Crisis management practice in Brazil has developed significantly over the past few years. This development was driven by specific industrial and environmental accidents that occurred in Brazil, by climate events that have become more extreme and recurrent and, of course, by the COVID-19 pandemic. Companies acting in different markets were suddenly faced with the complex challenges of overcoming a crisis; such challenges are inherently multifaceted, and bring significant liability exposure that could impair the most thorough crisis response efforts. The development of the market has raised awareness of the need for adequate preparation and crisis response, and of the value of engaging external consultants for this intricate and unique task. Companies across different industries have begun to dedicate their time and resources to developing their internal policies and procedures; this, in turn, has led to the crisis management market improving and professionalising its practices more each day.

Industrial sectors are inherently subject to potential crises arising from the usually significant risks of their activities. An industrial accident may not only lead to a disruption of the company’s activities and other damages but may also bring a significant level of exposure to multiple legal demands by authorities and third parties, which can perpetuate and multiply the impacts of the crisis.

Extreme climate events know no boundaries when it comes to affected sectors, as their material impacts disrupt companies’ abilities to perform their activities across the board. Brazil is rarely ever subject to events like hurricanes, but overflooding and storms have disrupted activities in several regions and markets.

Furthermore, the aviation sector and other services that depend on flights and tourism have not completely bounced back from the COVID-19 pandemic, although there the respective crisis was more restricted to financial impacts (rather than being more widespread). As Brazil has a considerably developed legal statute and practice on financial restructuring – including a law that was significantly updated in 2020 – successful judicial restructuring of companies on those markets has occurred as well.

The maturity of Brazil’s restructuring laws and practice is significant for crisis management, as a crisis usually has significant financial implications that can impair a company’s ability to meet its past obligations. As Brazil is a high-litigation country (its courts consistently top rankings in terms of number of ongoing proceedings), an important part of overcoming a crisis will be to renegotiate these past obligations and avoid related enforcement measures. For that reason, most business acquisitions and/or restructurings occur via judicial restructuring proceedings, where the company will not only be able to renegotiate collectively with its creditors but will also have access to corporate restructuring measures that protect the acquirer of the asset from past liability, maximising the value of the assets sold and the possibility of the company overcoming the crisis.

Brazil’s civil law system governs the various implications of crisis management through different statutes, which can sometimes create overlap and confusion when applying the law. The Brazilian system also enjoys the particularity of having different authorities with concurrent competences over the same types of claims (legal representatives of the federal government, the states and the municipalities, as well as public prosecutors and public defenders), which would almost certainly lead to duplicative and multiple demands, in and out of court (and before different courts at the same time, depending on the territorial extent of the crisis event). Being advised by consultants who know how to best navigate these particularities is key to a successful crisis response. 

The legal system has been altered to respond to the COVID-19 pandemic crisis, specifically suspending the statute of limitations for claims and allowing more time for people to judicially seek their rights. Other initiatives to update significant legal statutes are ongoing – for example, the Brazilian Civil Code. One would expect the modernisation of the relevant laws – which is a never-ending exercise – to reflect the complexities identified in recent practice and better regulate potential future crises (for example, expected and recurrent extreme climate events) and their consequences on different areas of the law.

There is no single governmental entity in Brazil with the authority to co-ordinate crisis management, or to oversee or comment on a company’s preparedness and adequacy regarding steps taken to respond to a crisis.

Most crises will have multifaceted legal implications that fall within the competence of different Brazilian authorities (including the government at municipal, state and federal levels, depending on the event), and the company will need to address each of their demands. In several matters, however, these competences are concurrent (for example, environmental liability), which leads to a destructive overlap of demands and legal requests. In the case of public prosecutors and public defenders, their members also enjoy autonomy within their respective function, so there is no guarantee of co-ordination even within the same institution.

In that scenario, co-ordinating the response to demands from public authorities during a crisis should include having a consistent approach on all fronts, as well as engaging these authorities to act together, dealing with their demands and the multiple judicial proceedings that will come. This will depend almost entirely on the efforts of the company and its external consultants, and will be one of the most complex challenges a company will face during the process.

