Crisis Evaluation and Its Management: A Model for Managers

Dr. Sachin Kumar Srivastava

Sr. Lecturer
Amity Business School
Amity University
Lucknow Campus
+9194151!59!
Dr. Archana Sharma
Assistant "ro#essor
Amity Business School
Amity University
Lucknow Campus
+91945$$%%&1'
Key Words: Crisis( Crisis mana)ement( Crisis *valuation( Crisis +ecovery( ,isasters.
Abstract: Crisis literally means an -emer)ency- or -ur)ency-. Crisis is also ,e#ine, as -such events
which act as a turnin) point #or .etter or worse-. /he wor, crisis comes #rom the 0reek wor, 12risis1
which means ,i##erentiation or ,ecision
1
. Althou)h in le)al spheres the term was use, to ,escri.e the
,i##erentiation .etween 3ust an, un3ust( the meanin) varie, when use, in me,ical( political an,
economical conte4t.
/he late US "resi,ent 5ohn 6. 2enne,y note,( -7hen written in Chinese( the wor, crisis is compose, o#
two characters 8 one represents ,an)er an, the other represents opportunity9.
:any researchers an, scholars over the years have trie, to ,e#ine crisis an, crisis situation. 7hile
"auchant an, :itro##

.elieve that a crisis is a -,isruption that physically a##ects a system as a whole an,
threatens its .asic assumptions( its su.3ective sense o# sel#( an, its e4istential core-; 6ink <19&'=( 2ash
an, >arlin) <199&= a,, that a crisis is re#erre, to as an unplanne, event emer)in) #rom the internal or
e4ternal environment o# an or)anisation( re)ion or country which can ,isrupt operations( threaten people
physically an, mentally( an, en,an)er the via.ility o# entities no lon)er a.le to cope with the situation
usin) normal mana)erial pro,ucers. >irk 0laesser tries to un,erstan, ?as a ,an)erous an, e4traor,inary
situation in which a ,ecision must .e ma,e un,er time pressure. @e #urther states that crisis is seen as a
critical chan)e in important varia.les that en,an)er or ,estroy either parts o# or the entire system. An this
paper a mo,el is esta.lishe, to calculate the total crisis level o# any in,ivi,ual or a )roup with the help o#
,i##erent parameters. At is a clinical stu,y o# crisis mana)ement.
I!"#D$C!I#:
Crisis literally means an -emer)ency- or -ur)ency-. Crisis is also ,e#ine, as -such events which
act as a turnin) point #or .etter or worse-
1
.
/he wor, crisis comes #rom the 0reek wor, 12risis1 which means ,i##erentiation or ,ecision
1
.
Althou)h in le)al spheres the term was use, to ,escri.e the ,i##erentiation .etween 3ust an,
un3ust( the meanin) varie, when use, in me,ical( political an, economical conte4t.
/he late US "resi,ent 5ohn 6. 2enne,y note,( -7hen written in Chinese( the wor, crisis is
compose, o# two characters 8 one represents ,an)er an, the other represents opportunity9.
:any researchers an, scholars over the years have trie, to ,e#ine crisis an, crisis situation.
7hile "auchant an, :itro##

