Crisis Management

Giving the right response in case of a significant business disruption. Explanation of Crisis Management.



  

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Obviously, any corporation hopes not to face "situations causing a significant business disruption which stimulates extensive media coverage" (crisis). The public scrutiny that is a result from this media coverage often affects the normal operations of the company and can have a (negative) financial, political, legal and governmental impact. Substantial value destruction is to be feared of, especially when the crisis is not handled well in the perception of the media / public opinion. Crisis management deals with giving the right crisis response (precautionary, structural and ad-hoc).

 

Some generic help and hints on crisis management

  1. Prepare contingency plans in advance (crisis management team and members can be formed at very short notice, rehearsing of crises of various kinds)

  2. Immediately and clearly announce internally that the only persons to speak about the crisis to the outside world are the crisis team members)

  3. Move quickly (the first hours after the crisis first breaks are extremely important, because the media often build upon the information in the first hours)

  4. Use crisis management consultants (advice by objectivity of PR consultants is important, use the corporate image expertise of specialists)

  5. Give accurate and correct information (remember that trying to manipulate information will seriously backfire if it is discovered, also internally!)

  6. When deciding upon actions, consider not only the short-term losses, but focus also on the long term effects.

Executives at all levels of the organization are employed to manage crises and often do so on a daily basis. Their skills are really tested when they have to manage significant crises that have the potential to disrupt the organization's value creation process, income sources, operating expenses, stock price, competitive position and ongoing business. Compare: Charismatic Leadership.
The most effective crisis management occurs when potential crises are detected and dealt with quickly - before they can impact the organization's business. In those instances they never come to the attention of the organization's key stakeholders or the general public via the news media.

 

Creating a Business Continuity Plan

In instances where the crisis already has erupted, or it is inevitable the crisis will impact the organization's key stakeholders, a business continuity plan is helpful to minimize the disruption and damage. Developing such a plan can seem like a daunting task, but in actuality it is a common-sense document. It involves identifying those functions and processes that are critical to the business, then designing the operational and communications contingency plans to deal with the potential failure of one or more of them and how key stakeholders will react when they find out. An important element that is sometimes overlooked is to test the Business Continuity Plan.
Corporations with business continuity plans will be in a better position to minimize the business impact and financial damage. On top of that, executives may find that the process of developing these plans also has an indirect benefit. Their organizations are more sensitive to possible crisis situations that could disrupt the business and affect its operating expenses, profits and overall growth. As a result their managers respond more rapidly and effectively to head them off.

 

Book: Laurence Barton - Crisis in Organizations II -

Book: Steven Fink - Crisis Management: Planning for the Inevitable -

 