Some crises will also trigger the need to co-ordinate immediate emergency responses with the local authorities (ie, the Civil Defence at the municipality and/or state level), if there are emergency actions to be taken (eg, the research and rescue of individuals).

There is no specific governmental oversight of a company’s preparedness for a crisis, but companies should have and abide by adequate corporate governance laws and regulations – these would fall within the authority of the Securities and Exchange Commission (CVM), the entity that regulates capital markets in Brazil. Other specific regulatory provisions related to managing risks associated with the company’s activities in each sector would fall under the oversight of the respective regulatory bodies – such as (among others):

• the National Mining Agency (ANM);
• the National Agency of Electric Energy (ANEEL); and
• the National Agency for Telecommunications (ANATEL).

The adequacy of the measures taken by the company to respond to a crisis will also be closely watched by the relevant regulator – within its respective authority – as well as by the justice institutions (public prosecutors and public defenders), particularly as pertains to measures to mitigate and repair collective and diffuse damages, as well as damages caused to multiple third-party individuals.

From a regulatory perspective, companies faced with a crisis are expected to observe the usual transparency and market-reporting obligations, which vary depending on whether they are a public-traded company or not.

A company faced with a crisis, however, will suffer significant pressure from the media and the public for adequate transparency of its efforts, including to maintain its reputation (which in turn affects the perspectives of potential consumers and prospects of business continuity, depending on the case and sensitivity regarding the crisis’s origin). The company will also receive multiple demands for information from public authorities and will be expected to meet challenging deadlines under the significant pressure of legal liability.

Each regulated sector will have regulatory provisions establishing measures for adequately managing the risks associated with the activity, with the view towards mitigating and preventing the risk and properly addressing its consequences if it occurs. Usually, the respective regulation also provides for reporting obligations, to enable regulatory oversight.       

There are no pre-structured public-private co-operation frameworks for crisis prevention or response. Mapping the relevant governmental authorities and paths for their engagement during a time of crisis is one of the necessary steps when drafting an adequate crisis response plan for a company.

There is no national crisis management plan or policy in Brazil, and one of the most complex challenges a company will face during a crisis is dealing with different authorities that hold different – and sometimes conflicting – positions on the same matter.

Organising the demands from governmental authorities and creating adequate circumstances for their co-operation will depend mostly on the company’s efforts in this regard. There have been situations in the past where inter-agency or inter-institution protocols were created, but these are not a rule nor is there an obligation for these authorities to do so. Effective co-operation, therefore, will arise from proper engagement of these authorities and creating an environment for them to work together.

Structuring an adequate crisis management plan needs to consider at least the following.

• Objective identification of the first immediate steps to be taken once a crisis arises, including:
1. who to engage internally and through which channels;
2. informing management/executive directors; and
3. how to convene the crisis committee members, and where, etc.
• The roles, mandates and members of the crisis committee.
• Nomination of a “public face” of the company for the crisis, which is usually not the company’s CEO/manager.
• Immediate communication with relevant governmental authorities (appropriate to their different roles/regulatory powers or concurring competences), by whom and through which channels.
• Proper communication with the public and other stakeholders, with a transparent and consistent response on all fronts.
• Engagement of external consultants to help structure and co-ordinate an immediate response, assuring consistency in the response and that records are kept from day one.
• Depending on the origin and nature of the crisis, engagement of external consultants to initiate internal investigations.

Having a specific corporate structure in place to co-ordinate crisis response efforts within the company is essential for successful crisis management. The multifaceted nature of a crisis demands that individuals from different areas of the company collaborate for a proper evaluation of each problem and the best solution, and co-ordination of the company’s efforts on one single structure is key for an adequate and consistent response. Because of the complexity of crisis response and the multiple demands arising therefrom, these demands will need to be the primary concern of the employees/executives involved. Formally appointing them to the crisis committee ensures that such priorities are respected, including by their superiors within the company.

Convening the Crisis Committee

The crisis committee should be formed in the event of a significant crisis that demands its operation, and although such significance will vary from company to company and depending on the circumstances, the internal crisis response protocols can (and should) establish some thresholds and triggers for the identification of the need to engage the committee.

