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Crisis Management

By Unnikrishnan P, Director & Head – Risk, Analytics & Advisory Services, Hewlett Packard Enterprise

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Unnikrishnan P, Director & Head – Risk, Analytics & Advisory Services, Hewlett Packard Enterprise

Crisis is an event that is, or is expected to lead to, an unstable and dangerous situation affecting an individual, group, organization, community, or whole society. Extending this concept, Crisis Management is a discipline of dealing with a crisis  effectively enough to ensure damage to an organization, its stakeholders and public in general can be minimized. Crisis Management as the name suggest seems more “after the fact” set of actions that needs to be undertaken after the occurrence of
an event or a crisis. This is the one key difference between Crisis Management and Risk Management, where in Risk Management there is a structured approach to identify threats and vulnerability, assess impact to evaluate risk and then define controls that  can mitigate the identified risk. Crisis Management though encompass most of the these steps, however the major focus of Crisis Management is towards decision making for response and recovery post the occurrence of the crisis.

Generally crisis is an unexpected event, creates uncertainty and poses a threat to goals of the  organization. A formal Crisis management approach is the application of strategies designed to help an organization deal with a sudden and significant negative event. Hence Crisis Management approach should provide an organization with a structured plan to manage an uncertain situation by clearly identifying the stakeholders involved, defining their roles & responsibilities and be action oriented to enable quick decision making to minimize the negative impact of the crisis.

 "Having a well defined Crisis Management plan covering people, process and technology provides  organization a framework to respond effectively to a crisis"

The credibility and reputation of organizations is heavily influenced by their response to crisis situations. Organization’s response to a crisis can be examined at two levels that provide a reasonable insight into its ability to recover and remain
competitive in increasing volatile socio-economic environment. The following two are two key aspects that need to be looked at in terms of organizational response to a crisis:

Operational Response: Organizations have to ensure that the critical operations should continue to run in the event of a crisis. Inability to recover operations can impact the reputation, compliance and customer satisfaction.

Psychological Response: Human nature significantly influences how organization responds to an actual crisis. It normally encompasses with denial, dis belief followed by siege mentality before organization starts thinking in right directions to manage the crisis.

Having a well-defined Crisis Management plan covering people, process and technology provides organization a framework to respond effectively to a crisis.

Broadly there are two types of crisis that need to be recognized. The first category is the one where we can group all the events over which organizations have no control. The second category contains all those events that might have been avoided had organizations chosen to take the actions necessary to protect them selves. For both these  categories of crises it is important for organization to build and institutionalize a crisis management approach that minimizes down side to an acceptable level as per the risk management strategy.

Let’s evaluate some of the key components of an effective Crisis Management approach or plan for an organization. Crisis Management approach at minimum should include but not limited to, the following:

• Have formal plan in place, with clear objectives, team structure and reporting lines that reduces ambiguity and confusion during a crisis scenario. 
• Identification of all relevant teams and stakeholders with clear roles and responsibilities as part of the crisis management team, that provides quick and structured decision making in the event of a crisis.
• Detailed plans that describe response actions to the most common crisis faced by an organization as per its periodic risk assessment. 
• Establishing monitoring systems and practices that can detect early warning signals or red flags for any fore see able crisis.
• Developing a formal training program for all the stakeholders of the crisis management team and periodically evaluating the effectiveness of the training.
• Conduct periodic drills and test to ensure the crisis management team is well aware of its roles and responsibilities and improvement areas thus identified can be plugged before and actual crisis materializing.
• Communication plans that cover all the stakeholders and clearly identifies the team, periodicity and nature of information to be disseminated, especially to external parties and media groups.

A crisis that is not managed well can wipe out company value in a matter of hours. A well-managed crisis confirms that and organization has the processes and procedures in place to address almost any issue that may develop. It is very important that organizations create the crisis management plan when every thing is running smoothly and everyone involved can think clearly. By planning in advance, all parties will have time to seriously think about the ideal ways to manage different types of crises.

As famous author Nassim Nicholas Taleb says in his book Black Swan – “We think we can manage risks by predicting events & acting accordingly. This is the worst error we make. It is more effective to focus on the consequences – that is to evaluate the possible impact of the event and act on them” may be through an effective crisis management plan.

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