SHIVAJIRAO S JONDHALE INSTITUTE OF MANAGEMENT SCIENCE &

RESEARCH

SUBJECT: PROSPECTIVE MANAGEMENT

TOPIC: CRISIS MANAGEMENT

F.Y.MMS – I SEMESTER
Roll No: 19

PREPARED BY: PRAVIN PAWAR

SUBMITTED TO: MS. JOTY MADAM

What is a Crisis?

A crisis is a turning point or decisive moment in events. Typically,

it is the moment from which an illness may go on to death or

recovery. More loosely; it is a term meaning 'a testing time' or

'emergency event'. It is an adverse incident or series of events

that has the potential to seriously damage the concerned people,

operations, finance or reputation. It is a situation or condition

that has a high probability of leading to an emergency if left

unaddressed.

Types of Crises according to the Cause of Their Existence Crises

are divided into nine categories, based on their causes, which are:

1. Natural Disaster Crisis:

The most relevant type of crises is the one that happens because

of a natural disaster. This natural disaster happens in the

environment and the human beings have nothing to do with it.

Examples of a natural disaster include: earthquakes, volcanoes,

floods, and fire.

2. Industrial Accidents Crisis:

Industrial accidents may vary from fires to machine dysfunction,

to electrical short-circuit. These crises lead to a full-scale

emergency. Other crises lead to a limited local response. The

danger in the industrial accidents is that they are termed as a

"Media Magnet" because these accidents can cause serious

casualties.

3. Product Failure Crisis:

This type of crises is a potential crisis for the company because

the product may fail even if appropriate research and

development techniques are followed. The magnitude of this crisis

depends on the speed of decision-making in the company and their

resistance to any kind of escalation for the problem.

4. Public Perception Crisis:

During a crisis, a company may fall into another crisis because of

failure in dealing with the crisis in a public way. This may lead to

confusion, along with financial and personal losses due to a poor

public image. This crisis is a kind of consequence or a "satellite"

crisis for an emergency crisis. Dealing with this crisis reflects

the quality of the organization response to a crisis and the

efficiency of their decision making process.

5. Industrial relations Crisis:

Poor industrial relations between the workers and the

administration may lead to a major crisis. This crisis may lead to

serious disorder in the operations. Sometimes business is forced

to react aggressively. Sometimes the labor force may force the

industry to stop. The relationship between the labor and the

management should never reach this level of animosity.

6. Business Management Crisis:

The real danger in this crisis is that it is subtle and non-

predictable. The real cause is hidden within a plan followed by the

organization that is proved to be erroneous later on. This happens

due to a sudden market shift that the management did not plan

for. However, management is responsible for this crisis because

they did not foresee the potential market threat. There are

other causes, such as: The consequences of other crises; failure

to adjust to the market regulations; international events that

have indirect impact on the business.

7. Criminal Events Crisis:

These events are currently becoming more frequent. They are

considered a major threat for some industries, such as tourism,

banking and the airlines' industry. Common examples are hostage

taking, terrorism, hijacking, and theft. This crisis requires a very

precise response because this type of crises is a "Media Magnet."

8. Management Turnover Crisis:

Sometimes change in the organization management is considered

as a type of crisis. Some companies think about their CEO's as

indispensable, or as a figurehead and their leaving is a real crisis.

Some companies follow succession plans to ensure that such a

crisis will never happen.

9. Hostile Takeover Crisis:

This type is becoming more frequent because of tough

competition between companies. Some companies that monopolize

the market may lead other companies into hostile takeover crises

that would direct them to losses and cost the management its

name and reputation.

The five stages of crisis life cycle are:

1. Pre-Crisis Stage: Here the conditions for a crisis to occur are

waiting for a small error so that the crisis can step in. This

"seed" that starts growing in this stage can be ignorance or

neglect from a manager concerning some aspect of the company,

such as risky operations or lack of crisis planning.

2. Warning: This is considered one of the most important stages

in a crisis if not the most important. In it, a problem is first

recognized and it can either be solved and ended forever or it can

expand and lead the way to complete destruction. Crisis can easily

occur after this stage because of fear of facing the "storm" or

the "problem" by ignoring it. The general response in this stage is

either shock or denial and complacency.

3. Acute Crisis: Beginning here, the crisis begins to occur and

the press (with the people) begins to know about the problem.

Managers may try to avoid or ignore the problem, but the crisis

has already reached a stage where it must be dealt with because

actual losses have already started. This is the time where the

documents and modules for facing crises are taken out and put in
effect and it is shown whether the crises' management staffs

are well prepared or not. If not, then it is too late for the

management to hide the problem.

4. Clean-Up: When the problem passes the warning stage without

being solved, then it has struck the company and damage has

happened. It is then time to recover the losses or at least save

what is left of the firm's stock price (if applicable), reputation

and production line. In recovering, a company must deal with legal

cases, the press and people's pressure and litigation. From all

this, a company can see and determine the reasons for such crisis

to occur and to make sure that it never happens again.

5. Post-Crisis: This is the stage mentioned before which a

company should reach when the warning of a crisis occurs. It is

where a company finds remedy for the damage caused by the

crisis (if not stopped from the beginning). If the company wins

back the peoples' trust and work is back to normal, then the

crisis has officially ended.

The most dangerous thing in a crisis is not know about it or not

being prepared for it, whether it is natural, mechanical, human

error, or a management problem. The natural causes are hard to

control as they happen unexpectedly. For other causes, they

can be faced with the proper planning and sometimes, the plans

are well-designed enough to suit and deal with even the natural

causes.