Composition of the Crisis Committee

A crisis committee is comprised mostly of internal employees/executives of the company, but may also include a few external consultants, usually from:

• management consulting firms (to help with business continuity/restructuring matters);
• law firms with expertise in crisis response; and 
• media/communication experts.

When considering internal members of the crisis committee, one should include mid to high-level employees/executives of the company with consistent knowledge of its internal procedures and policies. There should be representatives from:

• the supply and contractual departments that can implement the demands from the committee efficiently;
• the executive board;
• the legal department;
• the technical/industrial area for contributions regarding business continuity, specifically including representatives of the department that managed the risk from which the crisis originated (in the case of a crisis arising from an internal risk);
• the communications department;
• the investor relations team; and
• the governmental relations department.

All these areas need to be aligned and integrated for an efficient and adequate response to a crisis, and their representation at the crisis committee will ensure that the respective views are taken into consideration when implementing the response.

Proper and Adequate Mandate, While Keeping an Internal Hierarchy Report

One of the most important aspects of structuring a crisis committee is allocating a proper mandate to its members that is both sufficient for a proper response and adequate for their responsibilities and budget. Attributing extensive mandates without proper autonomy will only bring potential liability and accusations by third parties on the adequacy of the response; on the other hand, an over-extensive and general mandate can contribute to an unfocused, uncoordinated and ineffective response. There is no need for complete independence of the crisis committee from management, as the lack of an internal report could also lead to an uncoordinated and ineffective response. If the specific circumstances of the crisis recommend that one or more members of management not be involved in crisis response, usually the most adequate measure is to temporarily substitute said members with other executives rather than change the reporting lines of the crisis committee.

The crisis committee should have a leader who holds a high-level or executive position within the company, ensuring that final decisions can be taken if there are disagreements between committee members; there should be a direct line of communication with management, in case any measure requires approval at management level (which can then be done efficiently).

Within the first days or months following a crisis, the crisis committee will usually be on call 24/7 and have daily updates and meetings to decide on the next steps of the response. Less recurring and fewer meetings shall be considered only after the crisis response demands decrease, which can take several months depending on the nature/extent of the crisis.

Direct Lines of Communication, While Keeping the Committee Independent Within a Proper Mandate

The crisis committee should have a direct line of communication with management, which can be ensured both via:

• having representatives from the executive committee on the crisis committee (considering, of course, whether there is any conflict of interest depending on the origin of the crisis, which shall prevent management from participating); and
• establishing a recurrent report between the crisis committee and management (usually in hourly intervals during the first days/months, and then switching to daily, weekly or bi-weekly intervals when the situation starts to de-escalate).

However, it is paramount that the crisis committee has the mandate and autonomy to make the necessary determinations for properly addressing the consequences of the crisis in an efficient manner; therefore, this reporting line to management cannot deprive it of such mandate, including from a financial budget perspective.

The engagement of external experts to help a company prepare for and deal with a crisis is also extremely important. There are external management consultants and law firms in Brazil that provide consulting services to help guide a company with drafting and training of internal policies and procedures for risks and crisis management.

Some areas of expertise will always be paramount during a crisis – one of which is the law. All crises have legal implications, both regarding their origin and arising from the measures adopted by the company to address their consequences. One should not underestimate the importance of engaging external law firms in crisis response, and certain law firms and lawyers in Brazil have been responsible for the co-ordination of companies’ responses to major crises in the country during the last few years. Management/corporate consultants are also important to help guide a company’s efforts in mitigating impacts/threats of disruption to the company’s activities, as well as other financial setbacks arising from a crisis.

There are also consultants that specifically provide input on communication efforts related to a crisis and response efforts, which includes external communication with media platforms and engagement with governmental authorities. These efforts should also be accompanied by the external law firm(s) engaged to co-ordinate the response, review their adequacy, completeness and legality, and ensure that the external communications and engagement with third parties is consistent on all fronts.

An evaluation of a company’s response to a crisis should involve examining the efficacy of efforts to deal with the crisis itself (that is, dealing with its immediate consequences, including by mitigating or repairing impacts caused to third parties in an efficient and adequate manner) as well as those directed at successfully surviving the crisis by mitigating its effects on the company’s activities.

