written by | November 8, 2022

Crisis Management - Concept, Importance and Related Aspects

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Table of Content


An organisation crisis is a sudden, unanticipated event that causes significant employee dissent. In other words, an unexpected crisis disrupts the workforce and causes instability inside the firm. An individual, a group, an organization, or the entire society can be impacted by a crisis. Due to the unpredictable nature of world events, many contemporary organizations try to forecast possible crises and develop plans to address them.

For example, when the Covid-19 pandemic broke out, many companies incurred huge losses due to this unforeseen event. As the world went into lockdown all conventional methods of communication, revenue, advertising and inventory management started to crumble and as a part of systematic crisis management, companies had to come up with innovative solutions for their problems.

Did You Know? An internal or external event may bring on a company crisis. Due to the seriousness of a company crisis, it's crucial to develop a plan to manage one of these occurrences if it arises.

What is Crisis Management?

Crisis management is known as planning for and handling any disruptive or unanticipated emergency events that impact your company's stakeholders, customers, staff and revenue.It is the tactful use of techniques intended to assist an organisation in coping with a sudden and severe event.

The goal of crisis management is to lessen the harm that a crisis can do. This does not imply that crisis response and management are interchangeable, though. Instead, crisis management is a thorough procedure that is implemented in advance of a crisis . Practices for crisis management are used before, during, and after a crisis.

The management of the 1982 Tylenol cyanide poisoning issue in the Chicago area by Johnson & Johnson is widely regarded as the beginning of the field of crisis management. All Tylenol capsules in the nation were immediately recalled by the firm, and free items in tamper-proof packaging were made available. The impact on shareholders was reduced as a consequence of the company's quick and efficient response, and the brand recovered and thrived.

Today, crisis management is used by almost all large enterprises, nonprofit organisations, and public sector organisations. One of the most important steps in making sure a company can react to unplanned disasters is developing, practising, and updating a crisis management strategy.

To ensure that your team and crisis leaders are well-prepared. Following are the key steps in the crisis management process.

Need of Crisis Management on Business and Customer Management

Ensuring that business is managed on crisis level would allow one to maintain a positive and professional image with clients and competitors as well. Developing a plan, considering possible stages of a crisis or creating a team of individuals to help in critical events will prevent companies from long-lasting or negative circumstances. 

1. Pre-Crisis

Preventing any possible crises comes first in the process. This entails developing a crisis management plan, hiring and preparing a team, and carrying out mock exercises to implement your plan. 

2. Crisis Management Response

Managing and responding to the various stages of a crisis is probably what comes to mind when you think of it. Your crisis management strategy is implemented at this phase. 

3. Post-Crisis

Your work starts when a crisis ends or decreases. You must stay in touch with your staff, clients, and other stakeholders and be available to respond to inquiries. Finally, examine and assess your crisis management strategy with your crisis management team to see how it performed in a real disaster.

4. Prepare a Response

Then, for each risk you have identified, consider what activities your team would need to take to respond to the danger if it occurred. For example, if you work in software and your firm suffers a cyberattack, you may need someone to secure the network, someone to notify your clients, and someone else to analyze the damage.

5. Strengthen the Plan

Solidify your strategy once you have spoken about the dangers your firm may face, the business effect, and how to respond. A crisis management plan involves more than a written or spoken approach. It should include critical components like an activation routine and emergency contacts.

6. Educate Users

Once you have developed a crisis management strategy, ensure all relevant workers are aware. All employees must understand their duties during a crisis. Ensure that everyone has simple and equitable access to all necessary information. You may do this by holding frequent rehearsals, exercises, and other crisis management-related training.

7. Review and update

Once your crisis plan is finished, go over it to ensure there are no holes. Because possible threats change over time, you should revisit and update your crisis management strategy at least once a year.

Also Read: Business Model Meaning - What Is Business Model? Types, Importance & Advantages of Business Model

What Does A Crisis Management Plan Mean? 

A Crisis Management Plan is an in-depth plan describing the numerous movements that want to be taken at some point during crucial conditions or disasters. Any plan organized through superiors, individuals of the disaster control group and associated personnel to assist the agency in triumph over disaster within a pleasant feasible manner is called a crisis management plan. 

A crisis management plan aims to reduce harm and repair commercial enterprise operations as quickly as possible. Let us below discussion about the crisis management steps: 

Step 1: Create a Crisis Management Group

The first stage in developing a crisis management plan is to assemble a group of leaders and form a crisis management team with whom you will collaborate during the crisis preparation process. 

