputation or headline risk. What could go wrong? Since you’re doing due diligence, go the extra step.
  • Second, ask that each portfolio company have a crisis plan in place. You won’t get everything right, but you should scope out the anticipatable risks, and you’re putting into place the mechanisms to respond quickly.
  • The final piece is when you have the CEO meeting, as so many sponsors do, have a crisis expert come in a do a short ‘chalk talk,’ just to make the CEO aware of some things that might happen, it’s part of his or her job.

Andy Liuzzi discussed the impact of social media: It’s kind of defragmenting risk. The news cycle is no longer 24 hours, it’s 140 characters on Twitter. The blessing of Social Media is that it allows direct contact with your constituency. The curse is that it’s asymmetrical – anyone can lob anything at anybody. How to respond in kind is tricky. What we look at on the agency side is analytics, for example who is posting, how influential are they, and are they getting reverberation.

So much of it is white noise, but you have to have the metrics and numbers in place before the fire breaks out, to know whether or not to engage. I’ve advised clients to take some of the critique and move on. That’s the nature of the beast, and that’s why it is important to have those analytics in place – know what your Social Media levels are and how many engagements you get a day. If you see a spike, you have to determine why it happened. It has changed the world, but you need the numbers and analysis behind it to determine its impact.

The consensus of the panel is that thoughtful preparation for a possible future crisis is very helpful.  Because many of the events cause management and investors to have an emotional reaction to the crisis at hand, having a team and process in place for the most likely types of issues be they product, personnel, industry, Cybersecurity, customer injuries is a really smart idea.  Making your general counsel the first call and having him/her contract with any communications or investigative professionals will allow the company to maintain the shield of privilege.  Your second call should be to your insurance carrier who often has experts that can be dropped in to help manage the crisis at hand.