Commonwealth Bank's handling of the current crisis engulfing its financial planning division is a “staggering failure” in crisis communications and has now gone beyond PR to be a branding issue, according to industry observers.
The bank has yet to say anything publicly to address the scandal which has unfolded in recent weeks around the high-risk financial advice given to many customers that resulted in hundreds of people losing their life savings while the bank made solid profits and allegedly promoted the individuals involved. The Sydney Morning Herald this morning ran a piece questioning the radio silence from the business and calling for CEO Ian Narev to make a statement into the report and the potential Royal Commission it faces. Narev is expected to make a public comment tomorrow (3 July).
By saying nothing and not addressing the issue publicly, Commonwealth Bank is undoing years of branding efforts across the sector to shed its negative perception with the public, according to marketing industry observers, and it could have long term impacts beyond this issue not just for CBA, but for other big players.
David Chalke, marketing strategy researcher at The Strategy Planning Group, said: “ As with any crisis it's not the disaster that's the problem, it's the handling of it. The whole thing is a public perception issue.
“If they don't do anything positive, it will fester and any future misdemeanors will be seen through this prism. They have to clear the decks. They can't over-react as people will see through that, but there needs to be a clear, rational and proportionate response,” he said.
While it wasn't necessary for CommBank to come out with a full response to the issue immediately, It needed to say something, and lay the foundation for a fuller response, said one industry observer.
Another source close to the bank said that it has been a “staggering failure in crisis management” from the get go.
“It's a huge issue for the brand. Brand and trust are volatile and the flames of mistrust burn strong right now. You can douse them quite simply but [CommBank hasn't],” the source added.
A “proportionate response” could be to give the victims their money back, Chalke suggests.
“Hundreds of people lost their life savings, what's the total value of that, and what did Commonwealth Bank make in profit last year, how much do they spend on advertising? To give the money back could be a relatively low cost.”
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