Responding to a crisis: 'Establish the facts. Then do the right thing'

03 Oct 2019 In-depth

How should a charity respond to being in crisis and investigated by several regulators? Charity Finance convened a panel of experts, and Ian Allsop scutinised their answers.

It is what every charity fears. An accusation of wrongdoing, often historic, that leads to scrutiny from both the media and regulators – sometimes several – and which can snowball with further issues being uncovered. It can damage hard-built reputations, even if the allegations end up being unfounded. What approach should an organisation in this position take?

Panellists at the roundtable were presented with a fictional case study of a high-profile children’s charity in exactly this position after a catalogue of incidents. As a result of the press running stories about the charity being rife with corruption, sexual exploitation and harassment, the Charity Commission opened a statutory inquiry. The charity also faced being investigated by the local authority, Ofsted and the Care Quality Commission. At the same time, it was providing evidence to the Independent Inquiry into Child Sexual Abuse and was invited to appear before a parliamentary select committee.

George Pascoe-Watson is senior partner and chief adviser at Portland Communications, which has advised many charities and other organisations on PR. He is also a former political editor of The Sun. He says that he would advise the charity to do three basic things.

“The absolute rule is to establish the facts. Then I would advise them to do the right thing by what ordinary audiences would expect. For example, there are individuals in this scenario who need to be contacted for welfare reasons.

“Finally, you need to establish whether or not this is a crisis. It can be very easy for organisations to jump to the conclusion that this is not normal and therefore it is a crisis. There are stages in a series of events that make it one. Now, in this fictional example, it is obviously a crisis. But the way you respond can make it worse than the situation you are already in.”

He continues: “The spotlight is on you. Your reputation is not made by the sequence of events leading up to now but by how you handle it. You can’t stop what has happened. But you can try and survive this crisis as an organisation and come out of it even stronger.

“It is only now that we are all looking at you. You can stand up and be seen to be doing the right thing and gain plaudits, seize the momentum by being transparent and take the action required. Or you can bury your head in sand and make it worse.

“You need to acknowledge that it is a thing that is happening and deal with it with the seriousness it merits. And that means, if you are a CEO on holiday, getting on a plane and coming home.”

From a CEO perspective, VSO’s Philip Goodwin calls the case study scenario a perfect storm. “Once you have established the facts, you should always look at what the right thing to do is in terms of who you serve – not the charity itself. Too many organisations have tried to deal with reputation first and worked out what the right thing is later. If you do the right thing, it is more likely that your reputation will survive.

“Even if an allegation isn’t true, you still have to do the right thing. So whether your reputation is damaged is ultimately irrelevant.”

While the interests of the charity are important, it is also important to consider trustees, particularly former trustees if events are historical, says Rosamund McCarthy, partner at Bates Wells. “As a charity, you ultimately need to maintain a tenable relationship with the regulator as they will still regulate you tomorrow. But if you are a former trustee in this situation, you have only got one reputation. If a regulator is seeking to damage that by, for example, unfairly alleging misconduct, you could end up disqualified, so you might have different interests.”

Gerald Oppenheim, chief executive of the Fundraising Regulator, views things from a regulatory perspective: “Our first step upon receiving a complaint is to establish the facts and what our remit is. What has happened? Has it breached the code of fundraising practice?

“Our motivation is to respond to a complaint, see if it is justified, and uphold it if there has been a breach, or don’t uphold it if not. Our job is to act in the interests of the complainant, but with regard to proper behaviour of the charity. Although the code is not a statutory document, parts are supported by charity or other law.

“In this scenario, we would also talk straight away with the Charity Commission. Our memorandum of understanding means the two regulators can share information without breaching data protection law.

“If the Commission decides to open a statutory inquiry, we might hold back. However, what can happen is if the Commission recognises that a substantial proportion of a case revolves around fundraising, it will say ‘we would like you to investigate and deal with it via your normal processes’. In this way, the charity isn’t bombarded with multiple requests. So it is about establishing who among the regulators is taking the lead.”

Practical steps

Emma Dowden-Teale, partner in Bates Wells’ public and regulatory department, who leads the firm’s multidisciplinary safeguarding group, summarises some important practical considerations for charities in a crisis situation. “Everyone around the table is absolutely right about the imperative of establishing the facts. However, organisations should not wait until that exercise has been completed before making necessary notifications. This is intensely time sensitive. Some regulators require them to be made within 24 hours. You cannot pick this up later and so thought must be given to this as soon as any ongoing live risks have been dealt with.

“The other thing that is important is to make sure your insurers are on board. While policies vary in their requirements, most require prompt notification before any action is taken. If you are dealing with regulators and the press, and being transparent and accountable, but you haven’t fully informed your insurer as to what has happened and proposed next steps, your cover may be void under your policy.”

She also recommends exploring the database of funding contracts as there are frequently requirements to notify institutional funders about serious incidents and regulatory involvement. And she states that, as regulators may need access to information, it should be made clear to staff that no relevant material should be destroyed – in essence, retention/deletion policies need to be suspended to preserve evidence.

“Ultimately, it is about demonstrating that you are a charity deserving of its registrations, is safe, well-managed, and can be trusted to do what it is registered to do, even if regulatory requirements or best practice are found to have been breached in isolated cases.

“I would recommend that a root cause analysis is undertaken as soon as possible to determine what, why and how it all went wrong, and as quickly as feasibly possible produce a detailed action plan to put in place arrangements to manage live risks and/or mitigate the impact on those affected as well as to prevent recurrence in future.

