A factory burns down, customers' financial details are stolen, a product has to be recalled.
A crisis can strike at any time, and what sort of shape a business is in when it emerges from the crisis depends on how well its senior management was prepared and how they dealt with the crisis – in other words, whether they had a crisis management plan.
Ross Campbell, chief executive of RCA Crisis Management, says crisis management is a “practical planning system designed to elude the adverse impact of potential dangers”.
“Most managers or executives aren't prepared either intellectually or emotionally to face the very worst case scenario,” says Campbell. “This is a process that puts a plan in place, identifies a team to manage and prepares for it by identifying the threats.”
A crisis is any incident or series of incidents that has the potential to severely damage an organisation's operations, employees, reputation, finances - and possibly its future. A crisis plan tries to do two things: firstly, to keep the business operating during the crisis, and secondly, to minimise any long term harm from the crisis.
Ian Davidson, who leads the Australasian crisis management team at AON Risk Services, says all businesses large and small need a crisis management plan of some sort, but many small and medium sized businesses do not.
“The type of incident and the scale of the incident that can cause a crisis are going to be different across all clients, but the need to have a plan isn't different,” he says.
The first step of forming a crisis management plan is to identify possible risks. Business managers and owners need to identify the major threats to their business; “what's the likelihood, what's the consequence, where's it going to come from?” says Davidson. “Start with the source of your revenue, be it products or services that you're selling, then look at that distribution chain and where you sit in it and you can quickly work out your major threats.”
Once the risks are identified, it's time to develop the crisis management plan. “You need to work out what needs to be done to respond to that incident that's going to keep your business going,” says Davidson. “Different threats need different plans.”
For instance, a manufacturer might need to have alternate arrangements for sourcing raw materials, for producing outside of its factory, or for distribution if its supply chain breaks down.
Davidson says plans don't need to be voluminous. “One of the keys is to keep it simple. The more you put in there the less likely people are going to read it and the slower the response time is going to be,” he says.
Test the plan
Develop a scenario – the “what if scenario” – and test the plan with a surprise simulation exercise. One important aspect that is often overlooked is whether the plan can be accessed. It's no good having a crisis plan in someone's desk drawer if the office has burned down.
Everyone needs to know what their role is in a crisis and a crisis management team should be identified ahead of time.
A key part of crisis management is communications – ensuring that key parties, such as customers, employees and regulators are kept informed.
Chris Gray, of ICON International Communications, says use of the word “crisis” in crisis management can be misleading, and give the impression that it always involves a catastrophe or a major incident. While these are undoubtedly crises, the majority of businesses will be faced with more mundane – but also more likely – issues.
These sort of issues – such as legal disputes or industrial relations issues – can eat away at a company's reputation. “The business community in Australia needs to really start thinking about crisis management as a necessary part of planning for any business, whether it's turning over $1 million or $250 million or $1 billion, because it really is issues management and planning for issues,” says Gray.
With the proliferation of social media such as Twitter and Facebook, now even something as commonplace as a few dissatisfied customers can become an issue. “I would contend that those little issues have just as much potential to impact upon a business, disrupt its normal operations and affect its reputation as the one-in-a-hundred-year crisis,” says Gray.
Have a script
A crisis management communication plan should firstly identify the audiences who will need to be communicated with in a crisis, and the medium used to communicate with each of them. These could include customers, employees, emergency services, regulators, the local community, media and suppliers.
For each crisis, come up with a simple script of what to tell customers and the media so that a company can respond quickly, says Gray. In the age of social media, a fast response is crucial to staunch any reputational damage.
Companies should keep people well informed – brief, to the point and regular – but only give them information that is totally verified, says Gray.
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