Lessons in Crisis Management and What the Thoroughbred Industry Must do Better
David Fuscus
David Fuscus, President and Chief Executive Officer, Xenophon Strategies

Stuart S. Janney III: Racing surfaces were under the spotlight with the fatalities at Santa Anita, and we, obviously, need to do everything in our power to make them as safe as possible.

The Jockey Club was an original sponsor of the Racing Surfaces Testing Lab. I'm pleased to report that yesterday the board of stewards of The Jockey Club voted to support certain capital improvements to the lab, including the provision of new software for their database management and field equipment to increase their fleet to more adequately cover the entire country.

Those fatalities at Santa Anita have clearly reflected poorly on the entire Thoroughbred industry. When you have fans, animal rights activists, media representatives, and even elected officials calling for the abolition of our sport, you're dealing with a very serious crisis.

David Fuscus has dealt with crises in the past. He's the president and CEO of a Washington, D.C. based firm called Xenophon Strategies, a global public relations firm. Among his clients, Alaska Air, DHL, the Salvation Army, Williams and Sonoma, and to some extent unfortunately, The Jockey Club.

He's known and enjoyed our sport for a long time. He's actually lived here in Saratoga Springs. Today he's going to share some insights on how others have dealt with major crises and how we should be dealing with ours. David, look forward to hearing your remarks.

David Fuscus: Thank you, Chairman Janney. So I work in crisis communications and management. It's kind of an unusual line of work. And a lot of times people aren't very glad to see me. I appreciate the warm welcome I've had yesterday and today from everyone associated with The Jockey Club and this summit. You know, a few years ago I was down at Delta Airlines and doing a training. And at a break in the training I was walking down to the restroom and the then CEO of Delta, Leo Mullin, walked by me, took about two steps and turned around and said, what the hell are you doing here?

So I appreciate the warm welcome.

Crisis is an interesting line of work. And in the past 25 years I've worked across any industry you can think of on a wide variety of public-facing crises. As Stuart said, right now my company is working for The Jockey Club on press, on social media, and on advertising. But I tell you, out of allthe crises I've worked on, this one is the one that's most personal to me. And, quite frankly, most of them don't get personal for me. I just do a lot of this. And it's because I love horse racing. I like to think of myself as a competent handicapper. As Stuart said, I owned a house for many years here in Saratoga. My kids grew up here. My two sons, Will and Chris, grew up here running around the backstretch and the boxes and delivering the Saratoga Special. So it is personal and I'm proud to be helping the industry through these difficult times.

Today I want to go through a couple of crises that are not horse racing-related and to show you how they were handled. And perhaps we can have some lessons and some practices that can apply to Thoroughbred horse racing.

So the Chinese symbol for crisis is made up of two characters; one meaning danger and one meaning opportunity. In every crisis does offer an opportunity. It offers an opportunity to solve problems, to enhance reputations, and build credibility through the deft handling of the situation. And some companies and organizations and industries do come out stronger out of a crisis. But many do not and they leave a trail of lost public trust, of diminished businesses, and unemployed senior executives. Invariably the reason for failure is ignoring some deceptively simple fundamental rules of managing a crisis and communicating with the public.

Crisis communications is about how you communicate your actions. In today's world you can't spin your way out of a tight spot, many have tried and many have failed. And the first rule of crisis communications is to end it. Take the actions necessary to correct the situation, and then clearly communicate it to the public. But all too often corporations, individuals, and industries don't end it. They sustain enormous damage because they break one of these four fundamentals:

Engagement. Full engagement means the ability to shape the story, having the ability to define rather than be defined.

Transparency. In a situation where something is wrong, transparency gives you the public credibility to be able to shape your own story. And without it, you can't.

Responsibility. Responsibility means admitting if you did something wrong. So I'll show you that in a minute. Or acknowledging that something needs fixing. Again, the reason you need this is for credibility.

And finally, the most important thing is meaningful actions. Everything comes down to meaningful actions in crisis management. It's what are you going to do to solve the problem, how are you going to do it, and do people believe in your ability to take those actions. So let's look at some examples.

Cyber security and privacy. So cyber attacks and privacy are in the news all the time. Seems every month or so we get news of a new one, major corporation announcing the theft of personal data. And two of them that have been in the news recently are Equifax and Capital One, so they're good examples. So I think you probably have been reading about them.

