By Stephen Bowey, who has decades of commercial and communications experience in insurance, asset management and private equity, which he now puts to use as co-founder of a Sydney-based strategic communications advisor, B&VA.

The Royal Commission confirmed The First Law of Crisis Management: the crisis is always worse than it first seemed.

There’s a simple explanation for this: corporate leadership consistently applies selective honesty when dealing with crises.

This manifests in several ways: The most common is Distraction: tell the truth about a lesser evil to divert attention from a bigger misdeed. There is also Deluge: drown the truth in corporate platitudes. And then there’s Delay: cite investigations or a confidential legal process for not providing full and frank disclosure.

When CBA’s Matt Comyn said recently that “we expect to be judged on our actions, not words”, he missed the point entirely. Of course, we consumers judge a bank’s actions. But when they speak, we expect truthfulness. We do judge your words.

So why do companies keep opting for selective honesty, only to be damned when they are inevitably exposed? Typically, there’s no one reason. It’s usually motivated by a combination of factors, learned and innate.

The first is that people are rarely willing to admit error. We are trained and possibly hard-wired to be defensive.

Second, management and boards invariably prefer to take legal opinion over that from their communications experts. The law carries more weight and their personal risk is minimised. And lawyers always caution against a potential admission of liability.

Third, management and boards don’t sufficiently recognise and respect the role played by their communications people. Partly because too few communications people have operational business experience. But I believe the main reason is that good communications practitioners raise issues that make management uncomfortable.

So it’s rare that in-house communications teams can speak truth to power. Instead, they’re called in after the proverbial hits the fan and are then limited to Distraction, Delay or Deluge – putting lipstick on the pig. And when the full truth inevitably emerges, the damage is multiplied by the unsuccessful attempts to change the narrative.

For banks, supers and insurers, this is critical. They rely on customer trust yet, more than most industries, they’ve failed miserably to tell the whole truth about their activities. Post-Hayne, who trusts them?

The solution is straightforward. Boards and executives must understand that the risk of alienating customers and other key stakeholders is as critical as any other business risk. To help them incorporate reputation management into their risk matrices, they must give their communications experts a seat at the top table.

The financial services industry is ripe for disruption, and if Hayne hasn’t taught them a lesson, then it will be learned the hard way when customers choose more believable brands.