Efficient and Adequate Response

One of the most important aspects when dealing with a crisis is a company’s capacity to effect an immediate response. Transparent communication and taking material steps to address the consequences of a crisis are key to working through it. Companies should have immediate action plans in place, with clear steps for:

• forming and engaging the internal crisis committee;
• effecting immediate communication through the company’s reporting lines;
• taking immediate actions and external communication with relevant governmental authorities and other stakeholders; and
• structuring an exceptional budget assignment to deal with the crisis that is adequate to its mandate.

It is common for companies to rely on external experts/consultants when structuring these immediate action plans and when putting them into action. External law firms play a key role in crisis response due to their knowledge and expertise, and play a key role in co-ordinating these efforts. Engagement of law firms that provide this co-ordination service is essential, as Brazil is a high-litigation country. Any company involved in a crisis – especially one arising from a risk inherent to its activities – should anticipate being subject to immediate enquiries and legal actions by authorities (“justice institutions” in Brazil – ie, public prosecutors and public defenders) and numerous third parties. These multiple legal measures can involve considerable expense and usually lead to an overlap of contradictory orders from different courts, as well as measures that can impair the company’s ability to continue its activities (such as freezing of assets and bank accounts).

The only way through this potentially chaotic scenario is a transparent and consistent response to all enquiries, and ensuring that the company’s relationship and reputation with these governmental authorities, courts and other relevant stakeholders remains strong and intact.

The engagement of external counsel to help co-ordinate response efforts also ensures that steps are taken to mitigate exposure to future litigation arising from the crisis response itself. The company will not only have to promptly respond to the crisis but will have to demonstrate that its response was as adequate, thorough and efficient as possible, and that it abided by the company’s internal policies and procedures for crisis management (another reason why said law firms should be engaged to consult on drafting and training of these policies and procedures as a pre-emptive measure).

Some of the particularities of the models and frameworks to be adopted for crisis response will depend on the nature and consequences of the crisis, which will of course only be fully understood when it occurs. It is therefore paramount that the internal procedures and protocols created as part of the risks and crisis management provide enough information to be easily and efficiently implemented (when necessary) but do not contain too many particularities and render it ineffective/inadequate for a specific type of crisis or plainly useless as a general framework.

Typical elements of a basic framework or model for crisis management include:

• an immediate action plan, with the first steps to be taken for the potential crisis;
• immediate communication within the company, and with governmental authorities and other key external stakeholders;
• formation of the crisis committee; and
• engagement of third-party consultants (as previously explained).

As part of adequate enterprise risk management, the company should structure its action plans for response to potential crises that might arise. That management should involve an assessment of risks associated with the company’s activities – which, according to Brazilian civil and environmental law, could lead to significant exposure to liability – and other regulatory and market risks that could affect the company’s businesses.

The most immediate action plans associated with each risk should be tailor-made and targeted to the specific consequences of that risk, but they should be complemented by a structured general immediate action plan for a crisis, in case such matter escalates. These action plans that deal with the consequences of a crisis and its risk/escalation should further complement risk mitigation measures, which should also be structured as part of the overall enterprise risk management and be tailor-made to each specific risk.

Companies should also consider including simulation exercises as part of their enterprise risk management efforts, and they usually do so. In certain situations, the regulatory provisions in Brazil require such simulations – for example, in the case of risks associated with tailings dams, where regulators impose on the structure’s owner/operator the obligation to promote simulations with the population located downstream of the dam, in co-ordination with local authorities (the Civil Defence). Other risks associated with industrial activities should also be subject to simulations for evacuation or other accidents, and the employees in such facilities should also receive appropriate simulation training.

Simulations of Potential Market/Regulatory/Political Crises

Apart from simulations of risks associated with their activities, companies should consider promoting simulations for potential market crises deriving from extreme adverse climate events (such as flooding) that might disrupt the company’s activities, as well as for other regulatory/political risk changes in the market according to the scenario in the relevant regions and/or countries.

More general simulations would typically involve adopting the pre-mapped necessary measures to minimise disruption to a company’s activities should such risks materialise, and implementing the company’s overall immediate action plan for a crisis.

