BulletProofBlog the blog on crisis communications

Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, as an increasing number of indicators point to impending economic recovery, we spoke with Greg Farrell, a reporter for the Financial Times who had a ringside view of the best and worst financial communications strategies deployed during the economic crisis.

Mr. Farrell believes that communications was a key contributing factor to the survival or failure of financial services giants over the past 18 months. Speaking with Bulletproofâ„¢, he highlighted two very different approaches taken by companies that met two very different fates.

What lessons about communicating in crisis can the financial services industry take from the last 18 months?

Greg Farrell: I think we' ve seen that companies best manage a crisis through sober assessments of the issues they face and then crafting communications plans that are as open and transparent as possible. You can' t hide something if it' s wrong. Saying it' s not true isn' t going to make it go away. You' ve got to answer the tough questions. Obfuscation, double-speak, and dishonesty will only fuel skepticism and encourage critics to dig deeper.

Is there an example of a company that failed to be fully-transparent during the current financial crisis that stands out to you as particularly telling?

Greg Farrell: Lehman Brothers had fundamental business issues that were problematic. They had purchased billions of dollars worth of real estate and they were holding it on their books at values that a lot of people thought were too high. Yet, Lehman' s executives insisted that nothing was wrong and that everything was under control.

When David Einhorn, a successful hedge fund manager, sounded alarms about Lehman' s real estate exposure, the company didn' t take his criticisms to heart or respond thoughtfully. Instead, it lashed out and accused him of having personal financial motives that were driving his agenda. That made Lehman look defensive and created the impression that the ship was sinking.

To get in a fight with a critic is to magnify and call attention to the issue. Lehman' s fate was ultimately determined - in part - by its regulators, but this episode undermined the firm' s standing among investors.

Is there an example of a company that got it right during the current financial crisis?

Greg Farrell: Goldman Sachs' business issues weren' t as severe as some of the others out there, but that didn' t stop the company from responding to the crisis. As early as November 2008, Goldman communicated a strategy for moving forward and they' ve stuck to it. Chairman and CEO Lloyd Blankfein has been an outspoken critic of out-dated risk/reward structures. He has welcomed regulatory reform. He has been willing to accept that the industry as a whole has made mistakes. Goldman has been criticized in the media in recent months, but the firm has not changed its message or tried to become something it isn' t.

By articulating transparency, accountability, and solutions to a marketplace sorely in need of each, the company has sought to build what the markets need most right now - trust.

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation' s top crisis communications firm, and a contributing author to Bulletproof Blog.