To those who thought bank runs belonged to the 1920s and 30s, this year’s top crisis, the most significant of the last twelve months, ought to disabuse them. It should also disabuse all of us who thought crises were on the wane after COVID. Crises are back with a vengeance.
Which have been the top four crises of the last twelve months? Read on to find out.
1. The Silicon Valley Bank crisis
USA, March 2023
Silicon Valley Bank (SVB), as the name suggests, was synonymous with the tech industry, which calls Silicon Valley its home. Many of the region’s startups called SVB their bank.
Many of these startups, however, came under increasing financial pressure due to rising inflation and disappearing venture-capital funding. They, in turn, began drawing down on deposits held at Silicon Valley Bank.
SVB, for its part, had invested those deposits and so was unready to deal with what soon became one of the most significant bank runs since the Financial Crisis.
Indeed, SVB sought to sell off its investments in low-yield treasury bonds but could only do so at significant loss. As a result, SVB attempted to raise more money by issuing their own bonds on the open market. This only created more panic among depositors, and SVB’s stock fell by 60 per cent.
With fears of a generalized banking crisis growing, the government stepped in. The Federal Deposit Insurance Corporation, or FDIC, took over nearly USD 175 billion in SVB deposits, and the bank’s assets were put up for auction. Its U.K. arm was bought by HSBC.
SVB, which as recently as March 2022, had assets as USD 220 billion had collapsed, in the largest banking failure since Washington Mutual in 2008.
2. The Southwest Airlines crisis
USA, December 2022
Known for its affordable fares, Southwest Airlines is one of the largest airliners in North America. In fact, it’s the largest domestic airliner in the U.S. based on domestic originating passengers.
Indeed, Southwest operates more than 4,000 flights a day during peak travel periods. And travel periods don’t get more peak than the holiday season.
Unfortunately, that was when Southwest’s internal technology melted down, derailing the travel plans of millions of customers.
All told, Southwest cancelled about 16,700 flights between December 21 and December. 31, some 45 per cent of its operations, owing to technology snafus, staffing issues, and inclement weather.
Besides the severe reputational damage, the carrier also suffered monetarily from lost business. Southwest announced that the crisis had led to an USD 800 billion hit to its pretax results and a rare quarterly loss for the usually profitable airliner.
That’s not all. The crisis garnered policymaker and regulatory attention. Transportation Secretary Pete Buttigieg insisted his department would open an inquiry to hold Southwest accountable if it didn’t provide customers with refunds and reimbursement.
Southwest COO Andrew Watterson was also hauled before Congress for bipartisan grilling. Watterson, for his part, vowed to update the carrier’s scheduling software as well as continue ongoing assessments and funding to address icing issues at airports prone to freezing conditions.
3. The Medibank crisis
Australia, October – December 2022
Medibank is one of Australia’s largest private health insurers. In October of 2022, the insurer detected unusual activity on its internal systems but announced that it lacked evidence to suggest that customer data had been accessed.
Fast forward a few days later and the insurer was approached by a malicious party aiming to negotiate with the company regarding their alleged removal of customer data. Soon the hackers’ claims were confirmed, bolstering their threat to release the data of the thousand most prominent media persons if their ransom demands weren’t met.
Medibank refused, backed by expert cyber security council that there was little chance that the company would get the stolen data back if they paid the ransom.
Further complicating matters, journalists soon alleged that the hack itself was the result of hackers gaining access to Medibank’s internal systems. Which they access via compromised login credentials.
But how many records were compromised? Medibank revealed that the data for 9.7 million past and present customers had been accessed. That data include email addresses, phone numbers, addresses, Medicare numbers, names, dates of birth, passport numbers, and visa details, as well as the private medical information for 192,000 customers, e.g., where customers were admitted for procedures, service provider names, and locations and codes associated with diagnosis and procedures given.
Those documents would soon be released, as the hacker, linked to a Russian cyber gang, published a “good-list” and “naughty-list” of customer data files on the dark web.
The Australian Federal Police, in turn, partnered with Commonwealth agencies and the Five Eyes Law Enforcement partners to investigate.
But the damage had been done. As a result, the nation’s prudential regulator, APRA took the extraordinary step of imposing an AUD 250 million increase in Medibank’s capital adequacy requirement. The regulator claims these new requirements reflect weaknesses identified in Medibank’s information security environment.
That’s not all. Medibank now faces its fourth class-action lawsuit over the cyberattack, as well.
4. The Ticketmaster crisis
USA, November 2022
Twelve-time Grammy winner, Taylor Swift is one of the biggest musicians in entertainment today. Ticketmaster is the world’s largest platform for ticket sales. The partnership ought to have been fruitful. And it was until last year. What happened?
In mid-November 2022, tickets to the U.S. leg of Taylor Swift’s The Eras tour went live on Ticketmaster’s official website for registered fans. That’s when the record-breaking entertainer broke another. This time, 3.5 million people registered for presale tickets.
Alone those numbers would be staggering. But another two million verified customers remained stuck in line for hours, ultimately failing to purchase the coveted tickets.
It turns out that Ticketmaster had failed to distinguish between verified fans eligible to purchase the tickets and online bots.
The bots flocked, purchased, and resold the tickets on other websites, often boosting the prices of the already-expensive tickets. Ticketmaster, meanwhile, pointed up Swift’s popularity as contributing to the increased demand which then led to the tech issues that stranded fans in the digital queue.
That wasn’t it, either. Legitimate ticket buyers also complained of what they perceived to be excessive service fees charged by Ticketmaster.
The crisis brought attention to Ticketmaster’s unique status. Its 2010 merger with Live Nation, the world’s largest concert promotion company, created Live Nation Entertainment, an industry behemoth.
As a result, some lawmakers argued that the Swift ticket crisis was the result of illegal, anticompetitive practices. In turn, they urged the Department of Justice to investigate Live Nation Entertainment and potentially break up the merger.
It soon became known that Live Nation Entertainment was already under DOJ investigation, and the Swift ticket crisis would only add more grist to the mill.
Developing Improved Reputation Management Safeguards
So, what’s the learning? One major learning from the top four crises of the last twelve months is that companies must develop reputation management as a critical crisis management and business continuity capability. What are some strategies to get started?
Figure out what drives your reputation
Companies rarely understand what goes into
shaping their reputation. Companies need to know what’s driving their reputation. And once they’ve figured out what those factors are, companies should enshrine those findings as cultural values across the entire company.
Apply social monitoring (and situational awareness) capabilities but spread the wealth
Social media monitoring technologies shouldn’t reside exclusively in Marketing. If companies have a critical event management function, which they should, that team needs social media/situational awareness monitoring tools to better understand the threat environment on social media and to monitor reputational impact during crises.
Ideally, those situational awareness capabilities will come integrated into the critical events management software they use already.
Plan out your response
And finally, when a reputational crisis does occur, everyone needs to be ready. Another might be on the way. Achieving this level of preparedness should be part of a broader crisis management and crisis communication plan and process. Again, social media will be a key component of this plan, as well. Companies should have pre-scripted responses (which they can modify) to share on their social
What else should go into your crisis management plan so you don’t find yourself next year on the list of the top four corporate crises of the last twelve months? Download our Guide to Understanding the Value of Crisis Management Planning to find out.
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