In the early stages of a crisis, decisions made within hours can shape legal and reputational outcomes for years. Having advised manufacturers under investigation following serious incidents, preparedness — or the lack of it — can make all the difference.
In today’s environment, manufacturers increasingly find themselves facing complex crises. When something goes wrong, whether whether it’s a product failure, or a regulatory breach, the consequences can be severe. Media attention, regulatory scrutiny, health and safety investigations, and civil and criminal investigations may follow. Further, these situations are often multi-faceted: they often involve legal risks, including product defects, regulatory issues, health and safety, environmental concerns, allegations of criminal activity, fraud, defamation, privacy breaches, or bribery allegations.
Such allegations can lead to potential criminal and civil actions against the company or its directors, as well as serious reputational impact, diverting you from your business objectives, and jeopardising financial success. So if an issue comes up, how can you manage a crisis and avoid costly litigation?
This article provides a practical checklist for how manufacturers can prepare for and respond to crises in a way that protects their people, their legal position, and their reputation.
Prevention
Some problems are hard to predict. But many can be avoided or mitigated by good governance and robust controls. In particular:
- Assess exposure to key legal and regulatory risks
- Put in place policies and procedures to anticipate these risks
- Build compliance into key approval processes
- Ensure incentive systems and training anticipate and avoid risks. Ensure your culture rewards early notification of potential issues of compliance concerns
- Ensure you have a clear system of oversight and reporting
Immediate Response
Your legal exposure is often shaped by what you do in the first 48 hours – how the company responds, what is said, and what is documented. Act quickly and decisively, with a joined-up approach. Consider:
- Secure the scene to prevent further harm and preserve evidence
- Ensure medical attention is provided to anyone injured
- Notify internal stakeholders including legal, compliance, and senior management
- Begin internal documentation of events, actions taken, and communications
Legal Considerations
- Engage legal counsel immediately to advise on regulatory and criminal exposure
- Establish legal privilege over internal investigations and communications
- Preserve all relevant records, including emails, maintenance logs, and safety reports, put a legal hold on all documents and make sure this is clearly communicated to and understood by those who are involved in the situation. Do not create new documents and keep discussions off email where possible
- Engage the right team. You may need input from legal, finance, strategy, and communications. You will need to agree roles and responsibilities that you can agree a co-ordinated plan of attack, any necessary internal and external communications, and manage stakeholders and key third parties. While some situations evolve over time, early identification and understanding of key issues is critical. Whether you are subject to dawn raids or regulatory investigations, or threats of legal action, you need to understand the different options available to you
- Avoid speculative statements, rumour and gossip – internally and externally
- Establish immediate containment measures and goals – Are there measures you need to fulfil now? Are there regulators you need to co-operate with? Do you need to act to ensure evidence is preserved? Do you need to establish a communications protocol to preserve legal privilege? Do you need to suspend any employees? Do you need any form of internal investigation?
- Consider and anticipate longer-term issues – do you have any immediate legal obligations you need to fulfil? Are there any contractual consequences for your commercial contracts? Are you subject to any conditions on trading?
Regulatory Engagement
- Identify any relevant regulators and obligations to notify, e.g. the HSE or relevant regulator
- Cooperate with investigators, but ensure legal oversight of all disclosures. However, you may want to be careful with co-operations where an initial regulatory investigation may lead to a criminal matter, e.g. health and safety offences, potential corporate manslaughter
- Designate a single point of contact for regulatory and legal communications. Make sure any team involved has a clear protocol for developing and agreeing communications and that these are channelled through a single point of contact
- Do you need specialist PR input? A number of specialist organisations deal with litigation PR. It can be worth considering early if this is something that may be advisable and, if so, which organisation is likely to be most suitable. Ensure that no one unauthorised is in touch with media or authorised to provide comment to journalists, and that there is a clear process for dealing with inquiries
Internal Investigations
- Appoint an independent team to conduct a fact-finding review. Any taskforce should have a clear protocol and structure, areas of responsibility, and mechanisms for reporting to the board, and agreeing actions and communications
- Separate legal and operational reviews to maintain privilege
- Identify root causes and any systemic failures
- Consider steps to improve the situation and ensure it does not happen again. This may involve re-structuring areas of the business to make responsibility lines clearer, reviewing ethical policies, product recalls or discontinuations, better labelling, adding warnings to the product or to marketing literature, disciplining or terminating staff involved (or even keeping staff if needed for a legal case). You will need to be able to conduct analysis to make these decisions swiftly
Media Reputation
- Prepare a holding statement that acknowledges the incident without assigning blame
- Avoid public speculation until facts are verified
- Monitor media coverage and social media for misinformation. Again, if you have engaged a PR specialist, this should be something they can help you with, along with deciding which, if any, articles or journalists to respond to and what, if anything, to say
Medium Term: Keep reassessing options!
- Reassess for the medium term– reassess the events from the first couple of days and readjust, scoping out next steps and considering any medium- or longer-term strategic goals
- Often different actions, e.g. product liability claims, regulatory issues can occur at once, so make sure you have a developing plan to deal with multiple strands in tandem
- If you have been accused of regulatory breaches, make sure you understand their core elements
- Ensure legal advice is holistic, looks strategically at the impact on your wider business, and works with you to achieve your commercial objectives. It will be important to take the right steps at the right time to ensure the minimum possible impact on and disruption to your business
- Focus on strategy and minimising the impact on the business. Continue to work with the team to ensure that plans and legally robust yet well-toned communications are aligned, and that any legal actions are effectively managed
Think Longer-Term: Post-Crisis Actions
- Establish how to move beyond the crisis and implement lessons learned in the wider business
- Review and update policies based on lessons learned, e.g. ethical or whistleblowing policies, other compliance policies
- Communicate outcomes to staff and stakeholders. Make sure everyone understands what has happened and why
- Implement corrective actions and track progress. Again, this may include updates to product literature or marketing, considering adding warnings or disclaimers either to a product or to product literature, restructuring departments, product recalls or discontinuations, or disciplining or terminating staff. You need a timeline for conducting, completing, and signing off these actions
- Consider board-level review of governance and oversight structures. Do you need any restructuring, any new roles, or to change any existing roles to better manage risks in future?
- Ensure implementation and leadership to prevent future re-occurrence – make sure you learn lessons and communicate these!
What are the Common Pitfalls to Avoid?
- Delaying legal advice until after regulators arrive. Do not delay and seek immediate advice to help you secure the best possible outcome
- Destroying or altering records, even unintentionally. You will be expected to preserve all potentially relevant documents and evidence, which may involve copying the contents of staff’s computers, capturing mobile phone data, calls and messages, or data from employee communication tools such as Teams or Slack. Do not wipe devices or drives, or reallocate phones or laptops before data has been collected
- Allowing multiple voices to speak publicly without coordination. Ensure that only a single authorised person or PR company is able to speak on your behalf
- Failing to separate fact-finding from legal strategy, risking privilege loss
Conclusions
Seeking sensible, trusted advice is key to minimising the impact of any crisis. Involving the right legal professionals at an early point can provide clarity and reassurance, enabling you to explore avenues to early resolution or to minimise the impact of any crisis. Manufacturers who prepare in advance, respond decisively, and act with integrity are best positioned to manage legal risk and emerge stronger.
Please get in touch with Roxanne Selby for more information on how to avoid and manage crises and litigation and protect your business.
Author
Roxanne specialises in resolving commercial disputes, providing straightforward, strategic legal advice to help clients navigate risks, including corporate liability, and find solutions to the challenges of running a business.