Training and simulations related to the materialisation of risks associated with the position and/or industrial location where the employee will perform their activities should be part of that employee’s overall training when starting in that position. Participation in such training and simulations should be mandatory and controlled by the company, via its human resources department.

Simulations and training of more general risks to which the company is subject (such as regulatory alterations, sanctions and other impacts deriving from political factors) should be considered and implemented – also as mandatory – for the employees and executives whose roles are relevant to the response efforts should such risks materialise (again at the behest of the human resources department).

Engaging external consultants with expertise in responding to specific risks (particularly when discussing risks associated with technical/industrial activities) and with expertise in overall crisis response to develop and implement the training and simulation plans will help ensure their adequacy and completeness.

In Brazil, crisis management practices have developed considerably over the past few years. Several companies have begun to structure more robust crisis management procedures (including developing measures and plans for preventing or responding to crises) as part of their internal policies, and that is an important step towards stronger governance structure and practice.

One should be aware, however, of the fact that developing policies (and related procedures) for preparation and response to crisis is not an easy task. Apart from the inherent complexity of dealing adequately and efficiently with the material consequences of a crisis and mitigating the disruption it brings to the company’s activities, an adequate plan should also consider each of its measure’s legal effects on the company, the executives and employees involved.

A plan should be feasible and establish measures that are appropriate to each level of the response, ensuring that the measure to be taken is within that level’s authority and budget. Wishing to create a response plan with a best-case (but unattainable) scenario on paper will not help anyone when the crisis arises and will only open the door for future liability, as those involved in the response efforts will ultimately not be able to implement the plan as structured, and the company could be accused of failing to meet its obligations – here the engagement of external consultants (such as firms with appropriate expertise) proves helpful.

Overlapping Measures From Public Authorities

One of the most complex challenges that a company involved in a crisis will face is being able to properly respond to the legal demands brought against it. A company should expect to receive multiple (often overlapping) enquiries as well as face investigative proceedings and judicial measures from public and other authorities in Brazil – particularly the justice institutions (public prosecutors and public defenders), which have overlapping constitutional and legal competences.

Members of these institutions also enjoy “functional autonomy” – meaning they are not bound by positions or acts taken by other members, even their superiors. Some institutions do strive to keep a consistent position and approach when dealing with a legal controversy/subject matter or even a specific company/crisis event, but this is not a rule and is not binding on their members. These overlaps of autonomy and competence frequently lead to the multiplication of legal measures against a company in crisis, and is a significant challenge in the Brazilian legal system. Given judicial measures from justice institutions, other authorities or third parties in the aftermath of a crisis, and frequent demands for attachments of the company’s assets (including freezing amounts deposited in bank accounts), the company will need to be able to respond adequately to these demands in order to mitigate their impacts (and the overall consequences of the crisis) on its ability to continue its day-to-day activities.

Close Oversight of the Response Efforts

Another challenge is the fact that the efforts to respond to the crisis will also be under the spotlight, particularly from the Brazilian authorities, and can also lead to future litigation if not taken properly. The goal here will be finding the balance between a proper immediate response (being efficient and adequate to mitigate, repair or compensate the consequences of the crisis, particularly for third parties) but not falling into the trap of “doing everything at once” and creating a chaotic scenario of overlapping measures that prove inefficient and that could expose the company to future liability.

For this reason, the co-ordination of the response efforts via a crisis committee that not only has representatives from the company’s legal department but that also relies on an external specialised law firm can be paramount for the success of the response to a crisis, mitigating legal risks on all fronts.

Responding to demands and engaging with enforcement authorities in Brazil (public prosecutors and public defenders) will be a challenge, due to their overlapping competences and the autonomy of each member within their institutions. A robust, transparent and consistent response to the crisis will also ensure that the company’s reputation and relationship with these authorities are maintained throughout the crisis. The main legal exposures of a crisis will be:

• criminal liability;
• environmental liability (particularly when a crisis arises from a risk inherent to the company’s activities, as environmental law provides for strict liability for environmental damage due to the activities’ risks); and
• civil liability.

Engagement of external counsel with expertise in crisis response is critical when dealing with these demands, responding to immediate legal action most likely to be taken, and maintaining a proper relationship and reputation before enforcement authorities and the courts.

