Crisis Management

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



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. Also companies should consider Business Interruption Insurance against the loss of income after events (disasters) that temporarily interrupt business operations.
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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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  |  Interim Management

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