Any action is better than nothing and it is surely better than the

denial that some managers tend to do with the public and the

press. Still, a bigger mistake is lying to cover for the crisis. If

this is the case, then the company has dug its own grave as people

will lose faith in the firm's honesty, and the crisis is doubled. A

better action is to choose a well-trained spokesperson that can

give the bad news in a "sweet" way in order to gain the respect of

the people and at the same time not expose all that’s harmful.

Then, investigation for the causes should take place to figure out

the proper precaution to avoid the same crisis in the future

What is crisis management?
Meaning and definition of Crisis management:

Crisis management can be defined as a, "Holistic management

process that identifies potential impacts that threaten an

organization and provides a framework for building resilience,

with the capability for an effective response that safeguards the

interests of its key stakeholders, reputation, brand, and value-

creating activities- as well as effectively restoring operational

capabilities." Essentially, it is the process by which an

organization deals with a major event that threatens to harm the

organization, its stakeholders, or the general public. The study of

crisis management originated with the large scale industrial and

environmental disasters in the 1980s.Three elements are common

to most definitions of crisis: (a) a threat to the organization, (b)

the element of surprise, and (c) a short decision time. Venette

argues that "crisis is a process of transformation where the old

system can no longer be maintained." Therefore the fourth

defining quality is the need for change. If change is not needed,

the event could more accurately be described as a failure or

incident.
In contrast to risk management, which involves assessing

potential threats and finding the best ways to avoid those

threats, crisis management involves dealing with threats before,

during, and after they have occurred. It is a discipline within the

broader context of management consisting of skills and

techniques required to identify, assess, understand, and cope

with a serious situation, especially from the moment it first

occurs to the point that recovery procedures start.

Crisis Public Relations or Crisis management as it is often called

is a form of public relations which until comparatively recently

was little known about or even thought of.

However, in recent years the number and scale of disasters, has

highlighted the need for a particular form of public relations that

enables an organization to cope with a crisis situation whatever

form it may take, and come out of it worth some credibility.

Lack of crisis management or planning can have a devastating

effect on an organization’s image, its credibility, its reputation

and on the morale of its employed; whether it is the government

of the country, a multinational corporation or a small company.

Because every often the organization is not seen to be in a high

risk business in the strictest strength, does not mean that there

will never be an occasion when it will not experience an emergency

of some sort. It is, well, to be prepared.

How does PR form the skeleton for the

management of crisis solution?

Assess: Look at the organization as objectively as possible. Try

and imagine a situation that could arise; a major explosion in a

factory, an outbreak of food poisoning, a bomb at a mainline

railway terminus, a fire in a shopping precinct.

Plan: Draw up contingency plans however simple, to cover

different possible scenarios that could affect your organization

and its reputation .Each plan have to be different, but it may be

that one plan can be adapted to suit all potential crisis.

Prepare: Earmark suitable premises as a crisis operations centre

and appoint key staff; allocate their tasks and responsibilities.

Good communications are vital in any crisis situation, so looks at

what communications facilities are available. Decide what else is

needed. Dedicate separate direct telephone lines and equipment

before the crisis occurs.

Train: Practice with all those involved in the team so that they

become familiar with what they have to do, when and how. Quick

response is critical in the early stages of any crisis. Train and

train again.

Modify: No plan will last forever. Situations, people,

circumstances all change. Therefore remember to update or

modify the plan at regular intervals to meet these changes.

Crisis management consists of:

 Methods used to respond to both the reality and perception

of crises.

 Establishing metrics to define what scenarios constitute a

crisis and should consequently trigger the necessary

response mechanisms.

 Communication that occurs within the response phase of

emergency management scenarios.

Crisis management methods of a business or an organization are

called Crisis Management Plan.

Crisis management is occasionally referred to as incident

management, although several industry specialists such as Peter

Power argue that the term crisis management is more accurate.

A crisis mindset requires the ability to think of the worst-case

scenario while simultaneously suggesting numerous solutions. Trial

and error is an accepted discipline, as the first line of defense

might not work. It is necessary to maintain a list of contingency

plans and to be always on alert. Organizations and individuals

should always be prepared with a rapid response plan to

emergencies which would require analysis, drills and exercises.

The credibility and reputation of organizations is heavily

influenced by the perception of their responses during crisis

situations. The organization and communication involved in

responding to a crisis in a timely fashion makes for a challenge in

businesses. There must be open and consistent communication

throughout the hierarchy to contribute to a successful crisis

communication process.
The related terms emergency management and business

continuity management focus respectively on the prompt but

short lived "first aid" type of response (e.g. putting the fire out)

and the longer term recovery and restoration phases (e.g. moving

operations to another site). Crisis is also a facet of risk

management, although it is probably untrue to say that Crisis

Management represents a failure of Risk Management since it will

never be possible to totally mitigate the chances of catastrophes

occurring.

Steps to manage the Crisis

There have been countless public relations crises in the past and

there are five steps that should be executed in order to properly

manage a crisis:

First, the corporation in crisis should be prompt, addressing the

public immediately following the discovery of the crisis.

Second, the corporation in question should maintain honesty

because the public is more willing to forgive an honest mistake

than a calculated lie.

Third, it is important to be informative because the media as well

as the public will create their own rumors if no information is

given to them by the corporation in crisis. Rumors can cause

significantly more damage to the corporation than the truth.

Next, it is important to be concerned and show the public you

care because people will be more forgiving if it is clear that the

corporation cares about the victims of the crisis.

Finally, maintain two-way relationships. This is important because

the corporation can learn a lot about the status of public opinion

by listening.

These five steps are necessary in order to manage any crisis

public relations situation.

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More on the Exxon Valdez
http://www.mallenbaker.net/csr/CSRfiles/crisis03.html

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