Crisis Management
The process of managing and preparing for an unexpected and disruptive emergency that hurts a business, including its stakeholders such as employees, customers, and owners
What Is Crisis Management?
Crisis management (CM) refers to managing and preparing for an unexpected and disruptive emergency that hurts a business, including its stakeholders, such as employees, customers, and owners.
CM involves managing threats after an organization has experienced a crisis or emergency.
It is a complex and evolutionary process based on organizational culture and structure. Therefore, good corporate practice must be encouraged in CM. Adequate responses to crises are managed under CM, and they determine a firm's success or failure.
A crisis can be managed before, during, and after. CM is a constant and rapidly changing process and is crucial for strategic organizational success.
Being a vital aspect of public relations, CM entails identifying organizational threats and taking suitable actions to respond effectively.
An important example is COVID-19, a global pandemic that altered how businesses responded to external environmental factors. As a result, many organizations were forced to shut down. Job cuts occurred, and operational functions were breached.
A crisis is normally a highly ambiguous situation where causes and effects are unknown in a given situation. Nevertheless, it is a common external factor that managers must consider when assessing the organization's business environment impacted by globalization.
A crisis also has a low probability of occurring but poses a major threat to the survival of an organization. Unfortunately, organizational stakeholders are usually provided little time to respond.
A crisis also presents a dilemma needing a decision or judgment that will result in change for better or worse.
A well-known example of a crisis was the breakdown of the BP oil transport system, leading to a massive oil spill that negatively impacted BP:
- Reputation
- Credibility
- Relationship with Customers
- Suppliers
- Investors
Early-stage CM focuses on an organization's actions to potentially capture and evaluate the threatening signs of a crisis.
Managers must use proactive management tactics to reduce the harmful impacts of a crisis on an organization and prevent future crises by protecting the organization's best interests.
Shared knowledge of a crisis leads to organizational learning, which can promote innovation to facilitate the detection of external threats and potential warnings.
An important CM practice is knowing the clear definition of organizational goals and objectives. In addition, the procedures of CM should be aligned with the company's overall strategy that can be implemented in every crisis that arises.
Crisis management strategies entail stakeholder cooperation, complete environmental analysis, and seeking the organization's best interests. Shared efforts result in crisis scenario creation and plans.
Proactive management aims to avoid a crisis and minimize its repercussions. The key to proactive crisis management is optimizing a range of tools, approaches, and methods to prevent or eliminate a crisis and maintain organizational stability.
A full-on crisis is often caused by the lack of preparation by managers who are inexperienced in handling a crisis. Prior experience, training, education, and knowledge help improve preparedness for organizational crises.
It is crucial that managers support each layer of the organization during a crisis response. The quick response speed to a particular situation is an important aspect of managing a crisis effectively.
Issues in Crisis Management
The most critical issue in a CM plan is the philosophy of crisis handling. It is important to assess the top priorities during a crisis before making decisions accordingly.
Priorities include but are not limited to preventing serious injuries, saving lives, mitigating environmental damage, protecting the organization's image and reputation, and business continuity.
Potential crises include natural disasters such as earthquakes, tsunamis, volcano eruptions, hurricanes, floods, droughts, and blizzards.
In addition, there could be technical issues, including power outages, technology breaches, privacy invasions, and cybersecurity attacks. Moreover, there could be human-caused events like explosions, fires, building collapses, and spills.
Communication is important for dealing with a crisis. Amid a crisis, employees seek management's guidance and leadership. A lack of communication may cause a hazard to safety.
A firm should appoint a team for crisis communication. The communication exchanged during a crisis must be concise, truthful, and clear.
Organizations should also develop templates fitting to possible scenarios, create the right communication channels, and continuously add important information as a crisis unfolds.
The main CM strategies are proactive, responsive, and recovery.
The proactive strategy is the most common and effective strategy used. This strategy requires planning for a potential crisis in advance to prevent or mitigate its effects on a company's operations.
It involves identifying potential threats, monitoring them, and creating plans to reduce their impact on an organization.
For example, setting aside an emergency fund or having spare plants for manufacturing in case one of the factories suddenly stops working constitutes proactive crisis management.
Responsive CM is a strategy that helps address crises to limit their impact on a company's operations. For example, entering a partnership with a new distributor after losing one's most important logistics provider is an example of responsive crisis management.
Recovery crisis management helps stabilize a company's operations after a sudden disruption it did not predict. For example, a company can negotiate new raises with an employee union after a month of strikes to recover from that crisis.
