Talk is not cheap: what you say during a crisis canmake or break your bank's reputation. Here...

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Your CEO is involved in a very public scandal. A fire breaks out in a branch lobby. Customer account numbers are compromised by a third-party retailer. Hackers infiltrate your online banking system.

The list goes on and on.

No matter how careful,

But what you do in the hours, days and weeks following the crisis can positively--or negatively--impact your bank's reputation. A tarnished reputation can translate into decreased brand value; lowered share price; lost customers, partners and strategic relationships, and difficulty in recruiting and keeping top employees.

As Warren Buffet said: "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."

The art and science of crisis communications, described by one public relations professional as the ability to maintain and regain trust between an organization and its stakeholders, does not vary significantly from industry to industry. However, the banking industry does have to manage a unique combination of circumstances, explains Michael Sheehan, president of Sheehan Associates, a crisis communications firm in Washington, D.C.

"The stakes are higher and a lot more personal in banking," Sheehan explains. "Banks have cultivated their customers' trust and customers expect banks to be responsible entities." He points to a personal experience as an example: "A few years ago I received a notice that my Hewlett-Packard printer could catch on fire, but I had a more visceral reaction when my bank told me my address, phone number, and Social Security number wound up on some disk somewhere."

Sheehan says the pressure of great expectations in banks is similar to the pressure felt by one of his other high-profile clients: Disney. "Because Disney has such a great brand they are held to a higher standard. If you go to another amusement park and a ride is closed, it's annoying. If Dumbo is closed, it's devastating."

The "CEO as celebrity" effect

Legal and even moral antics of the executive suite can trigger a crisis. Consider this headline from the Washington Post: "Scandal May Jeopardize World Bank Funds."

The pay scandal involving then president Paul Wolfowitz and his girlfriend brought into question the World Bank's ability to battle global poverty. Even though Wolfowitz has since resigned, the World Bank is still working to improve its image.

And sometimes it's what the chief executive doesn't do that makes the headlines. The Nov. 1, 2007 Wall Street Journal reported that Bear Stearns' CEO James Cayne wasn't in his office during the company's recent hedge fund crisis. Instead, Cayne was taken to task for not carrying a cell phone or e-mail device when golfing and playing bridge on vacation.

The phenomenon of "CEO as celebrity" is partly caused by the increased number of business press outlets sniffing for news. Gone are the days when you played "reporting roulette," hoping that your crisis happens on a big news day so you receive little or no coverage.

According to the Corporate Reputation Watch 2006 from PR firm Hill & Knowlton, 85% of analysts say that if a CEO behavior has a negative impact on a company's reputation, the executive should leave the company. The report also states that 90% of financial analysts believe that companies which fail to adequately look after non-financial aspects of reputation will suffer financially.

Communications during an executive crisis is a high stakes endeavor. Since every crisis and every bank is different, there's no clear-cut roadmap to follow, making a CEO crisis a perfect time to bring in the experts. Even if your bank handles most issues in-house, it's important to have relationships with outside firms you can turn to for guidance, says Rob Brough, executive vice-president of marketing and communications at Zions Bank in Salt Lake City.

Work the plan

Bankers and consultants interviewed for this article agree that planning is critical to surviving any crisis with your reputation intact. Although it's difficult to predict every type of crisis which can occur, your plan should be flexible enough to adapt, advises Rick Swagler, Director of Issues Management for Regions Financial Corp., Birmingham, Ala.

"Consider the types of communications you are going to need to provide to each of your stakeholders. This will vary based on the nature of the crisis but put a timeline together so executive management understands what happens when, and in what sequence," says Swagler.

Zions Bank's crisis communications plan evolved during the bank's planning for Y2K and has since been expanded to include a description of the bank's media policy, who is authorized to speak in the event of a crisis, contact information for the spokesperson, and procedures for communicating to employees.

Employee communication planning is vital. "We want to get information to our employees first, but there are times when the word hits the street before we can," says Brough. "In crisis communications you have to make sure that you are communicating appropriately to all your audiences and the employee audience is essential. Employees not only deserve to hear directly from the company but they also need information to respond to questions from friends, neighbors, and clients."

At TCF Financial, Wayzata, Minn., the crisis communications plan is part of the bank's overall disaster recovery plan, explains Jason Korstange, director of Corporate Communications. During a crisis he becomes the "communications conduit." The bank tests the communications plan twice a year with a surprise simulated crisis and holds quarterly meetings with the disaster recovery team.

