Crisis Management (CM)

Crisis Management

A crisis is defined by the dictionary as a 'critical moment or turning point.' A business book, on the other hand, might define a crisis as a substantial, unforeseen circumstance that can potentially jeopardize a company's employees, customers, products, services, fiscal situation, or reputation. Both definitions contain an element of urgency that requires immediate decisions and actions from people involved.

Crisis Management is the process of preparing for and responding to an unpredictable negative event to prevent it from escalating into an even bigger problem, or worse, exploding into a full-blown, widespread, life-threatening disaster. Crisis management involves the execution of well-coordinated actions to control the damage and preserve or restore public confidence in the system under crisis.

In the context of corporate governance, excellent crisis management is a 'must' whenever a crisis occurs because of the crisis' enormous potential impact on the company's reputation and financial standing. Poor handling of a crisis situation can ruin the confidence of the customers or the public in a company and jeopardize its survival, a situation that normally takes a long time to correct, if it still is reparable at all. Such is the importance of public perception of a company's handling of a crisis situation that media coverage management has become an important ingredient of crisis management.

In fact, the definition given by the American Institute for Crisis Management (ICM) for the word 'crisis' underscores the association of a crisis with media coverage by default. ICM defines 'crisis' as "a significant business disruption which stimulates extensive news media coverage. The resulting public scrutiny will affect the organization's normal operations and also could have a political, legal, financial, and governmental impact on its business."

Crisis management doesn't start only when a crisis arises and ends when 'the last fire has been put out'. Crisis management requires actions before a crisis happens, while the crisis is unfolding, and after the crisis has ended. In fact, crisis management is divided into these three stages: 1) pre-incident stage, which involves identification of potential crisis situations and developing contingency plans for responding to each of them; 2) incident stage, which involves management of an ongoing actual crisis situation itself; and 3) post-incident stage, which includes corrective and preventive actions to preclude the recurrence of the same crisis situation and business recovery actions to restore public confidence in the brand or the company.

There are many different ideas or theories on how to best manage a crisis situation. These differing ideas, nonetheless, have some common elements: 1) the need to anticipate potential crisis situations and prepare for them; 2) the need to provide accurate information during a crisis; 3) the need to react as quickly as possible to the situation; 4) the need for a response that comes from the top; and 5) the need for long-term solutions.

Anticipating potential crisis situations that a company may encounter and formulating and documenting contingency action plans for them are a basic requirement of any crisis management program. These plans should also be well-rehearsed by all employees, so the conduct of regular drills is also needed. Any company must be prepared to deal with fires, bomb threats, personnel violence, and natural disasters such as earthquakes and tornadoes. In the semiconductor industry, the discovery of a life-threatening device reliability issue, process gas leaks, hazardous chemical spills, and even the sudden loss of a major supplier are examples of crisis situations.

One of the hardest things to contend with during a crisis is the craving of customers or the public for a constant supply of information. Accurate information pertaining to a crisis are often not readily available at once, and are too bitter to announce to the public once they become available. If the crisis does not concern the public, then a company may get away with staying quiet about it.

Otherwise, the press will usually be all over the place within hours. In such a case, there is no choice - most experts agree that it is better to provide accurate information, no matter how painful they sound, than to manipulate the situation by giving false information to the public, which often backfires with tremendous repercussions. Thus, a company that has developed a culture of internal secrecy and manipulation is of great disadvantage in this respect, because they would find it difficult to provide honest information and subsequently resort to the thing they usually do: hide the truth. PR work for high-profile crises is something that any management team must be well-trained for.

Being indecisive, playing time, or inability to get accurate information quickly can be disastrous during a crisis. Management must act swiftly and decisively to contain the problem, assess affected goods, ensure business continuity, allay public fears, and preserve company reputation even while the crisis is still unfolding. Since a crisis by definition is unpredictable, a company needs to have a system for assembling a crisis management team that knows what to do within an hour after a crisis occurs, 24 hours day, all year long.

The visibility of top management people during a crisis is highly recommended by experts because it assures the public that the problem is getting due corporate attention. Management must also actively pursue long-term corrective and preventive actions to avoid being in the same crisis situation again.

A comprehensive crisis management program includes the following components: 1) an emergency response, which consists of all activities pertaining to safe management of immediate physical, health, and environmental effects of the crisis; 2) business continuity, or the company's ability to continue delivering goods and services despite the crisis; 3) crisis communications, which pertains to the internal and external PR management activities during a crisis; 4) humanitarian assistance, or the company's efforts to alleviate the physical, emotional, and psychological effects of the crisis on other people; and 5) drills and exercises that allow personnel to rehearse what they need to do in a crisis situation.

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