.elieve that a crisis is a -,isruption that physically a##ects a system

as a whole an, threatens its .asic assumptions( its su.3ective sense o# sel#( an, its e4istential
core-; 6ink <19&'=( 2ash an, >arlin) <199&= a,, that a crisis is re#erre, to as an unplanne, event
emer)in) #rom the internal or e4ternal environment o# an or)anisation( re)ion or country which
can ,isrupt operations( threaten people physically an, mentally( an, en,an)er the via.ility o#
entities no lon)er a.le to cope with the situation usin) normal mana)erial pro,ucers. >irk
0laesser tries to un,erstan, ?as a ,an)erous an, e4traor,inary situation in which a ,ecision must
.e ma,e un,er time pressure. @e #urther states that crisis is seen as a critical chan)e in important
varia.les that en,an)er or ,estroy either parts o# or the entire systemB
%
.
Sel.st
1
on the other han,( ,e#ines a crisis as -any action o# #ailure to act that inter#eres with an
or)anisation1s on)oin) #unctions( the accepta.le attainment o# its o.3ectives( its via.ility or
survival( or that has a ,etrimental personal e##ect as perceive, .y the ma3ority o# its employees(
clients or constituents.-
6aulkner o.serve, that in the a.ove ,e#inition o# crisis Sel.st <19!&= has mentione, two thin)s8
#irst there has .een inaction on the part o# the or)anisation. Secon,ly( the crisis has a ne)ative
e##ect. But we nee, to remem.er that most o# the crisis hittin) the /ourism Sector is not ,ue to
the or)anisational inaction .ut it occurs -all o# a su,,en-( -une4pecte,ly-. At times there is
momentary inaction on the part o# the or)anisation when some new an, totally une4pecte, crisis
happens like 9C11 or /sunami.
Brent on the other han, re#lects that Sel.st ,e#inition #ocuses on perception an, we shoul, #ocus
on the perception mana)ement when we )o #or any crisis mana)ement strate)ies.
5ohn : "enrose also talks a.out perception o# a crisis. @e states that the perception o# crises may
ultimately a##ect crisis outcomes. 6urthermore( the perception o# a crisis as an opportunity or a
threat may also have si)ni#icant implications. Crises are not inherently )oo, or .a,; they are
merely perceive, .y most as .a,.
Booth
&
,escri.es crisis as -a situation #ace, .y an in,ivi,ual( )roup or or)anisation which they
are una.le to cope with .y the use o# normal routine proce,ures an, in which stress is create, .y
su,,en chan)e-.
Accor,in) to >avi, Beirman( -A crisis is a situation reDuirin) ra,ical mana)ement action in
response to events .eyon, the internal control o# the or)anisation( necessitatin) ur)ent a,option
o# marketin) an, operational practices to restore the con#i,ence o# employees( associate,
enterprises an, consumers in the via.ility o# the ,estination.-
>e..ie @in,le o# .). communications .elieves that a crisis is somethin) that hits us
une4pecte,ly. Somethin) that reDuires instant attention alon) with hu)e investments in time(
people an, resources.
5. Spen)ler

su))este, that -A crisis is an emer)ency or si)ni#icant critical event that must .e
planne, #or proactively an, can o#ten .e ,ealt with .y the a##ecte, or)anisation.-

-Crises can also .e ,escri.e, as the possi.le .ut une4pecte, result o# mana)ement #ailures that
are concerne, with the #uture course o# events set in motion .y human action or inaction
precipitatin) the event. *vents o# this type inclu,e the 6oot an, :outh out.reak on U2 #arms in
%$$1( the Cherno.y >isaster an, the *44on Eal,eF oil tanker wreck. *4amples o# crises that may
occur at some point in the #uture inclu,eG
/he impact o# AA>S particularly in Su.8Saharan A#rica an, potentially in the An,ian
su.continent an, the +ussian 6e,eration;
An increase in militant reli)ious #un,amentalism;
Huclear war in Asia;
6inancial melt,owns inclu,in) )lo.al recession; an,
/errorism employe, to achieve political or reli)ious o.3ectives9.
Althou)h we are talkin) a.out crisis now( the concept o# crisis research is prevalent in other
sectors. As 0laesser states in his .ook( Crisis was a term initially use, with national economics.
/he various approaches within crisis research can .e seen in the #ollowin) ,ia)ram )iven .y
0laesser.
System #riented A%%roaches Decision oriented
A%%roaches
Individual
Models
:e,icineG
/urnin) point is the ,ecision
.etween li#e an, ,eath ,urin) the
course o# an illness
An,ivi,ual co)nitive pro.lem
solvin) Dualities o# ,ecision
makers in crisis situation
"sycholo)yG
"erception o# an occurrence or
situation as an intolera.le
,i##iculty which e4cee,s a
person1s resources an, copin)
mechanisms.
6ailure o# .ehavioural patters
>an)er o# i,entity loss
Collective
models
Social sciences
Crises as phenomena o# societies
en,an)ere, national interest
,urin) con#lict ,ue to a
threatenin) escalation towar,s
war <e.). Cu.an crisis=
Crisis as phenomena o# societal
su.systemsG
"olitics real chan)es to the
patterns o# political relations <e.).
coup. revolution=
*conomy e4o)enous economic
shocks( phases o# ,own war,
tren,s in the economic cycle.
Collective ,ecision .ehaviour
in crisis situations
Source: Boar, on Lin,e <1994=
&ig: Areas of 'no(ledge (ithin crisis research
0laesser ,e#ines crisis as an un,esire,( e4traor,inary( o#ten une4pecte, an, timely limite,
process with am.ivalent ,evelopment possi.ilities. At ,eman,s imme,iate ,ecisions an, counter
measures in or,er to in#luence the #urther ,evelopment a)ain positively #or the or)anisation
<,estination= an, to limit ne)ative conseDuences as much as possi.le.
A crisis situation is ,etermine, .y evaluatin) the seriousness o# the occurrin) ne)ative events(
which threaten( weaken or ,estroy competitive a,vanta)es or important )oals o# the or)anisation.
/erm crisis is o#ten use, alon) with ,isaster. /here have .een many attempts to ,e#ine .oth
separately as ,i##erent entities whereas at times they have .een use, collectively or may .e as
synonymous.
>isasters