Balance Between Transparency and Consistency

Maintaining a trustworthy relationship with public authorities is essential for a successful crisis response. Companies are expected to maintain a transparent and co-operative approach towards enforcement authorities, courts and regulators in Brazil. The key to achieving this is to be upfront regarding steps taken to address the crisis (interrupting ongoing impacts, investigating its causes, etc) and its consequences, and sharing reliable and consistent information, to avoid creating confusion that could harm the company’s credibility or risk future liability.       

Legal Risks as Part of Proper Corporate Risk Management

Legal risks are usually part of a companies’ risk management practices and should be mapped similarly as for any other risk associated with the company’s activities. Mitigating measures, action plans and severity analysis should also be considered within the expected management of these risks.

The Importance of Legal Advice During a Crisis

The involvement of the legal team is paramount for successful crisis management, as legal implications arise not only from the crisis (and its origin) but also from the measures to be taken by the company once it occurs. A company facing a crisis should expect to receive close and complete oversight by the Brazilian justice institutions, and should therefore thrive to consider all legal implications of its actions. To be able to do that while still responding to the crisis in an efficient manner, the company should involve both its internal legal team – including a senior-level representative in the crisis committee – and an external legal firm with expertise in crisis management.

Keeping a Proper Registry of Documents, Demands and Responses

An important aspect of an efficient response to a crisis is organisation and maintaining a registry. Companies usually engage external consultants to assist with the following.

• Collecting and preserving internal data on the issue related to the crisis, which will be necessary:
1. for responding to requests for information from the authorities;
2. in the case of eventual future litigation abroad (should those be brought), in jurisdictions where there are discovery/disclosure obligations;
3. for understanding the origin/relevant aspects that led to the crisis; and
4. for developing an adequate strategy for responding to corresponding legal demands, enquiries, investigations and judicial/arbitral proceedings.
• Receiving, registering and co-ordinating the response to demands received from third parties – ie:
1. requests for information by individuals/other companies directly affected or from public authorities; and
2. processing and addressing demands for material measures to mitigate/repair the impacts of the crisis on these third parties.

There are several potential avenues for settlement agreements to deal with the legal consequences of a crisis. Which of these alternatives is most advisable will depend on the circumstances of each crisis, including on which stakeholders are involved and the nature of the consequence that the company intends to cover with the agreement.

Agreement With Public Authorities for Civil Liability

Given that Brazil has a highly contentious legal system, reaching a comprehensive and robust agreement that deals with the civil implications of the crisis with the relevant authorities is the most advisable route for reducing litigation and for business continuity. The civil agreement can (and should) include eventual environmental, social and financial collective and diffuse damages arising from it to third parties and affected areas, as well as alternatives (recognised as legitimate by the signatory parties) for indemnification of damages caused to individuals (whose rights can be represented in court by the justice institutions but are not transferred to them for release purposes)/other companies.

When considering an agreement, the company should identify all relevant authorities for the legal implications that the agreement intends to address. As there is overlap in the authorities’ competences, leaving one of them out of the agreement could undermine the efforts to diminish litigation and lead to attempts to have the agreement re-opened or used as a basis for the indemnification/reparation measures it contemplates. Particularly for justice institutions, it is advisable to directly involve the highest levels of their respective ranks, to mitigate deviating measures from their members due to their inherent autonomy, which can perpetuate litigation and/or undermine efforts to implement the agreement.

A potential agreement should also be as broad (on its subject matter) and clear and definitive (on its provisions) as possible, to mitigate future (re)discussions of its completeness and adequacy.

Frameworks for Individual Indemnification

If there are impacts on or damages caused to third parties, the company should also consider implementing a framework for indemnification of these individual damages. Such framework should involve:

• creating a list of the damages caused and parameters to calculate indemnification, usually construed with the support of external specialised consultants and resulting from negotiations with the relevant authorities from the public defender’s office, if low-income individuals were affected;
• establishing channels to receive and treat these demands, including with offices in each of the affected territories; and
• engaging external law firms to represent the company in the negotiations with the affected individuals (which should be legally represented by the public defenders or their own counsel, with costs usually covered by the company in the case of the latter), as well as consultants to help mediate these discussions.

