1

Report on Business Crises Management: the definition, the approach, the

challenges.
Simarpreet Kaur – FC1320302
Ankit Kalakonda – FC1017578
Sneha Tojo Kanichai – FC10324966

Corporate Social Responsibility in a Global Environment

05092023--30-MGMT 226-G2
Hazar Sasila
April 13, 2024
 2

Introduction to Business Crisis Management

In the dynamic landscape of business operations, uncertainty is an ever-present companion.

Despite meticulous planning and strategic foresight, organizations often find themselves
navigating through unforeseen challenges that threaten their stability and reputation. These
challenges, commonly referred to as crises, can emerge from various sources, ranging from
natural disasters and technological failures to economic downturns and reputational issues. In
the face of such crises, effective management becomes imperative not only for survival but also
for maintaining trust and confidence among stakeholders.

Definition of Business Crisis Management

Business Crisis Management encompasses the strategic planning, coordination, and execution
of measures aimed at mitigating the impacts of crises on an organization's operations,
reputation, and stakeholders. It involves the identification of potential risks, the development of
response strategies, and the implementation of protocols to ensure swift and effective action
when crises arise. Essentially, it is the art of minimizing disruption and restoring normalcy in the
wake of adversity.

Approach to Business Crisis Management

The approach to crisis management typically follows a structured framework designed to

facilitate a proactive and systematic response to crises. This framework often includes the
following key stages:

1. Preparedness: This stage involves comprehensive risk assessment, scenario planning,

and the establishment of crisis management teams with clearly defined roles and
responsibilities. It also entails the development of communication protocols and the
implementation of training programs to ensure readiness to respond effectively to crises.

2. Response: When a crisis occurs, organizations must promptly activate their crisis
management teams and initiate predefined response protocols. This may include
mobilizing resources, coordinating with relevant authorities, and communicating with
stakeholders to provide timely updates and guidance.

3. Recovery: Once the immediate impacts of the crisis have been addressed, the focus
shifts towards the recovery phase. This involves assessing the extent of the damage,
implementing corrective measures, and restoring normal operations as swiftly as
possible. Additionally, organizations must engage in reputation management efforts to
rebuild trust and credibility with stakeholders.

4. Evaluation: Following the resolution of the crisis, it is crucial to conduct a thorough post-
mortem analysis to evaluate the effectiveness of the response efforts. This includes
 3

identifying areas of improvement, updating crisis management protocols, and

integrating lessons learned to enhance preparedness for future crises.

Challenges in Business Crisis Management

While the importance of crisis management is widely recognized, organizations often face
several challenges in effectively navigating through crises:

1. Speed and Complexity: Crises can unfold rapidly and often involve complex and
multifaceted issues, requiring organizations to make quick decisions with limited
information.

2. Uncertainty and Ambiguity: The unpredictable nature of crises can create uncertainty
and ambiguity, making it challenging to develop effective response strategies.

3. Reputation Management: Preserving and restoring reputation is paramount during

crises, yet it can be difficult to control the narrative in an era of instantaneous
communication and social media influence.

4. Resource Constraints: Crises may strain organizational resources, both in terms of

finances and personnel, necessitating efficient resource allocation and prioritization.

5. Stakeholder Management: Balancing the needs and expectations of various

stakeholders, including employees, customers, investors, and the community, presents a
significant challenge during crises.

Despite these challenges, organizations that prioritize proactive planning, effective

communication, and agile decision-making can enhance their resilience and emerge stronger
from crises. Through continuous learning and adaptation, businesses can transform crises into
opportunities for growth and renewal, reinforcing their capacity to thrive in an ever-changing
environment.
 4

Purpose of business crises management

Maintain stakeholder confidence:

Stakeholders, including customers, staff members, investors, and the community look to a
company for direction and confidence during a crisis. The objective of crisis management is to
preserve stakeholders' confidence and belief by ensuring transparency, delivering prompt and
exact data, and exhibiting compassion and consideration for their welfare.

Maintain your brand's reputation and image:

Every company would benefit greatly from having a solid brand image and a positive
reputation. By acting quickly to address problems, communicating clearly with stakeholders,
and taking decisive steps to end the crisis while celebrating the company's promises and values,
crisis management aims to minimize damage to the reputation.

Maintain business continuity:

Crises may result in operational difficulties and financial losses by interfering with normal
business activities. The goal of approaches to crisis management is to minimize disruptions to
vital services and tasks, identify essential services and resources, and put strong contingency
plans in effect to ensure business continuity.

Show initiative and responsibility:

A strong sense of accountability and strong leadership are necessary for effective managing
crises. During a time of trouble, a leader's duties include giving instructions, acting quickly and
wisely, and accepting responsibility for the organization's choices. Leaders promote confidence
and trust among stakeholders by exhibiting honesty, determination, and transparency.