can .e ,escri.e, as unpre,icta.le( catastrophic chan)e that can normally only .e
respon,e, to a#ter the event( either .y ,evelopin) contin)ency plans alrea,y in place or throu)h
reactive response. *vents o# this nature occur re)ularly .ut at un,etermina.le #reDuency(
intensity an, location
4
. *4amples o# #uture ,isasters that the pro,uction sector coul, .e)in to
prepare #or inclu,eG
Hatural ,isasters o# all types inclu,in) #loo,s( ,rou)hts an, earthDuakes;
Lon) term natural climate chan)e separate #rom the current concern over human
in,uce, )lo.al warmin); an,
A pan,emic perhaps cause, .y a new strain o# #lu or other unknown ,isease.
A!$"E AD C#M)#E!S #& C"ISIS:
Crisis situation are une4pecte, or su,,en in nature. At times some crisis situation are
e4pecte, #or e.).8 war a#ter prolon)e, tension. Iet one cannot .e certain when the
war will actually take place or #or how lon) the war will )o on.
Similarly( crisis a##ects the routine #unctions which means crisis situations are e4tra
or,inary in nature or else create e4tra or,inary situations.
/he crisis ,i##ers #rom person to person( or)aniFation to or)aniFation an, #rom unit to
unit. An to,ayBs worl,( ,isasters an, crisis ,oin) reco)niFe international .or,ers an,
a##ects all.
Althou)h the crisis nature varies #rom one crisis to another( it has o.serve, that
mostly crisis #ollows certain pattern. /his pattern has .een i,enti#ie, as the li#e cycle
o# crisis situation.
An illustration %.( there are some important similarities in terms o# assumptions an,
recommen,ations. /hey recommen,e, actions in #our or #ive main sta)esG pre8crisis(
acute crisis( chronic crisis( an, resolution. An the #irst sta)e( there are important ,uties
to carry out( such as analyFin) the e4ternal environment as an on)oin) process(
collectin) ,ata( interpretin) the si)nals( makin) plans( #ormin) a team( an,
esta.lishin) communication channels. /he secon, .e)ins when the symptoms o#
crisis .ecome apparent. At this sta)e( the e4tent o# the event an, its imme,iate an,
lon) terms e##ects shoul, .e assesse, an, appropriate measures shoul, .e taken
imme,iately. >urin) the thir,( the symptoms an, impact o# the event .ecome more
o.vious than .e#ore( an, it .ecomes essentials to respon, to them with appropriate
actions. An the #inal sta)e( the symptoms o# the crisis may )ra,ually ,isappear an,
operations .e)in to return to normal. At is also possi.le that the actions to ,eal with
the situation may not work( that #urther ,i##iculties may .e #ace,( an, that the
situation may worsen
5
.
&aul'ner*s +,--./ stages &in'*s +.012/ stages "oberts +.003/ stages
.. )re4event "re8eventG where action can .e
taken to prevent ,isasters <e.).=
)rowth mana)ement plannin) or
plans aime, at miti)atin) the
e##ects o# potential ,isasters.
,. )rodronal "ro,ronal Sta)eG when it
.ecomes apparent that the
crisis is inevita.le
5. Emergency Acute sta)eG the point o# no
return when the crisis has hit
an, ,ama)e limitation is the
main o.3ective
*mer)ency phaseG 7hen the
e##ect o# the ,isaster has .een
#elt an, action has to .e taken to
rescue people an, property
3. Intermediate Anterme,iate phaseG when the
short term nee,s o# the people
must .e ,ealt with J restorin)
utilities an, essential services.
/he o.3ective at this point .ein)
&aul'ner*s +,--./ stages &in'*s +.012/ stages "oberts +.003/ stages
to restore the community to
normality as Duickly as possi.le.
6. 7ong term +recovery/ Chronic sta)eG clean8up( post8
mortem( sel#8analysis an,
healin)
Lon) term phaseG continuation o#
the previous phase( .ut items that
coul, not .e a,,resse, Duickly
are atten,e, to at this point
<repair o# ,ama)e,
in#rastructure( correctin)
environment pro.lem(
counselin) victims( reinvestment
strate)ies( ,e.rie#in)s to provi,e
input to revisions o# ,isaster
strate)ies=
2. "esolution +esolutionG routine restore, or
new improve, state.
Source: 6aulkner <%$$$= ".14$
Illustration ,.5: Crisis and disaster lifecycle
/hese propose, li#e cycles o# the crisis woul, help the mana)ement to #ormulate
strate)ies .ase, on the sta)e o# the crisis. But as yet it is not possi.le to e4actly
i,enti#y the sta)e o# crisis we are ,ealin) with. At is important to note here that crises
are comple4 in nature.
/here#ore it is .etter to .e prepare, #or all eventualities. Iet at times such crisis
situations occur which were previously unhear, o# such as 9C11. /he Duestion o# crisis
mana)ement then no lon)er ,eals with the preparation #or an eventually or crisis .ut
how to respon, to the crisis in han,. An such a situation it .ecomes important to know
a.out the various components o# a crisis an, how to ,eal with the situation.
+eviews o# crises an, crisis plans typically inclu,e #our common elementsG the plan(
the mana)ement team( communication( an, post8crisis evaluation. /hese #our
components to)ether #orm the .asis o# crisis mana)ement activities an, shoul, #i)ure
in to any comprehensive crisis plan.
0laesser