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Recent User Comments
 - Nigeria Accurate and Correct Information "This must be strictly adhered to by managements and staff of organisations in order to know how to solve the organisation's crisis."    0
 - Bahrain Developing an Emergency Plan "To avoid loss of lives during an accident, it is good practice to exercise the emergency response plan. My question is how to develop an exercise plan? (brake down events list for the exercise)"    -1
JOMON JOY - India Economic Crisis "What precisely is the definition of an Economic crisis?"    6
 - USA Understanding Scenarios and Consequences "A failure in most planning is that it's analytical versus strategic in nature. In systems thinking, an important attribute is to understand consequences. Managing consequences is more than just mitigating risks -- which is analytical. Consequences are neutral -- its how you handle them. Understanding scenarios, consequences, are strategic precursors to contingency planning."    1
basant saurabh - India Strategy for Product Quality Crisis "What are the possible strategies one should take to overcome a crisis regarding the quality of your products (especially in the food sector)?"    0
Best User Comments
Martin Caldwell - US Types of Crises "In a recent paper, Erika Hayes James and Lynn Perry Wooten distinguish between 1. SUDDEN CRISES (Natural disasters, Terrorist attack, Plan explosion, Workplace violence, Product tampering, Sabotage, Hostile Takeover, Excutive kidnapping, Environmental spill, Technology dusruption) and 2. SMOLDERING CRISES (Product defects, Rumors/scandals, workplace safety, Bribery, Sexual harassment, Consumer activism, Mismanagement, Whistle blowing, Class action lawsuits and Labor disputes)."    25
Phil - USA Win the race to disclosure "In a short article about crisis management in the media William Essex also stresses how important it is to win the race to disclosure. And he also gives some rules: 1. Be first to issue information on the crisis. 2. Regularly, frequently, issue updated information on the crisis and on the status of the company’s crisis-management operation. 3. All available information should be disclosed; the presumption should be in favour of disclosure. 4. Ignorance should be disclosed. “As yet we have no information on … ” is an acceptable formulation in this context, subject to later provision of the lacking information. 5. Accuracy is an absolute priority, even though comprehensiveness is not."    24
Dr Harish Pareek - India Finance "Elaboration is much more required on Crisis Management since this is new arena in the field of finance and the literatures are not easily available. How do strategic management, risk management and crisis management differs from each other. The above mentioned comments are highly appreciated."    19
Aditi - India Statistics on Business Continuity "Here are some facts that show the importance of Crisis Management / Business Continuity Planning: There were 930 companies operating from the World Trade Centre towers when the September 11 attacks took place. 18 months later, 550 of them had gone out of Business. Post the WTC attacks, they were not able to deliver on their commitments to their stakeholders. In fact, approximately 40% of all businesses that experience a disaster never re–open; and almost 30% of those that do re-open end up closing within 2 years. 43% of companies that have suffered a significant disaster typically take about 2 months or longer to recover fully from the event."    13
Rachmah Amanda - Indonesia How to deal with the Media in a Crisis? "Sometimes, it's hard for the company to deal with the media. If the case is 100 % black propaganda (such as libels or slanders) from others, is not too hard to gather all the fact for the press. But, if the cause arose within our own company, it's really hard to build the company image again through the media. So how can we deal with the media when the crisis is coming from inside our company?"    11
Sarat C. Gupta - India Execution in Crisis Management "It is not only to forecast/ plan for the contigencies but also the execution in case of actual crisis. There have been several instances in my career of around 17 years now that this concept has been implemented."    8
Joanna - USA Why nobody prepared for the current crisis? "The article above explains that it's important to prepare contingency plans in advance, before an actual crisis occurs.
Isn't it remarkable that neither governments, nor financial regulators, nor financial instituations seem to have created any contingency plan for the current global crisis?
Surely they all should have seen it coming...""		    6
Dana Todd - USA Paid Placement for Company Statements and Stories "Part of making sure the world hears your side of the story is placing it in the online news media. Newsforce Network places "storytelling media" in ad space across hundreds of premium newspaper and news sites online, so you can control the message and tell your side of the story unabated. Yes, it's advertising, but our studies show that the source of information is less important to readers than the relevance of the information to their lives, and the immediacy/freshness of the announcement. We recently posted a blog entry about our opinions and observations: blog.onlinemarketingconnect.com/author/vince/"    0
Clark Cebrian - Philippines Preparing Execution of Contingency Plan "Contingency Planning is very important. Before actually executing the contingency plan, certain critical actions have to be taken such as:
1. Quickly gather, analyze and interpret factual data and information that led to the crisis.
2. Identify a symbolic head that will serve as the point person for the crisis.
3. Finetune or modify the plan based on the above.
4. Determine the threshold time, meaning the time to do something or execute, beyond which could probably lead to failure. Executing earlier may deprive you of vital information and other activities needed.
Now the plan can be implemented or executed based on the above."		    -1
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Compare with crisis management: Strategic Risk Management  |  Root Cause Analysis  |  Force Field Analysis  |  Brainstorming  |  Theory of Constraints  |  Scenario Planning  |  Game Theory  |  Real Options  |  Stakeholder Analysis  |  Stakeholder Mapping

 

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Copyright 2009 12manage - The Executive Fast Track. V10.4 - Last updated: 11/21/2009. All names tm by their owners.






  ● Editor (NL) Paper by James and Wooten "I added their paper in the Resources section."



  ● Duane (USA) WTC attack stats "What is the source of these crisis statistics?"

