In 2010, BP faced a corporate nightmare when the Deepwater Horizon oil rig exploded in the Gulf of Mexico, killing 11 people and spilling millions of barrels of oil into the water. BP Chairman Carl-Henric Svanberg only exacerbated the situation when he referred to those affected by the environmental disaster as "small people" in a public statement.
Svanberg, who is Swedish, meant no disrespect with the phrase, which is a common term in his native country. He apologized profusely for this error in translation, but the damage was already done. The company spent $50 million recovering from repeated PR errors related to the crisis, all of which could have been avoided with better planning.
The lesson here is that you need a crisis management plan in place--particularly if you conduct business in a high-risk environment or have global relationships that could be affected by international turmoil. We're seeing this now with Western brands that have been impacted by Russia's economic downturn, such as Ford, Volkswagen, adidas, and McDonald's.
You can't always prevent disasters, but you can certainly control how you plan for and respond to them. How your company performs during times of conflict has everything to do with your preparation beforehand.
Here's how to assess the risk of doing business in a foreign country and lay the groundwork for unshakable relationships overseas:
1. Identify the conflicts. Are they internal or country-to-country? How will your business be affected if the conflicts escalate? These questions are key when deciding which countries to invest in. Foreign corporations have been eyeing the recently opened Myanmar market as a lucrative place to invest, but internal political conflicts and a lagging legal system make it risky. Understanding these types of risks can help you assess whether it's worth gambling on a volatile economy.
Many entrepreneurs are also looking toward post-conflict African countries. Countries such as Kenya and Mozambique have credit guarantees and other incentives in place from the U.S. Agency for International Development, which makes them safer than other fragile economies. Examining existing safety measures and the likelihood of recurring conflict can help minimize your chance of losses.
2. Understand the culture. If you're going to do business overseas, you need someone on the ground who can establish commonalities between your company and your foreign stakeholders and who understands how business is done in that culture. Particularly in fast-growing markets such as China and India, you want someone bicultural who understands how public policies could affect your business.
Your liaison can help maintain strong relationships with global partners if conflicts arise by opening a dialogue on sensitive issues. Whether the crisis affects your business directly or indirectly, you need to assure stakeholders of your good intentions, create a plan of action, and find ways to overcome political tension.
3. Don't underestimate the importance of relationships. Before you ever break ground in another country, you should work to foster goodwill and start a dialogue with local stakeholders. Building strong relationships gives you a greater chance of succeeding financially and enacting change in poor or conflict-ridden countries.
Even after reconciliation, volatile areas often fall back into conflict after 10 years. Companies can help prevent conflict by stimulating the economy and promoting stability, but that can only happen if the local people understand your purpose and the benefits that your business provides.
When responding to any crisis or international conflict, timing is everything. You must have a communication plan firmly in place so you can react quickly with sensitivity, grace, and suitable action steps. Open a dialogue now to start building ties that can weather any storm and set your business up for success.
This article was co-authored by Monique N. Tapie, VP of Communications and Public Affairs at Gravity Media.