Managing Reputational Risk in Litigation

CD: When considering litigation, do companies often fail to factor in its potential impact on the reputation of the business? Do you believe companies should be as concerned about their reputation as they are about the legal and commercial impact of litigation?

Gemmill: Increasingly, litigation is creating a new kind of enterprise risk as legal, reputation and business threats merge rather than remaining siloed as usual. This is especially true in light of the coronavirus (COVID-19) crisis, and it is crucial that these elevated risks and liabilities be viewed and managed holistically. Underestimating the risk litigation may present – both operationally and from a communications and engagement perspective – holds the potential to damage corporate trust and reputation significantly. Too often, companies still think in terms of siloes within their business and believe the impact of legal matters will stay contained to that specific area. Unfortunately, legal, reputation and every other aspect of business are so intertwined today that the risk of overlooking the potential impact of litigation on reputation is far too great to ignore.

CD: What specific kinds of issues surrounding litigation might harm a company’s reputation?

Loeb: No one-size-fits-all approach applies to litigation communications. Companies should calibrate their communications strategies – proactive versus reactive measures – based on the type of legal issue involved. For instance, defending against a lawsuit following the death of an employee from COVID-19 requires a different approach than suing to fight for the survival of the business or to protect one’s intellectual property (IP). Three general issues arise consistently that could harm a company’s reputation in litigation. First, companies should not let the fog of litigation distract from its mission and values. These should be clear and should remain at the forefront of all communications. Second, communications efforts should always have the legal team’s approval. Litigation communications should always support the legal strategy and never complicate it. Finally, companies should never assume that not commenting about a lawsuit protects the company. Legal liabilities should be balanced with the need to communicate effectively and regularly about an issue to manage reputation risk. It is vital to recognise that lasting, business- impacting perceptions may develop and solidify much more rapidly in the ‘court of public opinion’ than through the often-lengthy legal process.

CD: What steps can parties take to manage and mitigate litigation-related reputational risk? Is it prudent to put together a risk assessment strategy from the outset?

Gemmill: Preparation is key. Conducting scenario- planning exercises to identify potential legal and communications issues and develop corresponding strategies ranks among the most effective tactics to anticipate and mitigate impact to business.

Loeb: While we know the importance of involving communications counsel ahead of time to assist in preparing and developing strategy, litigation communications also extends well beyond that first phase. It may seem difficult to envision at times but remember that every legal matter eventually concludes. Related, it is often helpful to plan and hold regular simulations or tabletop exercises for identified risks or upcoming events. This ensures leadership and other parts of the business are prepared to navigate criticism or explain legal positions appropriately. It is also imperative to understand the media landscape within the context of the legal issue. Companies should consider monitoring traditional and social media to gauge how key stakeholders are discussing the litigation or threats of legal activity. Are critical trends starting to emerge around your company? What are competitors and peers doing in response? Knowing this full picture aids a company in its ability to prepare and message effectively.

CD: How important is it to involve communication or PR advisers before, during and after the litigation process? What benefits can they provide?

Loeb: Lay the foundation early to position the company for life after a legal proceeding ends. Companies should develop strategies for the eventual recovery, transformation or transition to a post-litigation state and what that means for its reputation. Of course, by its nature, litigation is adversarial and uncertain. The other side almost certainly will challenge a company’s position and narrative. But these challenges that arise can be viewed as an opportunity to tell a company’s own story. Litigation communicators can assist a company to define its legal position in its own words and equip itself with the systems and protocols to respond swiftly and effectively to false or misleading claims.

CD: When liaising with the media, how important is it to communicate legal issues accurately? Does this require effective coordination between PR advisers and legal advisers?

Gemmill: In no other area of communications is accuracy so essential when liaising with media. Delivering incorrect information or information designed to mislead can have far-reaching effects beyond any impacts to the litigation itself. Indeed, it all starts with the communications-legal relationship. Communications must complement – and never complicate – legal strategy. But companies also must balance the court of law with the court of public opinion. It may be necessary to assume some legal risk to minimise reputation risk. However, communications strategy outside the courtroom must also provide necessary media cover to what happens inside the courtroom. Driving alignment from the outset across legal, business and communications teams may prove to be the single most-important element of every engagement. “Driving alignment from the outset across legal, business and communications teams may prove to be the single most-important element of every engagement.” Robert Gemmill, Edelman.

CD: Is there a risk that a party’s employees may release or share certain sensitive information related to litigation into the public domain, with a damaging effect on reputation? How can this be avoided?

Loeb: This is an excellent example of why companies should take an integrated view of communications development. Especially for issues involving employees themselves, make sure the right people are at the table when determining communications strategy and message development. This includes legal, communications, HR, labour relations and operations. It may also be worth considering forming a council of employees to pressure-test themes and messaging. This structure also helps maintain a ‘concentric’ view of a company’s stakeholder universe to align and prioritise communications strategy and efforts. In brief, focusing first on employees, core customers and other essential stakeholders is almost always to a company’s advantage before broadening focus elsewhere.

CD: What role does senior management need to play? Do they need to have a greater awareness of the reputational impact of litigation?

Gemmill: Senior management has a difficult task when considering the reputational impacts of potential litigation, especially in this era of COVID-19. In the current environment, balancing the health and safety of employees with keeping the business alive and preserving jobs can be an organisation’s greatest challenge. Getting this wrong, operationally and from a communications and engagement perspective, has the potential to do significant damage to corporate trust and reputation. And as more corporations reopen their office locations in the coming months, boards and management would benefit from working closely together to oversee their workforce’s health and safety. But it also speaks to the newfound enterprise risk that organisations face. On the horizon is a significant wave of second- guessing of the actions taken by companies in terms of whether the right ones were taken at the right time – and whether companies set appropriate health and safety priorities over revenue. It is critical that senior management views these elevated risks as holistic moving forward, and as the serious reputational threats that they are.

CD: What final piece of advice would you offer to parties looking to improve the way they manage reputational risks in litigation?

Loeb: Managing risk in litigation is not limited to being prepared to respond reactively or only if necessary. Taking a proactive approach can be just as protective under the right circumstances. For example, a company can incorporate thinking around potential litigation risk into proactive marketing campaigns and storytelling to build appropriate credibility and counter possible attacks in advance. Some of the most effective protective strategies occur during ‘peacetime’, in which a company builds a strong foundation for future attacks through promoting its culture, values and mission. Not having a strong base about what a company stands for and why it does what it does can make a company more vulnerable than it otherwise would be while facing a legal threat.

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