  ● Maarten (Holland) How to deal with Media in a Crisis. "Be honest to the media like you are always honest. Transparency in good governance is a forgotten thing, but is the only guarantee on survival. Journalists in particular will be surprised if there is an important player on the market being honest."
  ● Philemon Maboe (RSA) Crisis Management "Be proactive and accept that there is a crisis. To ensure yor survival, never try to challenge the media. Address your internal staff about the crisis. Involve them when developing contingency plan. Appoint a communication manager to address the media as the need arises."
  ● Dan Corbett (Canada) Proactive Crisis Management "An effective crisis management process will have a clear plan for dealing with the media and for ensuring that company spokespersons have appropriate training. Here in Canada we have had two recent serious events that demonstrate the value of having a clear proactive communications process. The first is a case study of how NOT to deal with a crisis- an explosion in Toronto at a propane storage facility. One employee was killed, thousands evacuated from their homes with serious damage to houses in the area. The second situation is a case study on how BEST to handle a very bad crisis. This event was in food safety, where a bacteria outbreak of listeria was found to be the cause of 20 deaths, mostly in seniors, from contaminated meat that was used in long term care facilities. Both events were tragic, caused much personal grief and will have a lot of lawyers busy on lawsuits. How the two companies handled the crisis is a case study in the value of having a proactive crisis management plan. "