San Francisco-based Union Bank of California, which recently activated its crisis communications plan in the wake of the California wildfires, has an emergency operations center that includes corporate communications, HR, IT, Operations, line managers and senior executives, says Stephen Johnson, Public Relations senior vice-president. The team follows an already-determined protocol for gathering information, securing bank assets, and communicating to both external and internal stakeholders including employees, regulators, shareholders, customers, the community-at-large and the media.

As part of its communications efforts during the fires, the bank issued a press release announcing emergency financial services to impacted customers.

Union Bank's plan includes how the bank will communicate information to its board of directors, an often over-looked stakeholder. "The board of directors is often the last to be informed during a crisis, and often they should be one of the first," says Johnson. "They may have immediate access to resources that would be helpful to the bank."

It's important to have some form of crisis communications plan, even if it's not complete, says R.M. "Reggie" Tracy, president of Privacy Trust Group in Elbert, Colo. At the very least, your plan should include who is in charge, who needs to be notified in the event of a crisis, and who makes the decisions.

News at internet speed

Like all companies, banks must deal with the increased speed at which information--and misinformation--spreads. "Truth can be half way around the world before truth can put its boots on," quips Sheehan. Add the triple glare of the public, regulators and public interest groups watching for every bank misstep and bad news can spread quickly.

Incident response in a crisis needs to be fast, says Tracy. "If you suspect there is a problem you've got to look into it quickly and initially notify your customers, employees and the regulators."

But even with the increased speed at which good and bad news travels, crisis management isn't any more important now than it has been in the past. "It's always been important but we are certainly seeing more and more examples of what can happen if you don't manage it appropriately, says Brough. We focus on reputation a great deal at Zions because we recognize that in banking trust and reputation is everything. If that goes out the window, so does your business."

Forget "No comment"

In addition to fast access to information, the media appreciates honesty. "In a crisis it's important to provide the media with information when you have it and to be honest, advises Brough. "The problem is that companies hold back information or aren't as forthcoming as they could be and that drags the crisis on. From a communications standpoint the key is to get in and get out as fast as you can. The best way to do that is to be honest."

And forget the cop-out response of "no comment." "Embedded in that answer is that you are guilty or that you know something you don't want to tell," reasons Brough. "The worst thing you can do is to be perceived as holding something back, because the media are naturally skeptical."

Of course there are situations such as an ongoing criminal investigation in which you can't be as open and honest with the media as you might like to be. The media generally understand when your hands are tied, says Brough. Tell them you are withholding information, and let them know that when you are authorized to release that information you will. Then do it.

It helps to be known

It's critical to foster and build relationships with the media before a crisis hits. "The worst time to introduce yourself is during a crisis," says Region's Swagler. But the relationship must be genuine. He suggests building a track record of honestly responding to media requests so that if you cannot provide information during a crisis you are more credible. Having a prior relationship also allows you to gauge whether or not you can go "off the record" and trust that the reporter will honor what is essentially a gentleman's agreement.

Perhaps you can assist a reporter by providing them with industry background or facilitating an interview with a subject matter expert at the bank to explain a complex regulation, suggests Swagler. He tells of his seven-year relationship with a Wall Street Journal reporter that started when the bank was smaller and under the publication's radar. "When I would see stories that I thought he might find useful I would forward them to him," says Swagler. "Our relationship has continued as the bank has grown."

Live test at Fifth Third

"Fire Breaks Out at Fifth-Third Bank Tower Downtown" and "Fifth Third Bank Building Shut Down." Those were two of the headlines Debra DeCourcy, vice-president and director of Corporate Communications at Cincinnati-based Fifth Third woke up to the morning after a small electrical fire broke out in the basement of the Fifth Third Tower in downtown Cincinnati. The fire affected about 2,500 employees, a half dozen tenants, and one banking location. All things considered, the headlines were not bad.

As soon as the bank was notified about the fire at about 7:30 p.m. the night before, bank executives implemented what DeCourcy calls a very elaborate business continuity and crisis communications plan. Job one was to gather information about the situation and assess the security of the facilities and the employees. A 30-person crisis team met shortly after 8:00 p.m. until well past midnight, caught a few hours of shut-eye and resumed at 5:00 a.m.

This type of response is all in a day's work. "We're a bank," states DeCourcy. "We have a lot of secure operations that don't stop and have to be addressed. And in this case we had 2,500 employees who needed to know what they should do and where they should go."

Getting information out to all employees during the crisis required a multi-faceted communications approach of e-mail updates, contacting the local television stations, and using the phone tree.

In managing this crisis, DeCourcy had to balance her desire to share as many details as possible yet not release unconfirmed information. "These situations change by the minute," says DeCourcy. "You have to be strategic in a crisis: you have to very carefully determine when you have accurate information and still have enough time for your employees or your customers or your tenants to react."

