Certain life events, such as illness or the loss of a loved one, cause deep personal crises. Earth’s natural process and rapid climate change can lead to catastrophic calamities. The business world sadly comes with its own set of crises, although natural disasters often bring crises for businesses too.
With the 2020 COVID-19 pandemic, several industries have been affected, companies have had to close their doors forever, and governments have been scrambling with aid packages to try to save economies. The pandemic has shown us how crucial it is to have an effective and fast-acting crisis management system.
What is a crisis management plan?
In business terms, a crisis management plan is a system through which companies can prepare their responses to certain crisis situations in order to manage them effectively and mitigate their impact as far as possible.
A comprehensive and actionable crisis management plan:
Ensure that your company has an effective response to the most likely crises
Save time and money in crisis management and avoid loss of assets and resources
Train your team to handle the situation effectively
Ensure the safety of staff and your customers
Your 5-step guide to a crisis management plan
A crisis management plan involves understanding the situation before it occurs and ensuring that all your resources are aligned to address the crisis when it happens.
- Conduct a risk assessment
Carrying out a risk assessment involves identifying all the possible crises that your company might have to face. While the nature of the crisis is unique to each industry and even each business, the most common crises fall into the following categories:
These include natural calamities like earthquakes, tsunamis, floods, and tornadoes that could damage your company’s infrastructure, your employees, and even your customers.
Depending on your geographic location, your business is probably more prone to some natural disasters than others. For example, China and Indonesia are among the most earthquake-prone countries in the world, while parts of the US such as Florida are more prone to hurricanes.
Human error can also cause disasters for a business, such as financial inconsistencies, damage to machinery or infrastructure, or a dire customer experience. Here it is very necessary to emphasize that unethical behavior by a member of the company, both in their professional and personal life, can also trigger a major business reputation crisis. The reputational damage to companies from cases of sexual harassment in the workplace that came to light during the #MeToo movement are examples of such crises.
A sudden drop in demand, the stock market crash, the loss of asset value, changes in the value of currencies, the unexpected termination of contracts and any type of crisis in the financial institutions of your company are just a few examples of financial crises.
Reliance on technology has made this category of crisis more pronounced. In addition to system failures, power outages, hardware and software failures, cyber crimes such as virus attacks, bots, or phishing, hacking and data theft have made companies more vulnerable in recent times.
- Conduct a business impact analysis
After identifying the types of crisis, you will need to identify how and to what extent each of these may affect your business and other stakeholders by conducting a Business Impact Analysis. Each crisis could bring its unique impacts or trigger a ripple effect in the results. Here are some cases:
An economic slowdown could trigger a loss of business opportunities or contract terminations, which could affect your operations, cause negative cash flow, and lead to downsizing.
A personnel error could cause a malfunction of a process, machinery or infrastructure, resulting in the production of a low quality or potentially harmful product, causing a massive withdrawal of customers, drop in sales, loss of customer trust and reputational crisis.
A mistake on social media could tarnish your company’s reputation and possibly trigger a costly legal battle.
Approach each crisis from all angles and then quantify the impact it could have on your company, employees, customers, and even the environment. Once you know what you are dealing with, you can determine the corrective measures to take in the event that any type of crisis hits your business.
- Create an action plan
The actions you will take in the event of a crisis will form the core of your crisis management strategy. When you have a clear, step-by-step action plan, you will not only be able to deal with a crisis situation effectively, but you can even prevent some of its potential impacts.
When listing preventive or corrective measures, you should consider:
The actual actions required for damage control
The people or departments of your company that will be part of the damage control
The resources you will need to invest
Consider the example of a social media bug: Someone on your social media management team tweets about one of your competitors. But Twitter users and further analysis point to the inaccuracy of the tweet.
At this point, not only will people be questioning the integrity of your company and your customers will be expressing their disappointment, but also your competitor may be suing you for defamation.
Delete your tweet as soon as possible or make it clear that it is wrong
Apologize to Twitter users and your competitor
Get in touch with your competitor to re-establish good communication and try to avoid legal consequences.
Communication and public relations with the media
Any fees paid to a third party, such as a law firm, public relations firm, or advertisements in the media or social networks.
- Educate your entire team
All team members, whether or not they have an active role to play in crisis management, must know exactly what to do in the event of a crisis. There are several ways to train your employees on what is expected of them, but the best way to ensure that each and everyone is aware of their roles is to conduct a multi-level training session.
Prepare a crisis management manual and share it with the relevant teams. For example, create a website with a domain name such as www.plandecrisis.site or www.plancontingencia.online accessible only to your employees where you can share all the action items. Your team can always review it when the time comes.
Organize an expert-led crisis management workshop or seminar, either internally or externally.
Make sure security management is part of their training. For example, in the event of a disaster of natural or human origin, such as a fire or a terrorist attack, each member of the team must know what to do to ensure their safety (for example, know where the emergency exits are, what is the number emergency, how and in what situation to call, etc.).
Hold a question and answer session with your teams to address any concerns or questions they may have. Leave the channels open for communication with each of them.
Run a performance test, such as a fire drill, to assess response time and identify gaps and room for improvement.
- Periodically review the situation
Companies operate in a dynamic environment. Customer behaviors are erratic, technology evolves at a frantic rate, obsolescence is a constant threat, and global warming is causing catastrophes with increasing frequency. On top of that, there are internal business changes such as the opening of new departments or expansion to new locations, the departure of old personnel and the arrival of new ones, and the dismantling and formation of unions and associations.
You should carry out a thorough review of your crisis management strategy every time your business goes through a period of change, but also on a regular basis to ensure that you are prepared to deal with the changes that the external environment brings with it. Updating your strategy will ensure that:
Your plans include any recently identified crises that have not been previously considered.
Your actions are not obsolete.
Your team members are aware of their role in crisis management.
You still have the right resources.
It is difficult to be 100% prepared for a crisis. Often times things will not go according to plan or the scale of the situation may be greater than you had imagined. But having a crisis management plan can help you avoid the most serious impacts on a business, such as bankruptcy, loss of life and property, and irreparable damage to reputation.