Encourage continuous development and progress:

Every crisis offers a chance for growth as well as education. Under crisis management, the
organization's resilience and readiness for future crises are improved by carrying out post-crisis
evaluations, noting the lessons learned, and implementing changes. Organizations may react to
new dangers and obstacles by cultivating a learning culture and constant improvement.
 5

Approach:

Prevention and Preparedness: Organizations undertake risk assessments and develop crisis
management plans tailored to their specific risks and vulnerabilities. This involves establishing
protocols, training personnel, and implementing technologies to prevent or minimise the
impact of potential crises.

Response and Recovery: Organisations activate their crisis management teams to implement
predefined response plans when a crisis occurs. This involves immediate actions to ensure the
safety of personnel, secure assets, communicate with stakeholders, and mitigate further
damage. After the crisis subsides, efforts focus on restoring operations, rebuilding trust, and
learning from the experience to improve future crisis management capabilities.

Challenges:

Complexity and Uncertainty: Crises are often complex, multifaceted events with uncertain
outcomes, making it challenging to anticipate and effectively respond to all potential scenarios.

Speed and Scale: Crises can escalate rapidly, requiring organisations to make quick decisions
and mobilise resources on a large scale. This demands agility and coordination across different
departments and stakeholders.

Information Management: Managing accurate and timely information during a crisis is crucial
but challenging, as misinformation and rumours can spread rapidly, affecting public perception
and decision-making.

Resource Constraints: Organizations may need more financial, human, and technological
resources, which can impede their ability to respond effectively to crises.

Reputational Risks: Crises can damage an organisation's reputation, trust, and brand value,
leading to long-term consequences such as losing customers, investors, and partners.

Legal and Regulatory Compliance: Crises often entail legal and regulatory implications,
requiring organisations to navigate complex compliance requirements while managing the crisis
effectively.

Applications:

Corporations: Businesses across various industries, including finance, healthcare,

manufacturing, and technology, implement crisis management strategies to protect their
operations, assets, and reputation.
 6

Nonprofit Organizations (NGOs): NGOs face unique challenges related to funding, public trust,
and mission alignment, making crisis management essential for safeguarding their programs
and stakeholders' interests.

Government Agencies: Government entities at local, national, and international levels develop
crisis management frameworks to address public emergencies, natural disasters, and security
threats.

Global Organizations: Multinational corporations, international NGOs, and intergovernmental

organisations like the United Nations employ crisis management strategies to address cross-
border challenges such as pandemics, conflicts, and environmental disasters.

“Think of crisis management like insurance. Few organisations would operate without being
properly insured; likewise, no organisation should operate without a crisis plan that’s been
practised and a crisis team ready to manage a crisis in the event one happens.”

– Paul Furiga of WordWrite, a Pittsburgh-based public relations and digital marketing agency

Types of Crises

Most potential crises break down into a few themes, as observed in Word Write’s Furiga,
“Though how these play out will be unique to your organisation.”

He outlines four significant types of crises:

• Acts of Nature (like a hurricane, for example).

• Acts of People (say, a chemical plant explosion).

• Acts of Nature Made Worse by People (a chemical plant that explodes because it’s in the path
of a hurricane).

• Acts of People Made Worse by Nature (a radioactive cloud from the Chornobyl disaster blown
toward Eastern Europe by the wind).

Within these four main types of crises are many more nuanced types. There are countless
examples of crises, but among the most frequent to occur are:

1) Natural Disasters
 7

Forces of nature, a.k.a. “Acts of God,” include crises that result from events like earthquakes and
floods or even outbreaks of diseases like COVID-19. The aftermath can be monumental and
often requires marshalling resources well beyond those available to the organisation alone.

Moreover, natural disasters cannot be blamed on any organisation or entity. However, how
they’re anticipated and subsequently dealt with can determine whether the organisation
successfully responded to them.

2) Financial Crises

As Joel Grey sang in Cabaret, “Money makes the world go round,” in the business world, it’s
undoubtedly responsible for much of the topspin. However, when there is a lack of funds to pay
dividends, loan payments, or even make payroll, the scarcity of resources can lead to a
complete financial breakdown.

The remedy — usually a cash infusion or financial restructuring — often won’t come until a
business crisis management plan is implemented to boost confidence for whoever is
underwriting the organisation’s bailout.

3) Misconduct

Truth is often stranger than fiction. This is especially true when it comes to risk assessment, the
sheer variety of crises that result from the actions of a few bad actors — and not the kind we
see in B movies. Hackers, terrorists, and other types of criminals may wilfully inflict damage on
your organisation.

Misconduct within your organisation could result in corporate espionage or violence

perpetrated by a disgruntled employee. However, organisational misdeeds are often committed
by the company’s own risk management and risk assessment. This usually leads to a crisis that
results in legal issues and revenue losses for the company.
 8

Picture 1
 9

Picture 2

Reference -

https://www.investopedia.com/terms/c/crisis-management.asp

https://www.beekeeper.io/blog/what-is-crisis-management/

4. Here's some statistical information about business crises management including graphs and
tables:

Crisis Experience is Common:

PwC Global Crisis Survey (2019):

https://www.pwc.com/gx/en/news-room/press-releases/2019/global-crisis-survey.html found a
staggering 69% of business leaders reported experiencing a corporate crisis in the last five years.

