Crisis management, in contrast with Business Continuity, involves dealing – besides the Operational Risk Management – with a threat once it occurs. More explicitly, it consists of the processes by which an organization deals with a (major) event that threatens to harm the assets of an organization, its critical activities, its resources, image, reputation and stakeholders. It is a discipline within the broader context of management, consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start. Here are some recent and well publicized crisis incidents from the global business scene:
- Natural disaster (Tepco and the Japan earthquake & tsunami, 2011)
- Accidents (Cyprus Electricity Generation Plant, 2011)
- Technological crises (MacAfee, 2010)
- Confrontation (Greenpeace vs. Shell, 1995)
- Malevolence (Jérôme Kerviel and Société Générale, 2008)
- Crisis of skewed management value (Enron, 2002)
- Crisis of deception (Andersen, 2003)
- Crisis of management misconduct (DSK case & IMF, 2011)
We consider Crisis Management as an opportunity for protecting the value of a business and fortifying its response mechanisms towards the internal and external threats. During any type of crisis, pressure is not only a cause but also a consequence and management can perform better and protect the “shareholders & stakeholders value” if a “crisis as opportunity” mindset is adopted to lead the organization out of the crisis.
In general, management executives understand Crisis Management as a communications and public relations exercise and often assume a “reactive” strategy. Not only the firm’s reputation with shareholders, financial status and existence are threatened but potential damage to reputation can result from how crisis is managed! Crisis Management can assist a business to immediately address both the damage and implications for the firm’s present and future conditions, as well as opportunities for improvement.
The credibility and reputation of a business is heavily influenced by the perception of their responses during crisis situations. The organization and communication involved in responding to a crisis in a timely fashion makes for a challenge in businesses. There must be open and consistent communication throughout the hierarchy to contribute to a successful crisis communication process.
Crisis Management consists of:
We use the “4-elements” analysis to define a crisis: