Just about all the posts on crisis management are technique and concept posts. They are the what is it?; where do I start?; what is my timing?; how to find the right resource to help point me in the best directions?
All this assumes that the company in crisis has liquid resources at the ready and can pay for what is necessary. None of it tells you how much that may be and when it will be required.
Maybe it’s not socially polite to talk about dollars required as though the company should never be thought of as illiquid, no matter what. In my experience, however, money matters are not always taken for granted. For various reasons, writing a check for even as little as $75,000 may present difficulty. [It is also true that in many crisis situations the initial retainage can be as little as $20,000. It depends upon the specific circumstances.]
If that is so, no one wants that to become part of the initial discussions between the company in crisis and the crisis consultant lawyer. One can simply say that anyone without immediate access to initial resources in that order of magnitude really doesn’t have a crisis. The crisis is done and reorganization or liquidation is the only and obvious tack. That is probably so most of the time, but sometimes not. Moreover, the initial amount is frequently three times that amount. A lot of late night oil must be burnt at high speed to come up with intelligent suggestions regarding first steps and second steps. In that instance, cash availability can be addressed as a step retention arrangement, with $50,000 in front and at least $25,000 available on demand if called for. It depends on the magnitude of resources needed in the beginning, and these numbers are presented for illustration only.
If the problems can be addressed without the necessity of formal dispute resolution, lawsuits, and arbitrations, the second phase retention may be able to remain in that kind of step arrangement, plus of course whatever additional resources may be needed for other outside assistance. Avoidance of litigation or arbitration is so valuable that skimping on that initial feasibility work is a really bad decision. Compared to litigation, the initial expenses are paltry.
If you are just too late and all hell breaks loose, you should be ready to accept attorney representation possibly up to $100,000 in front. If it something that a crisis specialist can deal with working with your regular law firm, the initial funds may be less. Frequently, however, that is not advisable, just as working with your auditors in a forensic mode may also be inadvisable. All out confrontation can easily consume $1,000,000 during the first year.
As you can easily envision, the crisis counsel will not be familiar with you, and retention will be required. No one with experience will do this and just send you the bill later on. Your financial statement and credit rating won’t suffice in lieu of cash, and a real sharp crisis resource won’t send bills and wait for some insurance company to decide whether and how much to pay.
Even if you have insurance, those who know how to deal with this get paid in front and you can then deal with your insurers about how much you get reimbursed. There are large firms that will slog away doing and charging for everything that can be done, useful or not, submitting bills for insurance coverage. What you really need insists upon being paid in full now. In 45 years of practice, I have not seen a case that required more than a three lawyer team (one senior and two junior) plus litigation support resources, and that includes antitrust litigation. One person who knows how it works is worth a dozen who have to go study about it.
When crisis hits, few companies know what to do about immediate retention. If cash may be a delicate issue, the CEO and CFO should discuss it now, so that if the worst happens, you aren’t running around in circles wringing you hands.
Obviously these values are stated as current approximations. All arrangements are subject to the terms of specific agreements.