Crisis Management (CM)

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Crisis Management

A crisis is defined by the dictionary as a 'critical moment or turning point.' A business book, on the other hand, might define a crisis as a substantial, unforeseen circumstance that can potentially jeopardize a company's employees, customers, products, services, fiscal situation, or reputation. Both definitions contain an element of urgency that requires immediate decisions and actions from people involved.

Crisis Management is the process of preparing for and responding to an unpredictable negative event to prevent it from escalating into an even bigger problem, or worse, exploding into a full-blown, widespread, life-threatening disaster. Crisis management involves the execution of well-coordinated actions to control the damage and preserve or restore public confidence in the system under crisis.

In the context of corporate governance, excellent crisis management is a 'must' whenever a crisis occurs because of the crisis' enormous potential impact on the company's reputation and financial standing. Poor handling of a crisis situation can ruin the confidence of the customers or the public in a company and jeopardize its survival, a situation that normally takes a long time to correct, if it still is reparable at all. Such is the importance of public perception of a company's handling of a crisis situation that media coverage management has become an important ingredient of crisis management.

In fact, the definition given by the American Institute for Crisis Management (ICM) for the word 'crisis' underscores the association of a crisis with media coverage by default. ICM defines 'crisis' as "a significant business disruption which stimulates extensive news media coverage. The resulting public scrutiny will affect the organization's normal operations and also could have a political, legal, financial, and governmental impact on its business."

Crisis management doesn't start only when a crisis arises and ends when 'the last fire has been put out'. Crisis management requires actions before a crisis happens, while the crisis is unfolding, and after the crisis has ended. In fact, crisis management is divided into these three stages: 1) pre-incident stage, which involves identification of potential crisis situations and developing contingency plans for responding to each of them; 2) incident stage, which involves management of an ongoing actual crisis situation itself; and 3) post-incident stage, which includes corrective and preventive actions to preclude the recurrence of the same crisis situation and business recovery actions to restore public confidence in the brand or the company.

There are many different ideas or theories on how to best manage a crisis situation. These differing ideas, nonetheless, have some common elements: 1) the need to anticipate potential crisis situations and prepare for them; 2) the need to provide accurate information during a crisis; 3) the need to react as quickly as possible to the situation; 4) the need for a response that comes from the top; and 5) the need for long-term solutions.

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