You know, it's hard to imagine the company handling a data breach worse than Equifax. In 2017 they announced the theft of personal data of 143 million Americans. It's over a third of our population. And this is from a company that's trusted to protect our most sensitive data. It's a credit bureau, a company that's expected to have world- class security, so this can't happen. And when they announced it after the breach, they did a lot of things wrong. They didn't define the problem initially. They let the story be defined by their missteps. They didn't disclose the breach for six weeks. And they gave very vague reasons as to why that happened. They didn't engage with individuals. They simply said, here's a website. Go to the website and check out if all your personal information has been stolen. And then when they went to the website, the website didn't work for four days. They gave little information out. It took a week for the CEO before he talked to the press. And it really gave the impression of a rudderless ship. They weren't transparent with the media. They were vague about the number of people impacted, the types of information stolen. It took them two months to even admit that information had been stolen in Canada and the UK as well as the United States. And it took them days to announce the reason for the breach. And when they did, this is what they said, "The vulnerability was Apache Struts CVE, blah, blah, blah." Like really? Like, anybody here know what that means? Because I don't. 143 million people. Nobody knew what that meant. That was their entire reason for it.

And they had a series of self-inflicted wounds as well. Shortly after the breach it was announced through some good investigative journalism that several of the executives had exercised stock options and sold shares between the time of the discovery of the breach and the public announcement. Equifax came before they finished an investigation and said, and I quote, "That the executives had no knowledge of the breach before their stock sales."

Well, the chief information officer of Equifax at the time just went to prison in June. Two other executives have pled guilty. And, yeah, so three weeks later they announced a second data breach, an earlier data breach than the big one, but they gave out virtually no information on it at all. They didn't have a plan or even control of their public communications. On social media they didn't switch over from their marketing social media over to crisis management social media and were tweeting out things like, "Happy Friday." You know, it's good, a third of the country doesn't have their data, but it's all good.

And then most notably on their social media, they retweeted four separate tweets that were actually phishing links going in by criminals to try to hack people.

So they really are, you know, the gang that couldn't shoot straight. The media was highly critical as a result of these mistakes. The slow, incomplete disclosure and other missteps set up a narrative and it set up the theme of the media coverage. And as the mistakes grew, the media coverage portrayed them as a company with a horrible security culture, which by the way, they had. Really, the gang that couldn't shoot straight.

And as an example of this, look at what Wired magazine, one of the premier technology publications in the United States, said about them. They said, "Three weeks since the company first publicly disclosed the situation, to a steady stream of gaffs and revelations paints a picture of Equifax's deeply lacking response to a catastrophe."

That's the media's opinion of what they did. And their missteps continue to this day. Anybody sign up for the $125 thing from Equifax? Two weeks ago they came out and said, oh, well we have got a 700 million dollars settlement with the Justice Department, go to this website, sign up, and if you're impacted, we'll give you $125. My entire office did it, right, everybody's out there going oh, I got 125 bucks. Well, a few days later millions of people went in and did this. They had to come out and say, oh, by the way, 700 million bucks isn't enough, so we're not really sure what you're going to get. And just another reason to lose public trust in Equifax.

Now, contrast this with another major breach, one that just happened two and a half weeks ago with Capital One Bank. It's a 600 million-person data breach. They discovered it 10 years — 10 days before they announced it. And unlike Equifax, they took the 10-day period there because they were working with the FBI to identify and arrest the hacker, which they did. They had a reason for that — a reason for that delay.

And what did they communicate? They came out in their first public announcement, they  said we have activated the Capital One incident response unit. What does that convey? It conveys we've got infrastructure to do it, we've got the ability to do it, we've got people to do it, we're ready for it, we're on it. They had a good security plan. They announced that they had identified and fixed the security vulnerability. That it's over. We fixed it. They identified the problem. They went in and said, hey, the problem is it was weak security on a computer that connects the Cloud to the public internet. And then they said, it's our mistake. We did it. It was our error. And all of that, what's all of that give them? They're communicating clearly, the responsibility, it gives them credibility.

And finally they said that they're going to individually contact 104 million people. They're going to do it by letter, but 104 million people. And they gave full and transparent information to the public and the media.

So if you contrast the two, you can go down the list there of everything that's there, but a couple of key points is that Equifax suffered from numerous and ongoing self-inflicted wounds. Capital One was highly organized in their response, and they were viewed by the media and the public as one of them is inept and one of them able to go in and solve the problem.

Equifax is coming out of this with a severely tarnished reputation. When it's over for Capital One, I can predict that they come out of this with an enhanced reputation.

