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A specialon Crisis Management

By Sunder Krishnan, Chief Risk Officer, Reliance Nippon Life Insurance

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Sunder Krishnan, Chief Risk Officer, Reliance Nippon Life Insurance

Introduction

We live in times when ‘Crisis’ events appear to be  the neo norm. What with demonetization, terrorists striking us post the surgical strike, slump in the economy, cyber attacks on banks, interest rates moving southwards and so on. Yet the people of
this country are largely resilient, the ques in the banks largely peaceful, persons largely praising the government, for its bold initiatives in cracking down on counterfeiting and black money already generated and the psychology of the people of thiscountry largely mature. Crisis management is all about people facing the crisis, handling the same in a matured manner, arriving at decisions in a measured manner but not necessarily slowly, being trained or equipped to handle it and there is some method to he madness (process oriented).

Crisis Management

The overall coordination of an organization's response to a crisis in an effective, timely manner, with the goal of avoiding or minimizing damage to the organization's profitability, reputation, and  ability to operate. Successful organizations are those
who manage to get it right every time thanks to the leadership attending Crisis Simulation programs on a periodic basis, structured crisis management processes, employees being well trained to handle disasters and robust technological support.

Incident Management & Crisis Management - Very Different, Often Confused

Incident Management starts when the 'disruption' is reported, and ceases when operations have returned to their original state (or a substitute 'business-asusual', in the case of a disaster). A 'crisis' may be as a result of an 'incident' - but not necessarily. A crisis could be a result of rumors, product defects, adverse publicity, negative social media activities, or actions of employees, distributors or suppliers which reflect poorly upon the organization.
 
"Not every Incident will result in a Crisis, not everyCrisis will be an Incident, and both will escalate if not managed well"

Actions 

Not every Incident will result in a Crisis, not every Crisis will be an Incident, and both will escalate if not managed well. At times not taking an action is also an action. For instance, one may choose to ignore a malicious rumour, in a ruthlessly professional manner of “getting on with business as usual”.

Thus, one could identify the crisis, diagnose the root cause of any incident / crisis, gauge the impact – financial and reputational and more importantly initiate action or series of actions to reduce the impact and deal with the situation in a robust manner.

Few Impactful Crisis Management Scenarios in India - 2016

1. Nestle Maggi Noodles Ban in India
- At the end of May 2015, India’s Food & Durg Administration (FDA) ordered Nestle India to recall its popular Maggi noodles after tests showed that the product contained high levels of lead and MSG. Hence, the 2-minutes ready Maggi Noodles ban in India was declared.

Crisis Management Techniques by Nestle -
• The company used various social media channels to take care of its image while the media was putting questions on its image. 
• Nestle continued to keep its customers up to date on the investigation into the safety of Maggi noodles in India.
• Nestle used its Twitter and Facebook accounts to answer questions about the levels of MSG and lead found in
their noodles.
• Nestle launches a FAQ page on the official website.
• Nestle recalled all Maggi noodles from India, after re-assuring customers that its noodles are safe, the brand did a U-turn and decided to recall Maggi noodles from the shelves.
• Nestle decided to destroy more than $50million worth of Maggi Noodles in India after they were deemed unsafe by regulators.

2. Multiple Banks hit:

3.2 million Debit Cards compromised - India’s largest bank, State Bank of India, said it had blocked close to 6 lakh debit cards following a malware-related security breach in a non-SBI ATM  network. Several other banks, such as Axis Bank,
HDFC Bank and ICICI Bank, too have admitted being hit by similar cyber attacks forcing Indian banks to either replace or request users to change the security codes of as many as 3.2 million debit cards over the last two months.

Crisis Management Techniques by Banks and RBI –

• Banks are planning to replace them with chipbased ones. 
• Maharashtra Police has begun investigations into the security breach and has written to the RBI seeking information on the fraudulent transactions.
• PCIDSS, an international body that sets data security standards, has ordered a forensic audit of the data breach in India.
• RBI issued instructions on a cyber security framework in banks, asking them to put in place a board-approved cyber security policy, prepare a cyber crisis management plan, and make arrangement for continuous surveillance. 

3. Demonetization – The Government of India announced on Nov 8, 2016 that the currency of 500 & 1000 denomination will be discontinued and will not be valid from next day onwards.

Effects of Demonetization –
• Liquidity crunch (short term effect)
• Welfare loss for the currency using population
• Consumption will be hit
• Loss of Growth momentum
• Impact on bank deposits and interest rate
• Impact on black money
• Impact on counterfeit currency To conclude, there are “lessons learnt” from crisis events and successful companies have come out of the events or a deep crisis, largely due to trained persons coping with the crisis.

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