Corporate Reputation

Reassessing Corporate Communications for The Decade of Disputes Ahead

2020 is set to mark the beginning of a decade of corporate disputes, according to FTI Consulting’s survey of over 2,000 business leaders of large companies across the G20 representing organizations with a aggregated total global turnover of $43.6 trillion and employing 58 million people globally.

FTI Consulting’s research has found that, entering the year 2020, business leaders were anticipating an increase in corporate disputes. While many of such disputes over the past decade were settled away from the public spotlight, corporate litigation can spark great interest in the media, among investors and
in political and regulatory spheres. In FTI Consulting’s research, a number of business leaders indicated a direct link between a corporate dispute and a subsequent dent in top-line earnings – indicating the scale of reputational impact that comes with high-profile litigation. With the anticipated trend of corporate
disputes on the rise, how can companies be best prepared for the reputational challenges that these situations bring?

Litigation on the Rise in Emerging Economies

According to FTI Consulting’s research, at the close of the 2010s, litigation was on the rise in emerging economies. Business leaders from companies based in Mexico and India were the respective fastest risers in corporate disputes in 2019. Together with those from companies based in Russia, Brazil
and Indonesia, they reported an approximate 50% growth in of the number of disputes they were involved in.

Litigation has not solely been confined to emerging economies and in recent years the global transportation industry has become a flashpoint for corporate disputes. The fallout from the diesel emissions scandal, the class-action cases against trucks manufacturers and patent litigation in automotive industry all account for the transportation sector’s 22% market share of corporate disputes in 2019. In 2020, litigation is expected to rise a further 3% across G20 economies led by an upswing in disputes for companies in the US, India, Turkey, Mexico, South Korea. The trajectory for litigation among Russian companies is also set to continue, with FTI Consulting’s research forecasting another year of 50% growth in disputes. Likewise, the transportation sector is set to face an upward trend in litigation, joined by companies in the consumer goods and renewable resources sectors, which are expected to see an increase of 23% and 19% respectively.

Communications Considerations in the Court of Public Opinion

With many large businesses recognising the advantages of alternative dispute resolution, it is no surprise that almost half (42%) of 2019’s corporate disputes went unreported in the media. This was up 2% on the prior year, with disputes among companies based in South Korea and Japan among those contributing to this growth of unreported litigation. Avoiding adverse reputational impact is clearly one key advantage to settling litigation cases privately. Corporate executives surveyed in FTI Consulting’s research indicated a link between litigation and loss of business, with businesses affected reporting an average 6% loss of earnings. Businesses most sensitive to the reputational impact of litigation were those in the US and Europe.

Litigation presents a particular set of communications challenges, requiring an element of preparedness and organisation in advance of the dispute coming to public attention through the media. The majority of businesses surveyed by FTI still adopt a reactive approach, but notably those from highly regulated sectors – such as financial services, telecoms and technology – are the most proactive in their approach to managing corporate disputes. When looking at the anticipated growth in litigation at the beginning of this forthcoming decade of disputes, four sectors of the economy appear below the average for organisational proactivity in managing disputes.

With the number of litigation cases expected to increase in the coming decade, companies may have to reassess their preparedness and approach to communications in order to protect their reputation in the court of public opinion.

 

 

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