,e#ines crisis as an un,esire,( e4traor,inary( o#ten une4pecte, an, timely
limite, process with am.ivalent ,evelopment possi.ilities. At ,eman,s imme,iate
,ecisions an, counter measures in or,er to in#luence the #urther ,evelopment a)ain
positively #or the or)anisation <,estination= an, to limit ne)ative conseDuences as
much as possi.le.
A crisis situation is ,etermine, .y evaluatin) the seriousness o# the occurrin)
ne)ative events( which threaten( weaken or ,estroy competitive a,vanta)es or
important )oals o# the or)anisation
'
.
/erm crisis is o#ten use, alon) with ,isaster. /here have .een many attempts to ,e#ine
.oth separately as ,i##erent entities whereas at times they have .een use, collectively
or may .e as synonymous. @ere one more type o# crisis is ,e#inin) i.e. Ampulsive
crisis. @ere we are ,e#inin) the term impulsive K impulsive crisis an, also #ormulate
how to evaluate the crisis as well as #ormulate the recovery o# the crisis. An, then we
have #oun, the estimation o# the ,ama)e ,ue to crisis. An this event we #in, the two
situations i.e. when recovery starts imme,iately a#ter the crisis K *stimation o#
>ama)e when recovery starts a#ter ,elay. An this mathematical analysis we have also
,evelop a #ormula #or Loss *stimation ,ue to Crisis
!
.
8o( to Manage !he Crisis:
Crisis &rame (or' Model:
Ist Stage:
9efore the Crisis:
"egular Chec' u%
"egular Maintenance
7earning about the )rocess
)rocess investigation before the starts
IInd Stage:
During the Crisis:
Detection of the %roblem
Diagnosis of the %roblem
Sam%le collection regarding Crisis
!esting (ith available resource
IIIrd Stage:
After the Crisis:
)recautions ta'es (hich comes after test results
&ull case should be discussed after crisis over: Detail investigation after crisis.
Measurements should be set for avoiding crisis
)revention and "ecovery are t(o im%ortant %oint in III stage.
Ist Stage IInd Stage IIIrd Stage
9efore the Crisis During the Crisis After the Crisis
"egular Chec' u% Detection of the
%roblem
)recautions ta'es
(hich comes after
test results
"egular Maintenance Diagnosis of the &ull case should be
%roblem discussed after crisis
over: Detail
investigation after
crisis.
7earning about the
)rocess
Sam%le collection
regarding Crisis
Measurements should
be set for avoiding
crisis
)rocess investigation
before the starts
!esting (ith available
resource
)revention and
"ecovery are t(o
im%ortant %oint in III
stage
C"ISIS AD I!S E;A7$A!I# in any (or'ing organi<ations
1
:
/he impulsive crisis ,ama)es su,,enly( an, .rin)s ,own the pro,uction or its money value #rom
its normal value to new low value. 6ollowin)s some are the ma3or causes #or the impulsive
crisisG
a. Lut.reaks in the or)aniFation.
.. *mployeesB sa.ota)eCterrorist attack.