“If you can show you have sufficient insight and enthusiasm to get better on your own, it may assure regulators that they do not need to use their enforcement powers.”

This means also providing information, cooperating appropriately and voluntarily doing what is necessary by recognising the breach, fixing it and accepting that there may be sanctions and consequences.

“In this way, you will not only be acting in the best interests of the charity and its current and future beneficiaries but also making yourself credible,” says Dowden-Teale. “If you emphatically deny a breach that has evidently occurred, you risk appearing incompetent, unreliable or both.

“That isn’t to say that you have to acquiesce to regulators without question. It is very important that regulators use their powers appropriately, on the basis of accurate information.

“Where they have not, representations that you make by way of correction, mitigation or complaint will be much stronger where you have generally acted appropriately and compliantly in managing the regulatory action. That pushback is critical for all, to ensure that regulation is actually effective and furthers rather than undermines their statutory objectives.”

Goodwin says it is vital to establish a cross-functional crisis management team to “objectively and coolly assess what has occurred”. He considers that you should not try to manage the crisis within the normal business of operation. “Where it comes apart is when people panic, and this can lead to a febrile atmosphere in which bad decisions are made.

“Any safeguarding case must focus on survivors. It is about the principles people follow, and having a zerotolerance approach. Do people – which means everyone including volunteers, trustees and patrons – understand what behaviours are expected? They need to know that they should report and act if they see anything.

“Be survivor centred. Be transparent and learn from it. If you can do these things, then you should be OK. But zero tolerance doesn’t necessarily equate to zero instance. Bad things do happen, which is terrible, and you have to respond appropriately.”

Pascoe-Watson recommends building relationships with the media. “Don’t do a reveal-all interview on day one, but plan for the worse possible sequence of events. What you say now will be scrutinised later, so you need to deal in facts. Don’t be panicked and spooked by what has happened.”

Once you have established your facts, he says you need to check for other skeletons in the cupboard. “You don’t want people reporting new allegations to the media. It is minefield clearance. Every organisation has ticking bombs. Things they know about, for example a disgruntled employee. Have you defused them? What about things you can’t defuse? Can you plot a way around them? What do you do if you stand on them?

“You have to continue to run the charity, so need to communicate that you are competent. People have an emotional attachment to charity that they don’t have to business, which requires an appropriate response. And, assuming the charity survives, you need to rebuild your reputation.”

Providing information

One thing Dowden-Teale hears repeatedly from the Charity Commission is “where is your audit trail?” She explains: “Its remit is charity management, so it frequently asks to see how decisions were taken. And other regulators will also want evidence. With a multi-regulatory investigation, it can be a real challenge to keep them all appropriately updated, especially if they have different priorities and concerns.”

She recommends that charities devise a protocol. “Volunteer to update each regulator of any developments or new information at the same time on a periodic basis (eg on a particular day each week). If one has sought particular information, tell the others as well. It isn’t cynical back covering but showing that you are driving improvement and facilitating regulation.”

Goodwin points out that ensuring trustees are fully briefed is also vital. “Some charities think certain information is confidential. Therefore, what trustees receive is too heavily redacted. While they do not need the names of those involved, they do require the substance. It is important that they understand the relevant detail of a serious incident.

“It might not seem serious at the outset but, as complexity is revealed, it goes up the scale. This is why an audit trail is important.”

Perverse incentive

Goodwin muses on the complexity of the regulatory approach and the difficulty of managing these things, especially given public expectations. “Part of the challenge is on regulators to do it exactly right – as in what the public thinks is right – which can create a perverse incentive in how they manage an investigation.”

Pascoe-Watson adds: “The regulatory world has had instructions from its political legislators to be much more punchy, with an active focus on consumers rather than producers. The downside of having an active regulatory regime is that organisations such as charities are much less likely to do the right thing because they fear they won’t be treated fairly by the regulator. If the regulator feels an incident has happened on its watch, it may feel it has to show how muscular it is in case it is accused of being asleep on the job of regulating.”

McCarthy points out that regulators have stretched resources. “They can’t investigate everyone. Therefore, some charities become emblematic, a symbol of the problem, and end up with a massive focus upon them. This means they will have to meet the cost of any response from charity resources. The decision to challenge regulators can appear a difficult one but may well be appropriate for the charity and the beneficiaries it serves.”

Oppenheim feels that regulators increasingly need to have their antennae finely honed. “This is why sometimes a regulator steps in early before complaints get into the press. We feel the need to get on top of things.”

He also says the Fundraising Regulator is keen to show that most charities do things really well. “This is why we have said that we will name all of the charities we have investigated, whether there has been a breach or not. This not only encourages transparency and accountability but also helps demonstrate positive behaviour.”

The panellists observe that bigger charities have greater resources to deal with these things. McCarthy’s particular concern for smaller charities is over the effect that the threat of resource and time-intensive crisis management will have on voluntary trusteeship. “There are instances where things go wrong because we are human beings, not through any ill will.”

Goodwin concludes that recent high-profile cases have been positive in bringing the sector’s attention to a range of issues. “What is difficult is where there is an environment of confusion around understanding that good management of a crisis is not the same as no crisis. There is little appreciation of the complexity of a crisis. Reactions can become counterproductive.”

With thanks to Bates Wells for their support with this feature

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