People often confuse crisis management and contingency planning, using the terms interchangeably. Crisis management (or disaster recovery) occurs during and after an event (such as the outbreak of a fire). Crisis management asks ‘What now?’ questions. Contingency planning happens before (planning a fire drill). Contingency planning asks ‘What if?’ questions, such as what the firm should do if exchange rates or interest rates rise.
What is crisis management?
Crisis management, or disaster recovery, refers to the response of a business organization to a crisis situation.
It is about being reactive to events, that can cause serious harm to the business or affect it in a negative manner, by taking actions to maintain its credibility and good reputation.
Otherwise, sales of products might be greatly reduced threatening the market position of the firm.
Example 1: There have been several serious crises in the first decade of the 21st century including the attacks of September 11, 2000 in the USA, the SARS outbreak in Hong Kong, a tsunami in Southeast Asia, world oil prices reaching historical highs as well as global pandemics of avian flu, swine flu and COVID-19.
How to manage crisis?
Crisis management is reactive rather than proactive.
Crisis management typically involves formulating the best response to a crisis under difficult circumstances, radical administrative measures, using centralized decision making, autocratic leadership style, etc.
When the business finds itself faced with an emergency, then crisis management is required to minimize the impact on the business.
It is important to note that crisis management is a complex process, and there is no one-size-fits-all approach.
Steps in crisis management
Here are the first few steps to start with:
STAGE 1: Crisis preparedness and planning. This includes developing a crisis management plan, identifying potential risks, and conducting training exercises.
STAGE 2: Crisis communication.This involves communicating effectively with stakeholders during a crisis, such as employees, customers, and the media.
STAGE 3: Crisis response. This refers to the actions taken to mitigate the impact of a crisis, such as evacuating buildings, containing a data breach, or responding to a product recall.
SRAGE 4: Crisis recovery. This is the process of returning to normal operations after a crisis. It includes repairing damage, restoring lost data, and rebuilding trust with stakeholders.
Effective crisis management requires the crisis management team to deal with crises in a swift and decisive manner before it escalates into a serious problem for the entire business.
What can managers and workers do during business crisis?
By working together, managers and employees can help their organization to weather a crisis and emerge stronger on the other side.
A. What can managers do during crisis? Here are some of the things that managers can do during a crisis:
- Take charge and assess the situation: Managers need to quickly gather information about the crisis and assess the potential impact on the business. This will help them to develop a plan to respond to the crisis.
- Communicate with employees and stakeholders: It is important to keep employees and stakeholders informed about the crisis and what is being done to address it. This will help to minimize confusion and panic.
- Make decisions quickly and decisively: In a crisis, there is no time for second-guessing. Managers need to be able to make decisions quickly and decisively, even if they are not perfect.
- Delegate tasks and empower others: Managers cannot do everything themselves. They need to delegate tasks to others and empower them to take action.
- Be flexible and adaptable: Crises are often unpredictable and can change rapidly. Managers need to be flexible and adaptable in their response.
B. What can employees do during crisis? Here are some of the things that employees can do during a crisis:
- Follow the instructions of their managers: Managers are responsible for developing a plan to respond to the crisis. It is important for employees to follow the instructions of their managers so that everyone is working together to address the crisis.
- Stay calm and positive: It is important to stay calm and positive during a crisis. This will help to create a more stable and productive work environment.
- Be flexible and adaptable: As mentioned above, crises can be unpredictable and can change rapidly. Employees need to be flexible and adaptable in their work during a crisis.
- Communicate any concerns to their managers: If employees have any concerns about the crisis, they should communicate them to their managers. This will help managers to address the concerns and develop a more effective response plan.
Unfortunately, most businesses find it difficult, expensive or unnecessary to plan for such unpredictable and unquantifiable risks that can have huge impacts on their business operations.
In short, successful business should be able to respond to significant disruptions to their business by implementing a contingency plan to restore its business operations. Crisis management is not contingency planning though.