This framework for individual indemnification should ensure that these individual damages are treated consistently by the company, and should avoid accusations of injustice or unequal treatment. As the public prosecutors in Brazil also have the competence to demand homogeneous individual damages in court via public civil actions, it is advisable that the framework be recognised as adequate by the public prosecutor’s offices as well – this can be done via its inclusion in a broader settlement agreement (that deals with all damages caused by the event) with all competent authorities.

Agreements for Administrative and Criminal Liabilities

Finally, paths are also available for agreements to resolve administrative liability, under specific conditions according to the underlying legal implications of the crisis. As for potential criminal liability, given that most criminal implications could also affect individuals/executives related to the company, it is also important to consider the implications of an eventual agreement on that front regarding the potential liability of these individuals.

Agreements With Creditors for Financial Restructuring

Most crises will severely affect a company’s financial prospects, either by imposing new (significant) costs related to the crisis and/or impacting on the company’s ability to continue its activities without any disruption. A crisis arising from an industrial accident, for example, can lead to the interruption of the company’s activities due to technical issues or material impairments, as well as to measures being taken by the Brazilian authorities to suspend the company’s licences and authorisations. While the latter can be dealt with via agreements with the competent authorities and specific proceedings to correct/readjust the licences and obtain new authorisations (which will underly measures to be taken by the company in that regard), the impacts of these measures on the company’s ability to maintain cash flow and observe its financial commitments will also need to be addressed. The Brazilian legal system provides alternatives for collective renegotiation of debts with creditors, either in court (via judicial restructuring) or out of court (extrajudicial restructuring), under specific circumstances.

It is common to have insurance policies dealing with potential liability for litigation and crisis-related costs. Receiving coverage will depend on the company’s ability to demonstrate that reasonable steps were taken to mitigate risks of exposure for such litigation, and to defend its interests when the crisis-related litigation arises. Keeping a robust record of documents related to the origin of the crisis (if related to a risk inherent to its activities) and to the company’s response efforts is paramount for supporting a claim for coverage from insurers.

A crisis will invariably affect the reputation of the company, particularly if it arises from an industrial accident or the materialisation of other activity-related risks. Rebuilding this reputation will depend on the company’s ability to properly manage the crisis and its consequences from the beginning, and to adequately communicate such measures to the general public (via media channels and proper communication channels of the company), the affected communities and third parties (if any) as well as the competent authorities. The company should adopt a proactive approach to ensure transparency and reliability, but should avoid communicating information that is still uncertain, particularly during the high points of the crisis. External statements should always strive to communicate the information objectively and with language adapted to the respective target audience.       

As part of its efforts to adopt a proactive approach of communicating to relevant stakeholders, it is important to observe all applicable regulatory reporting requirements related to the company’s activities during the crisis. Usually, Brazilian regulatory bodies will also demand new recurrent reporting in their respective areas of competence, which will need to be adequately organised and addressed as part of response efforts. One should expect the recurrence of these reporting deadlines to be challenging, particularly within the first days/months after the crisis.

Co-ordination of the responses to external demands and communication with the media and stakeholders is essential for maintaining these relationships, creating avenues for eventual settlement agreements necessary to address the crisis’s consequences, and preserving the company’s reputation throughout the crisis. This is a significant task of the crisis committee, and having external counsel with experience in crisis management is key to help find that delicate balance between transparency, consistency and legality.

The roles and members of the crisis committee should be pre-established, as much as possible, within the company’s internal procedures and norms for crisis response. When a crisis is identified, the committee members should be immediately informed and united in taking immediate response actions. The executive committee/managers of the company should also be immediately informed. These lines of communication (including who contacts who and through what channels) should also be part of the internal procedures.

When communicating with the media and public, the company should keep its messages transparent (proactive) but consistent (only publicising information when it is confirmed/trustworthy). The messages should be objective, avoiding unnecessary adjectives (ie, avoiding terms with emotional baggage or possible different interpretations) but keeping them respectful to affected third parties and regarding the event itself, when appropriate. The messages should also be tailor-made to each targeted audience, ensuring that they are properly received and understood. This will not be an easy exercise, particularly during the height of the crisis when the company will receive demands from numerous third parties, the media and the public, and will feel the need to provide information; nonetheless, consistency in messaging will be paramount for preserving trust and reputation.

