Crisis Management

How would you cope?

What disasters could your house

face?

Possible disasters

Business Disasters

If you were a terrorist, what business

areas would you threaten?

physical security
document security
personnel security
hardware security
telecommunications security
software security

So what is Risk Analysis?

So what is risk analysis?

Risk Analysis has been defined as:
"a formal process of determining risks and
developing a plan to deal with them"
Risks do not arise all by themselves. A risk is
normally a product of two factors:
threats (something could go wrong)
and vulnerabilities (the information system/s
used by the business will allow things to do
wrong).

Threats & vulnerabilities

Threats include
Deliberate manipulation of information
Impersonation of a legitimate user
Untrained or poorly trained staff

Vulnerabilities include:
- Poor website or network design (e.g. which can
allow "hackers" into a system or web site)
- Poor recruitment procedures

Stages of Risk analysis

Risk Analyst's need to identify.

You
need
to
know
this!

1. The potential cost of the loss of data

2. The probability of problem occurring
3. The cost of measures to protect
4. The inconvenience to staff security
measures are useless if everyone bypasses
them!

Disaster Avoidance.

What can a business do to avoid the

following disasters?

Fire in building
Power supply breakdown
Virus infection
Theft of equipment
Theft of customer data

Think of a HQ
of a city bank
to set the
context for
your answers

So why should anyone bother

with disaster management?

Effects can be catastrophic

90% of businesses who suffer major loss of data
go out of business within 2 years
43% go out of business almost immediately
In the UK, company and directors may be
prosecuted by the Health & Safety Executive
In financial and insurance sectors, customer may
well sue

More recent crisis?

2008

Can you think of any businesses that

have had to deal with a crisis recently?
JJB Sports results: 72
store closures, 800 job
losses, adjusted
operating profits down
28% at 34.3m.
Ikea, the Swedish retail chain,
warned that the housing downturn is
hitting sales of its flat-pack furniture
and said it is scaling back some of
its expansion plans

Environmental disaster

Hostile takeover

Faulty/dangerous
products

Strikes by workforce

What other types of

crisis might a business face?

Major customer
withdrawing
orders

Physical destruction e.g.

bombing / earthquakes / Physical
destruction e.g. bombing /
earthquakes / fires

Finance:
ad campaigns;
environment clean up;
compensation

Personnel:
Leadership style crisis
usually requires direct
authoritarian leadership;
internal and external
communication that is rapid
and direct; external
communication that is
informative and truthful.
Training
Recruitment

Operations:
particularly if JIT
Storage/warehousing
Machinery

What areas of a business

could a crisis affect?

Marketing:
public image under threat PR
Ad campaigns
Promotions to increase sales

Can crisis be avoided?

Companies can have contingency plans
established in order for staff to know how
to deal with a crisis when it occurs!

Contingency Plan content

A list of the most critical business functions;
A list of the facilities
hardware, software, data, personnel and other equipment
necessary to support those functions
A Back-up procedure
A method for getting in touch with all key personnel
A Recovery procedure
Education and training of personnel involved in implementing the
plan
Regular drills to test the effectiveness of the plan

Contingency Planning
The very nature of this unit reflects that businesses
have to be able to respond to change and change can
be unpredictable

What is contingency planning?

The

process by which organisations try to prepare

for unexpected and potentially disastrous events

What is crisis management?

The manner in which an organisation responds to an
unexpected and potentially disastrous event
A CRISIS RARELY GOES AS PLANNED!
What steps can a restaurant take to avoid a crisis?
What are the costs to a business?
Can a crisis be avoided?
How important is it to limit any damage?
BUSS4.8 Planning for Change

Contingency Plans

Value
Sense of security
Limits damage
Speeds up recovery
process
Informs staff training
Preventative
measures can be
part of CSR

Limitations
Costly and time
consuming
Including opportunity
cost

Needs reviewing
Lack of predictability
Fifa has a contingency plan in
case South Africa is not ready
for the World Cup.
Should there be a Contingency
plan in case London is not
readyBUSS4.8
for the
2012
Olympics?
Planning
for Change

Contingency Plan
Cadburys testing out of date
Cadburys withdraws products made in
China
Cadburys is fined
In each case:
Identify the cause of each event
Identify the potential threat
What actions could have been taken to prevent these events?
Rank each event on a scale of 1 10 in terms of seriousness to
the future success of Cadburys. Justify your answer
BUSS4.8 Planning for Change

How would you cope?

Group work
In twos or threes
You will be given a crisis to decide on a
contingency plan
Be prepared to feedback how you would react
as the MD/BoD to your scenario
You need to consider each stakeholder group!

Long term strategy

Need to consider the BIG picture!
What will be the impact on ALL sectors of
the business
HRM
Operational Management
Marketing
Finance

Strategy issues include

Profit margins what will the impact be?
(short term less important than the LONG
TERM!)
Risks & uncertainty
what is the business attitude to risks?
Opportunity costs
Business objectives
Constraints internal & external
Ethics
Business culture
Ansoff matrix & Boston matrix

Strategy tactics
what if Richard Branson died in
an accident?
How should the Virgin
conglomerate react?

Strategy tactics
what would the school do
if the U6 revision trip
were in London
when a bomb goes off?

Strategy tactics
how would you have reacted
If you were the MD of
Bernard Matthews?

Strategy tactics

What are the

implications to TESCO of
poor quality
FUEL being sold?
How would you
have reacted?

Strategy tactics

You are head of ICT at a bank

and a tape of all customer
Data has been lost in transit!

Homework
Revise for assessment next
lesson!