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Panama Papers: how Mossack Fonseca should manage its reputation crisis

EPA/Alejandro Bolivar

Panama Papers: how Mossack Fonseca should manage its reputation crisis

The massive global reaction to the Panama Papers story is a classic example of an organisation, in this case Mossack Fonseca, facing a huge reputation crisis. And not just the law firm: we have already seen the resignation of Iceland’s prime minister, public scrutiny of other public figures such as David Cameron, Vladimir Putin and Marine Le Pen, and there will undoubtedly be more scrutiny and casualties to come.

But what of the law firm whose leaked documents sparked the crisis that has transfixed the world. Will the firm survive? And, if so, how will it fix the damage that the leak of its private information has wreaked on its reputation? Here are six steps that organisations can take to help manage a reputation crisis.

1. Secure third-party support

Whether an organisation is seeking to build or rehabilitate its reputation, it needs reputation endorsement from credible third parties who come out in support of the organisation. During the 2010 Copiapó mining crisis in Chile when 33 men were buried underground, a number of foreign leaders publicly expressed solidarity and support during the rescue operation. This focused the media’s attention on the logistics of the rescue operation rather than on who was responsible for the accident.

Mossack Fonseca signalled the legitimacy of its clients through formal channels, stating: “Many of our clients come through established and reputable law firms and financial institutions across the world”. But so far the public have heard little in the way of support for the firm from credible third parties.

2. Keep talking to stakeholders

During a crisis an organisation inevitably faces a high volume of public scrutiny and an unprecedented number of requests for interviews and commentary. Ongoing, multi-channel and consistent communication is essential because it enables an organisation to send frequent signals to key stakeholders. An organisation must relentlessly communicate and prioritise who it is communicating to.

In the case of Mossack Fonseca, its priority stakeholders now are the media, regulators and its clients – and there will be key individuals within these three groups who it will need to connect with and use to reinforce its core message: that it is a responsible and ethical law firm.

3. Stress industry ethics

As we have already seen, a crisis can impact upon more than the organisation itself. Although Mossack Fonseca is facing a crisis around its own activities, this is part of a much wider scrutiny of overseas tax havens, a story in which Mossack Fonseca plays a relatively small part. But many people consider the sort of work it and other similar kinds of law firms do as ethically challenged.

This is known as the “reputation commons challenge” and means that a whole industry’s reputation may be damaged. This will have implications for the activities of other competitor organisations because they will also be facing a high degree of public scrutiny. Although many competing organisations in the same industry can be tarred with the same brush, they should respond with one collective coherent voice – but they typically don’t, which sends mixed messages that can escalate the crisis and have long-term negative implications for everyone in the industry.

4. Be specific

Specific details are important for providing credibility. Mossack Fonseca said:

We cannot provide responses to questions that pertain to specific matters, as doing so would be a breach of our policies and legal obligation to maintain client confidentiality.

While there is no question that the firm cannot afford to undermine its legal obligations, where possible it is vital that it rebuffs any particular claims which are false.

A statement such as: “We can confirm the parties in many of the circumstances you cite are not and have never been clients of Mossack Fonseca” is not helpful for clarifying uncertainty because it leaves the critical reader wondering what “many of the circumstances you cite” means in this context. On the other hand, it would send a much clearer message to put out a statement along the following lines:

We have never knowingly allowed the use of our companies by individuals having any relationship with North Korea, Zimbabwe, Syria, and other countries mentioned by you that might have been considered as a threat to any other country’s national security or that have been listed by a sanctioning body.

5. Communication is visual

It is critical to provide some visualisation to humanise an organisation. This is particularly the case with Mossack Fonseca, which is working in an industry which by definition is opaque and secretive. One way of doing this is by putting individuals in front of a camera and microphone, or telling a story about its history, such as an executive repeating on camera what the firm has said in its statement:

For 40 years Mossack Fonseca has operated beyond reproach in our home country and in other jurisdictions where we have operations. Our firm has never been accused or charged in connection with criminal wrongdoing.

Another approach would be to communicate the values that an organisation stands for. For instance, in a further statement, Mossack Fonseca provided details of its commitment, in the past 18 months, to compliance to new regulations and due diligence. But a further approach would be that if an organisation accepts any wrongdoing then it should clearly communicate the activities that it is taking to put that right and change in the future.

So far, Mossack Fonseca has denied any wrongdoing, but one thing it should be doing – if it isn’t already – is reassuring its clients about additional steps it has taken to safeguard their private documentation, otherwise it will lose them as clients to other competitors very quickly.

6. Be positive

It’s hard for an organisation not to be defensive when it faces a barrage of criticism that challenges its identity and possible existence. Nonetheless, it is important to keep the message positive, constructive and focused on the core message.

Mossack Fonseca is inevitably frustrated around “unauthorised access to proprietary documents”. But claiming that it is providing “validation of the information” rather than “our response”, complaining that information is being interpreted “out of context” and threatening legal action can distract from the positive messages it may be attempting to communicate.

Every reputational crisis, including Mossack Fonseca’s, is unique and dependent on its context. Nevertheless there are steps it – and any big organisation caught in the same sort of bind – can take to help it survive what is clearly a very taxing period.