Maintaining proper channels of communication with investors and shareholders throughout the crisis is also paramount, including to avoid exposure to litigation. It has become an unfortunate practice to have ill-intentioned investors or even law firms campaign for lawsuits against the company and/or its managers for purported damages suffered because of a crisis or the measures (for them seen as improper or inefficient) taken as part of the crisis response. The engagement of the investors relations team, and their representation on the crisis committee, ensures that up-to-date information can be shared with the market, investors and shareholders. Though the language will probably differ from the communication provided to the public, keeping these messages transparent and consistent will also be necessary as a proper communication strategy.

It is important to dedicate time and effort to preserving the relationship with the company’s customers, as they are indispensable stakeholders for preserving the company’s ability to survive during a crisis. If the company provides products/services to the public, preserving its reputation through proper communication is key. If its activities are focused on rendering services or selling its products to other companies, the departments that handle these relationships should be engaged and provided with adequate information on steps being taken to address the consequences of the crisis, to preserve reputation and maintain these customers’ trust.

Internal communication and transparency with employees will also be an important and challenging concern during a crisis. As a crisis brings a lot of uncertainties – including regarding the company’s ability to maintain its payroll and not diminish its workforce – it is important to keep lines of internal communication open and report to the employees on the company’s efforts to respond to the crisis, as much as possible. Human resources will play a paramount role in preserving employees’ morale, but specific engagements for the management and/or representatives from the crisis committee to provide this report will also be important.

If the crisis arises from a risk inherent to the company’s activities or other factors that can trigger internal investigations and lead to liability of managers/employees, it will be even more necessary to adequately select the information that is being shared and at what time – for this reason, external counsel plays an important role on this front as well.

Besides general communication to the public via the media and other vehicles, the company should also structure specific channels to communicate with and receive/treat demands from third parties affected by the crisis. Usually, these involve dedicated free-of-cost telephone and message lines, a dedicated website and service centres at the affected areas. Employees or external consultants with social services expertise should be available through those lines and at those centres, together with external counsel with expertise in rendering these services.

Once the height of the crisis has passed, the company should promote acknowledging and identifying mistakes and opportunities for improvement of its practices. This will involve:

• a data review of the demands and responses received, based on the records taken throughout the crisis;
• interviews with the key employees/executives involved in the response; and
• open-comment events with the company’s employees for feedback.

Depending on the type of crisis, internal investigations will also have been conducted to properly identify the facts and/or missteps that led to the crisis or an inadequate response (a service that is also provided in Brazil by external law firms with expertise in internal investigations for crises). Once this assessment is done, the internal procedures and policies for crisis response (if necessary and adequate) should also be updated, usually with the support of external consultants.

When conducting an eventual update of the policies and procedures for crisis response, the company should keep in mind that not all crises are the same – on the contrary, the elements of unpredictability of timing and extent (among others) are inherent when discussing a crisis. Any update on policies and procedures will have to be made with the same concerns as were suggested for drafting such documents in the first place: they should be detailed enough to be easily implemented but not too strict as to become unattainable or useless during a crisis. Proper responsibilities should be allocated to the executive/personnel involved in crisis response, and they should also have proper budgeting and mandates. One should not underestimate the importance of achieving a balance with these matters when establishing – or updating – internal procedures and policies for crisis response.

As the crisis management market and related procedures have only developed in recent years in Brazil, and given the inherent uniqueness of each crisis (and each company’s internal governance), there are not yet general guidelines that could be sought and immediately adopted by all companies. Relying on external consultants with expertise and experience is thus even more important, as is having a tailor-made approach appropriate for each company’s situation. The points highlighted in this guide, however, already provide for important aspects to be taken into consideration when drafting internal policies and procedures, and when implementing training and simulations for crisis response. Other means of gathering information include looking at what companies that faced complex and significant crises in Brazil have done, and reaching out to the people involved.