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Shearman & Sterling

12/F, GLOUCESTER TOWER, THE LANDMARK, 15 QUEEN'S ROAD, CENTRAL, HONG KONG
Tel:
Work +852 2978 8000
Fax:
Fax +852 2978 8099
Web:
www.shearman.com

Brian Burke, Head of Litigation for Asia

Following the launch of The Legal 500’s ‘Eye of the Storm’ GC roundtable in Hong Kong, GC talks to Brian Burke, Head of Litigation for Asia at Shearman & Sterling, about crisis management and prevention, and how in-house teams can help their businesses prepare for the worst.

GC: What is at stake when a firm is faced with a crisis? What is the cost of not getting it right?

BB: The cost of “not getting it right” can be catastrophic.  In some cases an initial crisis may be small and relatively contained, but as a result of the company’s response (or lack of response), it may become an existential threat to a company’s viability  That’s why, well before any crisis occurs, it is important to invest in preparation, including a dedicated response team and guidelines.  Waiting until a crisis erupts to do the preparation work is like building a plane while it’s flying.

GC: How should a firm strike the balance between pro-action and reaction? Is there such a thing as being too ‘proactive’?

BB: The balance is a delicate one and always should be evaluated on a case-by-case basis.  That said, it is possible to be too proactive.  For example, a company facing a crisis might immediately put out a holding statement defending itself or certain employees, only later to change its position when it has obtained more information.  Each step—including the holding statement—should be carefully crafted to strike the right balance.  The only way to do this is to think several steps ahead of the step you’re planning.

GC: Traditionally, it has been quite clear that some industries tend to be more susceptible to large-scale crises than others. Has this changed, or is this changing?

BB: I have found that a crisis does not really discriminate.  It’s more about the underlying conduct that causes the crisis, and whether such conduct is increasing or decreasing.  Take bribery, which is one of the oldest practices that infects virtually every industry.  Where you have humans working together, you have bribes – and where you have bribes, you have the potential for a crisis. 

With that being said, it is worth noting that certain business models lend themselves more easily to bribery.  For example, where salespeople’s compensation is largely based on meeting sales targets, bribery is more likely.   Other risky business models include those that allow for employees to use cash and be reimbursed, or those that utilize numerous third party agents.  But these characteristics can be found in almost every industry, and so too bribery.

GC: Can due diligence and honest efforts to foresee and prevent crises ever be enough, by themselves, to either avoid the ire of regulators entirely or significantly mitigate the consequences?

BB: There is no one magic solution to preventing a crisis, but certainly a robust due diligence program, coupled with an effective crisis management plan, can reduce the likelihood of a crisis being caused by a third-party business partner, since proper due diligence should identify major issues that can cause problems.  Foresight is also good, but it’s also rare among profit-minded businesspeople.  In the end, it comes down to preparation and system-testing:  Some hard work in advance can save loads of money and time later.     

GC: What role do in-house legal teams play in managing a crisis, and generally speaking, are in-house legal teams sufficiently prepared and equipped for this?

BB: A well-prepared legal team can successfully manage a crisis internally in many circumstances.  Where things break down is when that team is not adequately prepared, or is not able to act truly independently.  To be fair this really has to be looked at on a case-by-case basis.

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