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What is Crisis Management?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 12 September 2016
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Crisis management is an essential concept in any form of business and usually refers to two practices. One part of this is planning ahead to anticipate various types of crises and determining how a company would address them. The other is the actual handling of crises when they occur and in their aftermath so that a company continues on its way with minimal loss in profitability and having retained, if needed, its reputation.

There are a plethora of small or large disasters that might be considered in the planning stages of crisis management. These could include failure of technology, attacks against the company, weather disasters, serious mistakes made by the company or some of its employees, sudden loss of high numbers of employees, serious damage to company facilities, and others. It has been suggested that managing these problems must always begin before they occur to give a company the best chance of surviving the problem without huge financial setbacks.

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To this end, smart companies tend to look at potential risks and develop crisis management plans for any problems they think are likely to occur. They may even test each plan or run crisis management simulations so that people have a small amount of experience and knowledge if they ever need to put a plan into practice. Sometimes companies create these contingencies on their own, or they may employ crisis or risk management specialists that help advise the company on risks to consider and how to handle each possible disaster.

The second aspect of crisis management occurs when a gravely negative situation arises in the company that needs to be handled immediately. It’s hoped there is a plan in place, and aspects of that plan could vary depending on what has occurred. For instance, extreme damage to a facility might not be a problem for a company from a public relations standpoint. On the other hand, employee mistakes that damage the reputation of a company or hurt its customers could be very challenging.

In this second scenario, one thing companies will often do is to control flow of information. Too many employees talking may send mixed messages to shareholders, customers, the general public, and even other employees. The next goal in crisis management for employee mistakes is to immediately fix them, when possible. Firing malfeasant employees and offering quick reimbursement to anyone injured are likely steps. A company must then usually show the steps it has taken, usually to the public through a public relations department, to eliminate the problem or to address it.

Some companies have been very successful with crisis management in a variety of forms. Others do not do as well and take a very long time to recover, or they go out of business. Shrewd business owners are advised to look at every possible “thing that could go wrong” and decide in advance how to handle it. While this type of thinking might be called pessimistic, it’s really no different than having an exit strategy for employees if a building is on fire. For most companies, the last thing they want to do in a crisis is figure out how to handle it with no previous planning, which can waste time and money, potentially resulting in death of a business.

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