Back to Class: Managing Risk and Reputation in a Complex World

Having taught crisis management for 15 years, Steven Callander is an aficionado of corporate PR nightmares. He even keeps a running list of his favorites. Last summer’s CrowdStrike crash is a new addition. Boeing’s woes with the 737 Max are becoming a classic. “I could go on all morning with examples,” he tells his students. “These things are happening all the time.”

Callander pulls up a photo of then-BP CEO Tony Hayward during the 2010 Deepwater Horizon oil spill. In it, the oilman sits alone at a congressional hearing, surrounded by photographers, sipping from a paper cup. He looks like he wishes there was something a lot stronger than water in there. “It’s uncanny how frequently the main protagonist in a crisis is depicted drinking water,” Callander says. “It’s just a small part of the process of managing a crisis, but it shows you the competitive situation you’re in.”

If you haven’t had your turn in the hot seat yet, Callander has a warning: just wait. “Something will go wrong in your organization. You may not be able to predict what it is, but what you can predict is you will have a crisis. And so it’s up to you to prepare yourselves and prepare your organization to handle that crisis when it comes.”

Callander’s course on crisis management is part of Managing Risk and Reputation in a Complex World, a recent Executive Education program that he codirected with his fellow GSB professor of political economy Ken Shotts, PhD ’99. The one-week intensive focused on “strategy beyond markets” — how to survive when your business’ plans collide with the not necessarily aligned agendas of politicians, bureaucrats, activists, and the media.

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Risky business: Katherine Casey tells managers they can both follow the law and operate in countries where corruption is a problem. | Elena Zhukova

One of these risks is corruption, the focus of a class taught by professor of political economy Katherine Casey. Dirty dealing isn’t just a legal and ethical hazard; it creates an uneven playing field for honest companies whose competitors aren’t above greasing a few palms.

And it’s depressingly common. Casey shows her students a map of countries color-coded by their relative levels of corruption. “Are we going to write off half of the world and say this is a no-go zone?” she asks. And if you think shady officials aren’t first-world problems… she reads a headline from that day’s New York Times: “How California Became a New Center of Political Corruption.”

The topic isn’t an abstraction for many of her Exec Ed students, who come from more than a dozen countries, including some that feature prominently on the corruption map. “When I’m teaching to the execs, it resonates with people’s professional experience, and they have a lot of direct stories to contribute,” she says. Still, an exercise where students must decide whether a series of hypothetical scenarios violate the U.S. Foreign Corrupt Practices Act proves tricky: Even if you know outright corruption when you see it, the line between small favors and facilitating payments (legal) and bribes and kickbacks (illegal) can be fuzzy.

Casey encourages corporate leaders not to avoid markets where they might encounter these dilemmas. “If you can run a clean business in a really tough operating environment, there’s potentially a lot of positive externalities,” she says. “You’re creating jobs and wages, people are investing in human capital, and you can attract other foreign investments.” The key, she says, is to stay clear-eyed about the risk — “not being naive about it, but not giving up, either.” She also presents evidence of reforms that have proved effective in curtailing corruption in various countries. “Yes, corruption is a deeply entrenched problem and hard to get rid of,” she tells her class. “But not impossible.”

Similarly, Callander advises his students not to run away from public crises. Being thrust into the spotlight is a chance to make sense of what’s happening and win back trust. “You have an opportunity to shape how people understand this series of events,” he says. “And if you don’t do it, somebody else is going to do it for you.”

Callander wraps up his class with a simulated press conference. A volunteer playing a CEO faces the glare of real studio lights and cameras while her classmates lean into their roles as hungry journalists. After firing off a pointed question, one of the mock reporters gestures to the cup on the podium in front of the exec. “You may want to drink the water first,” he says.

Without flinching, the CEO fires back: “Not touching it!”