Be the primary source

That balancing act is tricky, but it may well be best to err on the side of providing too much information. ABA's senior policy advisor Doug Johnson, dubbed "Dr. Doom" for his focus on crisis management, believes that how an institution is perceived during a crisis is critical to its future success. "During a crisis things happen so quickly that inaccurate, incomplete or false information can be perceived as factual because some institutions don't want to provide a lot of information. It's more advisable to provide information as a primary source rather than a secondary source. That will carry the day in terms of what is happening at the bank," says Johnson.

The ABA has created "A Guide to Crisis Communications" (see sidebar, page at left) designed to help bankers determine the right amount and types of information to communicate during a crisis. "We also provide some basic key messages so banks can be quickly and accurately heard and be viewed as being responsive," says Johnson.

Reggie Tracy agrees with this approach. "I believe in a proactive response to the media," she says. "The media is our friend. The media is very powerful and an effective way to get your message out."

Denial is not appropriate

If you've goofed, it's best to apologize and tell stakeholders what you will be doing to correct the problem. "Your language must not exacerbate the situation but it can't unduly mitigate the possible fallout," says Tracy. For example, if you know a data breach included customer Social Security numbers, don't promise customers that they are not in danger of being victimized by identity theft. She adds that unfortunately much legal advice encourages banks to keep silent.

"You can get away with a lot if you say 'sorry' or 'I made a mistake.' Denial is not appropriate," she says.

Communicate what actions you are taking to ensure the crisis won't happen again. "If you make a concerted effort to be forthcoming on the information that you can, assist the individuals who may have been harmed, and make sure the situation doesn't happen again," says Tracy, "that's the salve to the wound."

Five Crisis Communications Commandments

* Tell the truth.

* Speak to the concerns of your target audience.

* Respond promptly.

* Be certain your information is accurate.

* Be solution-oriented rather than defensive.

From "A Guide to Crisis Communications," available to ABA members at www.aba.com

A good reputation has coattails

The fallout from the U.S. housing stump means some financial institutions have had to deliver bad news--and in some cases already, some very bad news--to investors. But is it possible to mitigate the reputational damage caused by poor earnings? What enables one financial institution to emerge relatively unscathed and another to suffer repercussions for years to come?

There is not much you can do at the time of the announcement to counteract its negative impact, believes Richard Bove, financial institutions analyst at Punk, Ziegel & Company. However, the credibility and reputation of your top management can make bad news tess devastating.

For example, Bank of America's expected writedown of $3 billion of debt in the fourth quarter will leave the bank's reputation largely intact primarily due to the reputation of its chairman and CEO Ken Lewis.

"Bank of America's loss is not earth shattering because people trust that Ken Lewis knows how to run a bank," says Bove. "Everybody believes that no matter what goes wrong at Bank of America, Lewis can fix it."

Bove offers several other examples. CEO Jamie Dimon's reputation as a straight-shooter bodes well for JPMorgan Chase & Co. "Dimon has always been very candid about the problems and difficulties of whatever institution he runs," explains Bove. "When he says something positive, you tend to believe him since he's kept you well apprised of the less-positive things that have happened. His detailed knowledge of the specific businesses he operates and his clearly articulated philosophy of how he operates those businesses give people a great deal of confidence.

"When JPMorgan Chase announces write-offs, people tend to overlook them," adds Bove.

Dick Kovacevich, chairman and former CEO of Welts Fargo, is another bank leader who can elevate the reputation of his institution even during earnings tosses. What Kovacevich and Dimon share, says Bove, is a willingness to argue with detractors. "The willingness to argue is an extremely positive characteristic even though on its face value it would appear to be negative. Arguing," he reasons, "means that you are taking other people seriously."--L.V.

ABA's recommendations for communicating during a crisis

* Assemble a crisis communications response team with clearly defined rotes and responsibilities.

* Conduct a brief communications audit and ensure good relationships with key audiences before there is a crisis.

* Conduct a SWOT analysis of your bank so you have a solid understanding of your bank's advantages and vulnerabitities.

* Coordinate communications channels and establish protocols to support streamlined and fast decision-making.

* Craft a crisis communications plan that covers the who/what/when/where/and how of communicating during a crisis.

* Establish on-site and off-site command centers to serve as a meeting place for the crisis response team.

For more information, see "A Guide to Crisis Communications," available to ABA members at www.aba.com. (Click on "Communications Tools" under "Member Resources.")

BY LISA VALENTINE contributing editor