And the postscript of this, just for grins, so, it was announced on September — Equifax was announced on September 7th, 2017. And on September 26th, a couple weeks later, Richard Smith, the CEO, resigned. I think he retired, right? I mean, the board retired him. And then a whole host of the senior management of the company followed him shortly after that.

Let's talk about our industry. And I feel pretty good in saying — using that pronoun there because I've been involved with this for a long time. But let's look at it. Let's look at ourselves and what we have been doing and what we need to do to weather this crisis. It has been a horrific year, right? We all know that. An unending, seamlessly unending storm of media coverage. And let me just put it into perspective for you a little bit.

So we went back and looked and since the beginning of the year there have been 20,000 news stories on the industry and our troubles. 20,000 news stories. If you want a single incident to further put it into perspective, if you look at the 27th fatality at Santa Anita, which occurred on May 28th of this year, within three days there were 300 news articles that appeared across the country. 300. And what does that mean? It means that that's a heat map of the coverage of those news articles. It hit 90 percent of the American public was exposed to or had the ability to read a story on that one fatality at Santa Anita.

And over the past few weeks it is less event-based coverage now, now that the Santa Anita meet is done, but we're seeing that the coverage is evolving. We're seeing less event-driven news coverage and the appearance of long-lead investigative pieces. These pieces are by high quality journalists. Just the past week The Jockey Club's been contacted by New York Times magazine for a major story, Town and Country magazine. And on Friday I got a call from an old contact of mine, a senior producer at Dateline NBC, saying, oh, I hear you're working on this. Is this something we should do a story on? And I can tell you none of these stories are going to be flattering to the horse racing industry.

If we look at the key elements of crisis communications, the ones I've been discussing, engagement, transparency, responsibility, and meaningful actions, we don't score very well.

On engagement, elements of the industry have been highly engaged, certainly. But it's not coordinated. Proposal after proposal has been put forth. There's no clear message that we understand the problem or that we know how to fix it.

Transparency. Again, with fragmented efforts the industry's response is cloudy. There's no unified narrative. Without better unity and consistency of messaging we don't look transparent at all.

Responsibility. Yes, of course. We admit there's a problem, but it isn't defined or even agreed upon by the industry.

And the most important thing: Meaningful actions. Have there been meaningful actions? Certainly there have. Horse Racing Integrity Act. The proposed changes in California. Proposals from a consortium of tracks. But the industry isn't engaged as a whole. From the public's perspective there isn't a clearly communicated fix or even consensus on the chief reasons for the spikes in the equine fatalities. We are a long, long way from meeting the first rule of crisis communications, which is end it.

So what do we do? What steps should we take? Number one, we need to engage as an industry. Be clear in our actions and show that we are capable of recognizing what needs to be done and have the determination to act on reforms.

Broad coalitions. As painful as that might be, this industry needs broad coalitions to go out to the public before something. Listen, I've been working on the Horse Racing Integrity Act for six months now. I happen to believe that that is a key thing to be for. It addresses the issues head on.

But the fragmented industry needs to agree on something that can be communicated overall. Strong messengers. Have the right representatives tell our story. That doesn't just mean The Jockey Club. It means horsemen and tracks and industry and prominent individuals.

And finally, no spin. Recognize that we can't market or spin our way back to the public perception of eight months ago. That is gone forever.

The single defining element of successful crisis management is that when there's a well-defined problem, you have to be for something, be at the forefront of the solution. I can tell you, so I've got an unusual job, I work in crisis. And just think for a moment individually, whatever your job is, whatever your base of experience is, there are times when you're in meetings or whatever, where you know what needs to be done based on your experience, right? You have insights based on your experience. And I can tell you from — listen, I go in to companies all the time, and I am the voice of calm. I am everybody calm down. You're going to get through this, right? Maybe there's going to be some damage done, but you're going to get through this. By disposition and profession I'm the calm one in the room. I am the most anti-alarmist person you will ever meet in your life. With that being said, this story is not going away. We can't wait it out. We can't muddy the waters. This is the most critical time American horse racing has ever experienced. And without better unity and action this sport will be diminished or in places it will cease to exist.

If we do all of this. If we come together as an industry, negative perception can be turned. There is hope we can come through these dark days, but to do so the public needs to understand what we are doing and believe we are on a path to success. Thank you.


Stuart S. Janney III: Thank you very much, David. Those are very provocative remarks. They challenge us, and I hope we're up to the challenge.

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