You must choose a group of individuals who will act in the case of a crisis or unpleasant incident for your team. Create the crisis management team at the start of the crisis management planning phase so that all members know the specifics of your crisis strategy.

Step 2: Identify and Evaluate Risks

Now that you have a crisis management team to assist you, collaborate with them to identify possible risks, hazards, challenges, and crises that might interrupt your business function and harm your organization. Here, you and your team must be able to distinguish what a crisis is. You need to define what a crisis means to you for this. Once you have identified the potential crisis scenarios, you must assess the likelihood of these hazards occurring so that you can begin preparing how to respond to them. 

Step 3: Analyse the Business Impact

Once you have identified the high-probability threats, the next stage in developing a crisis management strategy is to assess the possible impact of certain events on your firm. During this stage, important questions to ask include:

  • What impact will a crisis or issue have on the business?
  • Which areas or sectors will be the most affected?
  • What is the estimated financial damage caused by each crisis?

To do so, conduct a business impact analysis (BIA) and use available resources to develop judgments about the possible impact of a problem or danger. It guarantees that every aspect of a threat or crisis is considered.

Also Read: Types of Business - Different Types of Businesses One Must Know

Why do You Need A Crisis Management Strategy?

A need for crisis management prepares your company for a calamity or unforeseen incident. You may decrease the impact of the crisis on your staff and business operations if you have a strategy in place. There is less likelihood of long-term damage when the team is appropriately prepared for the unexpected.

If you are a company leader, it is your responsibility to collaborate with other members of senior management to develop an emergency management plan that works for you. You might not know where to begin at first, but project management software can assist you in navigating this unfamiliar region. A well-organized crisis management strategy can assist your firm in recovering after a calamity.

Stages of Crisis Management

Along with developing your crisis management strategy, it is critical to understand and be aware of the stage of the crisis. These stages might assist you in determining how to respond to the situation at various times.

1. Warning

Although you cannot always forecast the time or appearance of a crisis, there are typically warning indicators you may watch for. These warning indicators can be attributed to various variables, including employee behaviour, weather trends, and firm economics.

2. Risk Assessment

The risk assessment step begins as soon as a catastrophe starts to manifest. It is when the major stakeholders in your firm begin to examine the impact of the crisis on your company, workers, and consumers. The probable consequences of the crisis, possible damages, and related difficulties are considered at this stage.

3. Response

You and your team will be able to determine which crisis management strategy to adopt after reviewing the amount of risk connected with the issue. The response stage entails a great deal of communication to both notify everyone about the issue and to initiate the many measures that will be performed to manage and reduce the disaster.

4. Management

At this point, everyone is involved in resolving the crisis steps and working on managing the plan. It also includes supporting their management efforts and ensuring they have all of the resources and tools needed to fulfill their job.

5. Resolved

During this crisis phase, everyone involved in the crisis resolution should have completed their assigned responsibilities. At this time, the problem should be under control. It is also when all of the essential strategies and procedures are to return your business to normal.

6. Recovery

This step entails reintroducing all staff into their daily operations and ensuring that clients are again set up for success with your items. During the recovery phase, it is critical to examine the cause and results of your plan. 

Also Read: What is Sustainable Business & Its Benefits | Khatabook

Conclusion

While crises begin as threatening, effective crisis management can minimize the damage and, in some cases, strengthen an organization emerging from the crisis. However, crises are not the ideal way to improve an organization. This post provides several ideas that can be incorporated into an effective crisis management program.
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FAQs

Q: What is a Crisis Management Plan?

Ans:

A crisis management plan is an established process a business follows when dealing with a disruptive or unexpected emergency situation.

Q: What do you mean by Crisis Management?

Ans:

Crisis Management is an organization's process- and strategy-primarily based total technique for figuring out and responding to a threat, an unanticipated event, or any terrible disruption with the ability to damage people, property, or enterprise processes.

Q: What is a Business Crisis?

Ans:

 An incident that has the potential to endanger a company's prosperity and well-being by affecting its finances, reputation, business operations, or workforce constitutes a business crisis. 

Q: How is a Crisis defined?

Ans:

A crisis can be defined as:

  • A single occurrence that may or may not significantly impact the business.
  • An emergency circumstance that is stressful but not detrimental to your business.
  • A serious scenario that can have a significant influence on your organization.
  • As a result, it may be anything from cyberattacks to social media blunders to natural calamities.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.