c. 6ire e4plosions an, chemical spills.
,. Su,,en ,rop in revenueC :arket rate o# the shares.
e. Shorta)e in raw materialsCoilsC#uel.
#. Hatural ,isaster.
/he impact o# a.ove happenin) ,oes impulsive crisis an, let the value o# or)aniFation pro,uce at
any time t is "n<t=. Consi,er the crisis occurs at any time say t( then the value at time
=4>? @ )n+t/. A#ter the crisis( the value at time =A>? @ )c+t/. /he #all o# the value o# the
or)aniFation output is shown in #i)ure81.
&igure4 +./ 8a%%ening of crisis B instantaneous a%%lication of remedial recovery
/he #i)ure envisa)esG
!he value of the organi<ation @ )n+t/ if tC >
@ )c+t/ if > CtC!
@ )r+t/ if tD! EE+./
"EC#;E"F C$";E &"#M C"ISIS:
/he recovery curve is ,etermine, .y applyin) analo)y o# char)in) o# con,enser. /he value o#
the output o# the or)aniFation .etween time M an, / is e4presse, .y the eDuationG
)c+t/ @ =G)n+>/4 )C+m/HI+.4e
4t:'
/? . EE +,/
7here(
)c+t/ N value o# or)aniFation a#ter the crisis at any time t( where MOtO/.
)c+m/ N the or)aniFation value at the instance o# ma4imum ,ama)e.
)n+t/ N the normal value o# the or)aniFation .e#ore the occurrence o# the crisis.
K N crisis recovery constant
!he recovery crisis constant is im%ortant %arameter to get rid of the damage of the
crisis
0J .-
.
!his de%ends on many factors such as:
1. :oney employe, to replace ,ama)e it ever an, #or payin) char)es o# repairs
i# any.
%. Skille, people carryin) out the repair 3o. i# any
. Atems availa.ility to replace the .roken item.
4. Availa.ility o# cranes etc #or pickin) an, #ittin)
5. :Cc shops ( wel,in) ( shapin)( cuttin) ( machinery etc i# reDuire,
'. 6ast supply o# raw materials
!. Alternative electricity supply
All these #actors ,eci,e the value o# crisis recovery constant. An )eneral i# the value o# ?kB is
small( then recovery #rom the crisis will .e #ast. /hen we can say that the crisis mana)ement time
is inversely proportional to the value o# k.
Crisis Management !ime K +.:'/ EE +5/
/he a.ove proportionality lea,s to;
.. Management is eLcellent if - C ' C -.6 EE+5../
,. Management is good if -.6 C ' C . EE+5.,/
5. Management is average if . C ' C 6 EE+5.5/
3. Management is %oor if 6 C ' EE+5.3/
ES!IMA!I# #& DAMAME D$E !# C"ISIS
.-
:
/here are two possi.ilities to estimate the ,ama)e when crisis recovery is e4ponential an, the
recovery process is envisa)e, in eDuation <%=. /he #irst case when recovery starts 3ust a#ter the
happenin) o# impulsive crisis( the other case will .e when there is some constant ,elay in
startin) o# recovery ./he ,ama)e ,ue to either case is stu,ie, as;
When recovery starts immediately after the crisis:
/he #i)ure8% shows )raphically the ,ama)e cause, .y impulsive crisis an, imme,iately starts o#
e4ponential recovery.

