The Four Pillars of Halal Crisis Management

Negative  publicity  about  a  halal  incident  becomes  a  threat  to  both  sales  and  corporate reputation. In a highly connected world, a halal issue can easily snowball into a halal crisis. Companies should expect a halal crisis every 10 years, which could result in lost sales in the range of USD 10-50 million for multinational companies, USD 5-10 million for large companies, and up to USD 5 million for SMEs. Moreover, corporate reputation accounts for approximately 20 per cent of the market cap of a company; in terms of corporate reputation damages, therefore, the lost value associated with a halal crisis could easily be triple that of lost sales. So, how best to protect and optimise your halal reputation asset?

A Halal Crisis

With a halal issue in Muslim markets, a whirlpool easily becomes a maelstrom, with a vortex dragging companies under. The lifebuoy thrown by corporate communication often has no lifeline attached due to the many gaps in the halal crisis manual and in halal risk management. The trigger of a halal crisis, a halal issue, can be contamination, non-compliance, or a perception issue. In the case of contamination, consumers could be ‘poisoned’ with haram  ingredients  and wonder if they can trust the brand again. A non-compliance issue puts the halal status of a product in doubt, something Muslims should, according to their religion, avoid. With perception issues there is a possible mismatch between perceived brand image and the Islamic way of life. All three of these halal issue classifications have the potential to snowball into a global halal crisis, where corporate halal reputations come under attack. This situation demands quick action and communication from the brand owner in  order  to  reduce  damage  to  sales  and  reputation.  These  three  halal  issue  classifications require specific responses to prevent an issue progressing into a crisis.  As  time  is  of  the  essence,  it  is  important  to  prepare  responses  to  these  three issues in advance, as part of halal issues and crises manuals. This allows for better decisions and responses during halal incidents, saving companies a lot of money.

Best Practice Halal Crisis Management

Best practice halal crisis management is founded on four pillars: process, control, organisation, and information.

Process:

• Halal reputation by  design,  creating  excellence  in  halal  authenticity,  choice of halal certification body, messaging by companies, supply chain partners, and external stakeholders;
• Combination of individual  and  collective  halal  reputation  management  strategies.

Control:

• Halal assurance system documentation;
• Prevention: risk assessment, supply chain (re)design, vertical and horizontal collaboration, and monitoring halal risk and reputation performance;
• Mitigation: solid risk mitigation and communication plan;
• Recovery: solid risk recovery and communication plan.

Organisation (of halal responsibilities):

• Top Management: halal policy and objectives;
• Board Risk Committee/Risk Management: halal certification decision and halal risk reporting;
• Marketing: showing (or not) the halal logo on product packaging and halal branding, and marketing decisions;
• Halal Committee: halal assurance system implementation and management.

Information:

• A halal supply  chain  management  system  or  conventional  supply  chain  system with a halal management module;
• Halal reputation measurement (reputation index);
• Halal risk report for management and Board Risk Committee.

Conclusion

One cannot be involved in the halal industry without a proper halal risk and reputation  management  system  to  protect  both  corporate  halal  reputation  and  licence  to  operate.  A  halal  crisis  can  be  an  opportunity  to  strengthen  corporate  trust, Islamic values, and networks. However, this is only possible with the right action  and  communication  in  the  face  of  an  issue  or  crisis.

Best  practice  halal  crisis management is founded on four pillars: process, control, organisation, and information. These require solid preparation and practice. Islamic  countries  should  promote  advanced  halal eco-systems  to  better protect companies in the halal industry. This is particularly critical for companies in the food business using animal-based products, and for brands in non-Muslim countries.

Halal ecosystems can take the form of advanced halal clusters, parks or zones where halal industries are located and collaborate within their own supply chain in order to obtain halal synergies. Company supply chains operating from halal eco-systems are more robust by design as they are better organised.

Companies that are halal certified, or are going for halal certification, should be educated about halal risk and reputation management. It is good to realise that companies that are halal certified are also exposed to halal incidents and crises. This aspect should be covered in halal standards training courses.

For the full academic article, visit the Journal of Islam and Civilisational Renewal