Financial Impact of Crises:

 10

The Harris Poll/Reputation Institute (2020): [invalid URL removed] reported that a single crisis
can cost a company an average of $15 million.

Importance of Crisis Preparedness:

Weber Shandwick (2023 Consumer Survey):https://www.webershandwick.com/ found that

73% of consumers base their purchasing decisions on a company's response to a crisis.

Here's a table summarizing the above data:

Statistic Source Year Finding

69% of business leaders experienced a
Crisis Experience PwC Global Crisis Survey 2019 crisis in 5 years
The Harris Poll/Reputation
Financial Impact Institute 2020 Average cost of a crisis: $15 million
Importance of Weber Shandwick 73% of consumers consider crisis response
Preparedness Consumer Survey 2023 in buying decisions

Visualizing the Data (Graph Option 1 - Bar Graph):

This bar graph depicts the statistics on crisis experience and financial impact:
 11

| Crisis Experience (69%) |

| Financial Impact ($15M) |

Visualizing the Data (Graph Option 2 - Pie Chart):

This pie chart shows the breakdown of consumer decision-making influenced by crisis response:

73% - Crisis Response

27% - Other Factors

5. Six Stages of Business Crisis Management

 12

Stages Description Activities

Proactively recognizing such Brainstorming potential
hazards and putting threats, conducting risk
Stage 1—Avoiding the Crisis precautionary measures in place. assessments
Creating crisis management Developing crisis
strategies, assigning management plan, assign
responsibilities, training roles and responsibilities
Stage 2—Preparing to Manage employees, and gathering and provide training to
the Crisis supplies. team
Monitoring news, social
Quickly recognizing the early media, customer
Stage 3—Recognizing the warning indicators and realizing complaints, internal
Crisis that a disaster is occurring. reports
Deciding on a course of action Isolating the problem,
that will isolate the issue, stop implementing
additional harm, and carry out communications plans
Stage 4—Containing the Crisis communication plans.
Addressing the root cause of the Investigating the
crisis and restoring operations to underlying cause of the
Stage 5—Resolving the Crisis normal. crisis
Making use of the crisis Analyzing the crisis
experience to grow flexible, response, sharing lessons
Stage 6—Profiting from the increase readiness, and acquire learned with stakeholders
Crisis new skills.

Facts about the topic including photos and tables or graph:

1. The Big Data Breach by Equifax
Equifax’s data breach serves as a prime example of a crisis that could have been better managed.
In July 2017, the company discovered the breach but waited several weeks before publicly
announcing the issue. This delay only exacerbated the public’s distrust and frustration.
Additionally, there were reports of executives selling shares before the breach was revealed,
adding to the perception that Equifax prioritized financial gain over customer security.
This case highlights the importance of crisis management best practices, including swift action,
transparent communication, and a well-prepared crisis response plan. To regain customer trust,
Equifax should have promptly notified affected individuals and provided clear steps for
protection. Implementing effective crisis communication examples, such as offering credit
monitoring services, would also have demonstrated their commitment to resolving the issue.
To emphasize the crucial role of successful crisis communication, it is essential to note that
Equifax faced significant legal consequences and damage to its brand reputation as a result of its
 13

mishandling of the breach. By contrast, organizations that effectively manage crises can mitigate
damage and emerge stronger.

Crisis Management Best Practices Equifax’s Response

Swift action Delayed announcement

Transparent communication Inconsistent response
Well-prepared crisis response plan Lack of preparedness
Clear steps for protection Lack of guidance for affected individuals
Action to regain customer trust Limited efforts to address customer
concerns

2. Southwest Airlines’ IT Failure and Social Media Response

Southwest Airlines faced a significant IT failure that disrupted its operations and caused
inconvenience to thousands of passengers. In the face of this crisis, the airline swiftly turned to
social media as a powerful tool for crisis communication and customer engagement.
Recognizing the reach and immediacy of platforms like Facebook and Twitter, Southwest
Airlines utilized these channels to effectively address the situation. The airline promptly issued a
public apology and provided regular updates through social media, keeping affected customers
informed about the progress in resolving the IT issues.
The personalized response from Southwest Airlines on social media helped to humanize the
brand and showcase their commitment to customer satisfaction. By directly addressing individual
concerns and inquiries, the airline demonstrated attentiveness and a willingness to address
customer needs.
However, the overwhelming volume of complaints and inquiries on social media platforms also
exposed the need for comprehensive customer service support. While the airline was successful
in utilizing social media as a crisis communication tool, the sheer number of customer inquiries
created a challenge in providing timely responses and resolution.
 14

Effective Crisis Management Strategies: Southwest Airlines’ Application:

Taking immediate action Southwest Airlines promptly addressed the

IT failure and apologized to customers.

Utilizing social media as a communication The airline used Facebook and Twitter to
tool provide timely updates and personalized
responses.

Showcasing empathy and commitment Southwest Airlines’ personalized responses

demonstrated attentiveness to customer
concerns.

Providing comprehensive customer service The overwhelming volume of inquiries

support highlighted the need for additional support
channels.