&igure4 +,/ Sha,e, area ,escri.es the ,ama)e.
/he hatche, area will .e the ,ama)e cause, .y the crisis up to time /. Let ,ama)e is
,enote, .y >i( then
<>ama)e=Di @ )n+t/I ! N=)n+t/4)c+t/?I -O
!
=.4e
4t:'
?dt ..+3/
7here( "n<t=( "c<t=( / an, k are known then the ,ama)e can .e compute,.
Estimation of damage (hen recovery starts after delay:
/he )raphical representation with ,elay recovery #rom the ,ama)e ,ue to crisis is shown
in #i)ure <=.

&igure4 +5/ Shaded area describes damage due to delay in start of recovery
/he ,ama)e with L time startin) late the recovery ,ue to crisis is let )iven .y >L. /hen
>L is )iven .y the #ollowin) e4pressionG
D7@ =)n+t/4)c+t/?I7AG)n+t/=!47?4+)n+t/4)c+t/HI 7O
!
=.4e
4t:'
?4+!47/I)c+t/H EE+6/
Conclusion:
/he su,,en occurrence o# crisis terme, impulsive crisis has .een stu,ie,. A mathematical
mo,el in terms time an, money are ,evelope, #or the estimation o# ,ama)e loss o# the
or)aniFation #or instantaneously start o# recovery an, the recovery startin) late. /he results o#
case stu,ies are ta.ulate, in the stu,y. /he stu,y will prove, )ui,elines #or the Duantities
estimation o# any crisis in any or)aniFation.
"eferences:
1. As Duote, .y Lkumus( 6. an, 2aramusta#a( 2.( <%$$5=. Ampact o# an *conomic Crisis8
*vi,ence #rom /urkey( Annals o# /ourism +esearch( Eol. %<4=. *lsevier "u.lication(
".94
%. "enrose( 5.:.(<%$$$=. /he role o# "erception in Crisis "lannin). "u.lic +elation +eview(
Eol. ' <%=( <online version=(".15'
. @in,le( >.( Co8operation an, "artnerships #or Crisis /ourism :ana)ement "resentation
online.
4. 0eor)e 5 Siomkos( P:onitorin) recovery A#ter a "ro,uct @arm Crisis9 An,ustrial
:ana)ement( 199%( vol 4. Ho. <may8 3une=( pp 1181% <with A. ka.ak=
5. 0onFaleF8@errero( A.( K "ratt( C. B. P@ow to mana)e a crisis .e#ore whenever J it hits9(
"u.lic +elations Quality9 4$( %58$ ( 1995
'. "earson( C. :.( K Clair( 5. A. P+e#ramin) Crisis :ana)ement( Aca,emy o# :ana)ement
+eview9 %( 598!' ( 199&
!. Boin ( A. ( @art ( ". ( K Stern ( *. P/he politics o# crisis mana)ementG pu.lic lea,ership
un,er pressure. Hew Iork G Cam.ri,)e University( "ress9 %$$5
&. Coom.s( 7./. PLn)oin) crisis communicationG "lannin)( mana)in) an, respon,in).
/housan, Laks( CAG Sa)e "u.lications( Anc9. 1999
9. 2ansas City "u.lic School. 2ansas City( 2S. Crisis :ana)ement. +etrieve, Lct . %$$!
1$. Sachin 2 Srivastava et.al( P*valuation o# crises an, its mana)ement Eis8R8vis a
mathematical approach.9; PSkyline Business 5ournal <SB5= ASSH8199&8 4%5 Eolume 8 E
Hum.er % Sprin) %$$9 pa)e no. !81%.