  ● Johannes (The Netherlands) No crisis preparation "Nobody had prepared for this crisis because nobody new what the CEO's have been doing. They where swimming naked until the tide went low that is when the secrets were disclosed. *BBC"
  ● Leon Breedt (South Africa) Preparation in Crisis Management "Well people don't prepare for crises because they don't take it serious, and they have the attitude that it won't happen to them. It can not be expressed enough on how important it is to be prepared for any Crisis at all."
  ● William (China) It's human nature "Environment pollution; overpopulation; shortage of resources like water; food shortage.... we have been warned thousands of times but it is just human nature not to care or take action. It is just the way we were designed."
  ● Tran Hoan (Vietnam) How do you make a jobless more happy? "If you ask me "why nobody prepared for the current crisis?", i am just thinking about happy feeling inside of him. It's not an advantage."
  ● Limo Sammy (Kenya) The greatest crisis "How comes that whenever people are told the truth they shy from it. The Bible clearly states that all these things we call crisis will happen, yet we still don't believe even before our own eyes. the remedy is to repent and go back to God."
  ● Adeosun Leke (Nigeria) World Crisis "The USA that call themselves the world giant have no good head. Bush, he has no time for the prosperity of the world but instead war, destruction of property and all the rest."
  ● J. Wiley (USA) Retraction "How quickly people persecute! I represent a country who is fighting the war on terror. We support freedom in the world. We fight for those that are raped, tortured, stolen from, and are illfully represented. Pray for peace around our globe, as many Americans have represented countless good deeds in this world and are deserving of support."
  ● Dr. Uditha Liyanage (Sri Lanka) Crisis is Black Swan "The assumption that is made about the ability to predict the nature of the crisis with high/low probability may well be flawed. The crisis to be, may be a veritable "black swan", and the prescribed steps of crisis management may be of little use."
  ● Madhav Bhetuwal (Nepal) Man can't think seriously about crisis "The current challenge of the world is crisis management. Nobody is shown inactive. Lack of strong plan and lake of implementation smooth process is the reason of the crisis. Man can't think seriously about crisis is the major reason. Economically fluction between poor and rich is also a reason of crisis.For managing the crisis equal distribution of economic and non economic wealth I think is most powerful."
  ● Prof. Thomas Keel, MBA (USA) Crisis in the economy "When governments meddle in the free market, crisis occurs. The more governments impose corrections, the worse the crisis becomes."
  ● Ahmed Mehdi (Pakistan) Crunch Solution "It's a game played from huge transaction mark-ups of banks which has an impact generally on trading and on common people of rich countries, only solution to bear the cost of mark-up bank themselves rather imposing generally and they should seek financial support from institutions like the World Bank, IMF and the European Union as well."
  ● Wael Monakel (Syria) You can't prepare for this crisis "Such in Finance, there is something called BTL and ATL. If any executive in the institution can see the crisis coming, then it will become an issue, and with the ABC of the Business they will solve the issue and avoid any disorder. The crisis are another scenario, it's something you can't see or prepare yourself for it, it's something that can happen and you have to deal with it as is. Good management is to come out from the crisis with minimum loss."
  ● Connie Sue (USA) Remain grounded in our Faith "The challenge is to be aware of the crisis yet remain grounded. Listening to the unemployment rates, continued job layoffs, and bank failings causes the heart to fear. We must remain grounded in our Faith. This is also a time to reassess our priorities. We have to go back to the basics. Family, love, togetherness and being our brother's keeper."
  ● Khumbo Shaba (Malawi) Crisis management is like insurance "We all need to plan for something like a financial crisis. However, too much of risk management limits the creativity and innovation potential of individuals. Creating good products such as financial instruments requires some degree of creativity. However, it is important to have strict regulation in place."
  ● Fonchi Denis (Cameroon) No world without crisis "In as much as man continues to live in this world, there will always be crisis. Some will be natural and others man-made. It is impossible for man to predict when crisis will occur. The important issue is for man to master how to manage crisis once they occur. Good crisis management is the one whose after effects on nature is friendly i.e does not cause harm."
  ● Christopher Bean (United Kingdom) Crisis Management "It is too easy to say that no one was prepared - some were very much prepared as early as Jan 2006 when the flows within the global markets clearly indicated that the viability of the system had changed and its validity was no longer sustainable. Just because auditors and credit agencies continued the nugatory sophistry of verification against international accounting standards should not be an excuse for strategists and managers to have continued mechanistic thinking; when the reality was in reality there for everyone who has even the a basic understanding regarding the nature of complexity to observe and prepare."
  ● Dave Saunders (New Zealand) What we have to do now is Recover "Instead of worrying about the gloom and spiral downwards, stop being negative and start being positive. People did what they could to prepare, where it was possible for what they knew. What we have to do now is recover, stop listening to the gloomy press and start to grow our internal business structures again."
  ● Gordon (USA) The Dumbbell Strategy "As I have learned recently with the real estate retirement plan, "I am in control until I am not". We can organize, prepare, beforehand, and mitigate after, maybe. The most sensible strategy I have found but until this lesson only partially implemented, is the dumbbell strategy, one side you place all valued elements into security that is "guaranteed' e.g. cash into Govt bonds, and the other side place the elements you want to risk at play and go 100 miles and hour, to maximize return. The reason we don't prepare to the nth degree, is that we are always learning, developing, risking. Also to be that risk averse implies a huge burden in redundancy, that people and businesses are not prepared to carry, as it is not cost competitive to do so, in the short and intermediate term. I like risk, now I pay. Unfortunately I now have to rebuild from scratch, well not from zero exactly as i now have a more balanced strategy and have experienced the consequences. The best we can do is pass the education on."
  ● Randi Erentzen (South Africa) Poisened Challice? "This is not a "reaction". Semantics or not, mine is a "responsive engagement".
There is a view that I share which says that: "crisis/crises", is "created" by the "quantum" and/or the "butterfly effect". This particular crisis 'may' have been designed to hand President Barack H Obama "a poisened challice".
In SA 1994, we were handed over a "very poisened econimic challice". We were set up to fail. We did not "sip from the cup". That is Minister Trevor Manual can speak with an African confidence that no-one else.
I am obviously not an economist. Herein lies my view: Does the world we live in belong to the Doomsday Prophets? I think not."
  ● Tonya (United States) Wake up America "If you are in any religion it speaks about this happening. This is nothing people did, nor have knowledge of, this is what people have taken for granted. I think that people can do more postive things by taking the time out to do postive things by becoming creative."
  ● Jackie (Canada) Move On "Don't ask why just do and move on! If you allow your thoughts to only focus on the smaller things then you will never see the bigger picture."
  ● Ramesh Bandhoa (Maurituis) Crisis is Man Made "We human beings are responsible for the crisis. Management consists of humanbeings who looks for himself. "Beating the bush to gain self interest"" is the present moto.Even at our home we don't care to contribute for improving theis problem. The only solution is found within every idividual and nowhere on any platform outside, who will contribute for every drop to sliminate the crisis collectively and individually. "