When scandal hits, move fast, be honest, hire pros

Some company scandals are like rolling thunder — they don't just end with profit losses, legal troubles and terminated staff. The shock waves can be felt for years, causing incalculable damage resulting from tarnished reputation and trust.

Fraud, such as identity theft or breached data, "could ruin the reputation of the dealership," staff and management, points out Zoriy Birenboym, founder of online car leasing platform eAutoLease.

Indeed, a survey released by Total Dealer Compliance in 2016 found that nearly 84 percent of consumers said they would not go back to buy another vehicle from a dealership if their data had been compromised there. The data was gathered from 200 dealerships in five states.

If a dealership needs to repair a damaged reputation, the first step is be truthful, Birenboym said. "Honesty with customers is the most important thing there is in this entire business," he said.

George Avetisov, CEO of the biometric security company HYPR, said admitting responsibility is an important part of equity recovery, and denying the lapse is a bad look. "The longer the company waits, the more fallout you can expect from the attack," he said. "It's better to deal with it immediately rather than hide it or sweep it under the rug."

Fraud mishaps can't be fixed with small moves that only skim the issue's surface, said Yuri Mishina, professor of organizational and behavioral strategy at the U.K.'s Imperial College London.

"You need to do things in a way where people credibly believe that your company has changed," he said. Key steps include changing organizational policies and protocols, bringing in outside experts, retraining employees and adding security safeguards. "If people feel like you just put a little Band-Aid on it, the scandal is going to continue," Mishina said.

A crucial measure in rehabbing a business after a complicit fraud fiasco is to remove people in top positions, replacing them with executives who have already built a strong reputation for themselves, Mishina said. "If someone is willing to stake their own reputation, that sends a signal that they believe the company can be fixed," he said.

For a corporate culture that is too problematic for a trusted manager to inherit, "you're going to have to do things that are much more major," he said.

The process of rebuilding a name is often slow. It takes a long-term strategy that requires commitment from all levels, Mishina said. That's especially true if a dealership's integrity is compromised.

"It's always going to take longer if it's about character as opposed to being incompetent," he said. "You can improve someone's skill, but it's difficult to make them honest and moral."

Installing firewalls and a secure management system are ways dealers can end a security breach and show customers it won't happen again.

Avetisov said individual dealerships could have a difficult time quickly combating a security attack on their own. He recommends that dealers contact an information security firm to assess and remediate damages before they escalate.

"You bring out the big guns, get the best consultants you can," Avetisov said. "But you don't just sit there and wait for it to blow over."