The financial services industry has customarily basked in a glow of reverence as the rest of the economy marveled at an industry that continually brought home relatively steady profits and was the envy of many. That all came to an end almost exactly a year ago and the sector has since weathered so many storms that many wonder whether it will ever again bask in the same type of glow it enjoyed for decades. Interestingly, much of the industry's struggles stem from the fact that it has never really understood PR and how various elements of it can have a big impact on its business.
In many ways, the industry's response to the crisis has violated almost every cardinal rule of crisis communications. Executives at major institutions who were on life support a year ago, and in some cases still are, may not have seen things this way, but they were in the midst of the classic corporate crisis. First, there were genuine problems of epic proportions since bad bets on real estate and other sectors had caused capital ratios to dwindle to uncomfortable levels. Secondly, many investment banks took a bath on instruments such as auction-rate securities, once the market for those instruments literally dried up, leaving them worthless.
Yet, through it all including hundreds of billions in government aid, no one has come forth and admitted the mistakes of the past and charted a course for preventing them in the future. Instead, it's been the governments of the world that have sprang to action and started examining a number of new rule changes and procedures to prevent a calamity of the proportions we're currently weathering from occurring again. The latest is happening currently at the G-20 summit, where the U.S. is scheduled this week to present a framework for sustained global economic stability titled "Framework for Sustainable and Balanced Growth."
What the financial industry has yet to grasp is that good PR is indeed good for business. They have yet to understand that an angry public translates into angry customers; people who are more likely to shop a new institution the next time they need a new product their current bank provides. They've forgotten about that old adage that says it's much more expensive to lure a new customer than retain a current one. In fact, the crisis and the way the industry has responded to it is perhaps one of the most clear answers to that age old question of how PR impacts a company's bottom line. For more times than not, failing to practice sound PR principles will prove the biggest cost of all.