Stages In Crisis Management
The first stage of CM is the pre-crisis stage. It involves prevention and preparation to reduce the impact and the risks associated with the crisis. Prevention in this phase includes identifying known risks that can result in a crisis.
After pinpointing potential risks, preparation should include creating a crisis management plan and identifying and selecting the CM team for training. By planning and preparing for a crisis, faster decision-making occurs.
During this stage, the CM plan should be created and updated annually. In addition, a designated CM team should be properly trained. Finally, both the plan and the team should be tested annually.
The second stage is known as the response stage. It entails dealing with the actual threat and crisis.
The crisis response stage is what the management does after a crisis. Again, this highlights the importance of public relations in developing messages sent to different audiences.
A quick response must be finalized within the first hour; it should be accurate and consistent, using all factual data, while the public's safety is the priority. All communication channels of the organization should be used.
For instance, concern for victims should be expressed in a quick response to an office fire. The initial response should include all employees; counseling must be given to crisis victims and their families.
As soon as any news regarding the crisis is known, it must be delivered to stakeholders along with the progression of the recovery measures.
The final stage is the post-crisis stage. It includes reflecting and retrospecting the event and evaluating what happened so that the damage and consequences of the event are not repeated.
During this post-crisis phase, the firm returns to business as normal. Although the crisis is no longer management's main focus of attention, it requires a certain level of care and regard. Reputation improvement is often made during this stage.
Follow-up communication is also required. Crisis managers must deliver updated information during a crisis; otherwise, they will lose public trust.
A crisis is a learning experience for managers, and dealing with it is an effort toward finding out what works or needs improvement. Therefore, to prevent crises, a company must focus on improving preparation, strengthening prevention, and speeding up the response time.
All stages follow a continuous chain of events in the CM process. A crisis, if managed properly, can allow an organization to overcome its challenges and become stronger.
Crisis Management Teams
As no company is immune to a crisis, preparation for tackling a crisis is necessary for business continuity and survival. There are various success factors involved in building a CM team.
Characteristics of a successful CM team should include strong leadership, fast decision-making, proactive actions, effective mitigation planning, and clear communication with stakeholders.
Moreover, there should be clear roles for individual team members, well-trained individuals, strong relationships with stakeholders, and fast media communication.
The creation of a CM team should be undertaken before a crisis occurs. This helps the CM team familiarize themselves with the team's dynamics and the company's different aspects during the risk mitigation process.
The team should consist of a team leader, a security director, a finance director, legal counsel, a media spokesperson, an HR director, and a security specialist.
Amid a crisis, a leader's key role is to maintain the organization's credibility and trust between company stakeholders.
A CM leader's goal is to navigate through the crisis and facilitate productivity for the firm.
A successful organizational CM plan implements emergency response, risk management, disaster recovery, and business continuity programs. A company must handle the worst-case scenario. Strong teamwork is also an important factor.
For example, disaster recovery is the process of restoring data and systems in the event of a disaster. SQL disaster recovery involves creating a plan to ensure that the data in the database can be recovered in the event of a disaster, such as a hardware failure, data corruption, or a natural disaster.
A high-performing CM team minimizes a crisis's negative impact and speeds up recovery time.
The team should be formed using personnel from every department in a company. A cross-functional team can deal with a complicated crisis scenario more effectively and accurately evaluate crisis response impact.
In addition, adopting positivity will improve the team's ability to operate in a stressful environment and under fatigue conditions.
Effective CM teams are necessary for the crisis management process. Even the best crisis management plans are insignificant without an effective team.
Furthermore, the CM team should thoroughly know various organizational aspects.
Lastly, the team members should be given a chance to join instead of being assigned. They must possess work experience, willingness to work on a team, management skills, and commitment and motivation to the CM process in the long term.
Conclusion
No company can avoid a crisis. The dynamic environment in which companies function increases the chances of a corporate crisis. Firms constantly find a more comprehensive CM process to maintain a certain risk level.
Using a CM team is an effective risk mitigation and prevention process that decreases a company's chances of a crisis.
Companies with a CM plan and team before a sudden event will respond in an organized and effective manner that accelerates the recovery process. This will enhance the stakeholder's perception of the event as well as their perception of the company itself.
A proactive CM is a key element to an organization's stability. When the best practices are implemented in Crisis Management, the outcomes are positive and can lead to success; however, it is a team effort.
Researched and Authored by Haniya
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