[Commerce Class Notes] on Crisis Management Pdf for Exam

What is Crisis Management?

Tragedy and accidents can never be predicted. These can shut industries down and ruin a business setup. In moments of crisis like these, management is essential for keeping the company together. Crisis management is a crucial component of a manager’s job description. Any mishap or action that threatens the name, productivity and reputation of a company or its customers is called a crisis. Crisis management is the method of handling these accidents and mishaps of the company. It is the responses taken by the enterprise to ensure the damage is minimal. Organizations can predict the different points of failure in their systems and prepare themselves for them. However, it is impossible to always avert all kinds of crises. Various tragedies in a company have different effects on its functioning and managers must deal with those particular instances effectively.

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Crisis Management and Risk Management

Both of these terms, crisis and risk management, are excessively used in different industries. A common misconception is that both of them are similar to each other. Though both of them deal with the company’s tragedies, there is a stark difference between them. Therefore the terms should never be used interchangeably.

The primary difference between these two management activities is their time of occurrences. In crisis management, the company usually does the crisis handling after tragedy has struck the enterprise. It is an after-measure taken by the firm to keep the damage to a minimum or compensate for the losses.

On the other hand, risk management is more of a prediction-based analysis. Here, the company analyses its workings and tries to understand the points of failures. Managers and personnel are assigned to study the system and develop ways to reduce the risks of a crisis taking place. With a healthy risk management plan, a firm can avoid mishaps for a long duration.

The company’s best strategy is to develop a robust risk management plan and anticipate the crisis. Doing so can create effective strategies for what should be done after the accident occurs.

Types of Crisis

There are several different types of crises that can be faced by a firm. Analyzing the different scenarios has led to some of the companies’ most frequently occurring mishaps. Few of them have been listed below:

Natural Disasters

These types of accidents come under ‘acts of God’ and occur naturally without any human intervention. Floods, earthquakes, tsunamis, storms, droughts or any other situation can affect a large geographical area and thereby jeopardize the company situated there.

From a managerial perspective, these are the hardest to predict and nullify. The crisis management teams must have a go-to guide on what to do if the company’s resources are in jeopardy due to these natural disasters. 

Confrontational Crisis

A single organization has different departments. In the case of any international business, they might even have different governments. The difference in opinions, ideologies and needs may lead to confrontations among these groups. The company must have plans to handle the scenario so that no sides are favoured and the situation is not allowed to escalate. Some of these crises include boycotts by unions, blockades, sit-ins, etc.

Technological Crisis

Technology is an integral part of every human’s life. Still, the benefits of technology can sometimes be overshadowed by the disasters technology can cause if handled negatively. Crises like malware, spyware stealing the firm’s data or data leaks can harm its growth. Managers must be fully aware of what happens in these situations and take significant steps to keep the damage minimum.

Organizational Misdeeds

Sometimes, a crisis can be caused by the wrong steps taken by a firm. The manager devising the crisis management strategy should know about all the decisions taken by the firm. They must ensure every company’s action is legally and ethically correct to avoid any mishap in the future.

Rumours

When the competition among rival companies gets serious, some participants might try to win it by spreading rumours about the other companies. This starts destroying the reputation of the firm and thereby makes it suffer losses. The crisis management strategy must gather the proper certifications and other necessary proofs to show the public how baseless the rumours are as fast as possible.

Workplace Violence

Again in any single organization, there are tons of different employees working towards a common goal. There are times when these employees’ views may not align with each other, and confrontations may lead to acts of violence.

The management must then handle the matters very sensitively; otherwise, things may further escalate, hampering its functioning.