Crisis management plans: preparing your business for the unexpected

Whether it’s a hurricane destroying physical property, a stock market crash wiping a company’s share value or a global pandemic throwing society and the economy into chaos, businesses need to plan for unforeseen hazards. Prepare well though, and your company might even emerge stronger than it was before. Sarah Harrop describes how effective crisis management can protect businesses.

Since 2020, the world economy has been battered by a series of shocks, including the COVID-19 pandemic, skyrocketing inflation and the outbreak of conflict in Ukraine and Gaza. This has played out against the backdrop of more extreme weather events, from wildfires to hurricanes, as climate change progresses.

Consequently, we are experiencing, as the World Economic Forum describes it: “prolonged economic, social and geopolitical turbulence, driving uncertainty and volatility to their highest levels in decades.” 

For those who lead businesses, that means having to deal with new challenges almost constantly.

“As businesses face a rapidly changing world, the challenges of geopolitical upheaval, soaring inflation and economic uncertainties have become ever more prevalent. Moreover, the disruptions from cybersecurity attacks, supply chain challenges and climate crises have emerged as daunting and unpredictable challenges.

In such an environment, business leaders need to anticipate and respond to disruption proactively – not only to survive, but to thrive.”

So says the introduction to PwC’s Global Crisis and Resilience Survey 2023, which reveals that business crises are now so common that it’s more of a matter of when, not if, they will happen. Of the 1,812 business leaders that shared company data and insights with PwC, 96% had experienced disruption in the past two years, and 76% said the disruption had had a medium to high impact on their business operations. Clearly, businesses must prioritise developing resilience and preparedness, including response teams and response plans, if they’re to successfully navigate potential crises in the future.

The most common types of business crises

An unexpected crisis situation is, of course, just that: unexpected. But good crisis planning should evaluate the potential risks out there (even the unlikely ones), your business’s vulnerabilities to them, and how to best respond to unforeseen events. The following are some of the types of crises that every business owner should consider as part of their crisis response planning, according to determ’s Martina Pranjić.

·   Natural disasters: Hurricanes, floods, wildfires, pandemics and earthquakes are examples of sudden environmental natural disasters that can cause a great deal of physical damage and force businesses to take dramatic measures to adapt and survive.

·   A financial crisis: Often these happen when a company faces financial losses due to a plunge in demand for its products or services, a loss of assets or an outside influence such as a war or an economic downturn. Typically, a business will then need to make cost cutbacks, find extra funding or – in the worst case scenario – declare itself bankrupt.

·   A communications crisis: These are the kind of damaging public relations disasters that happen if, for example, your company or one of its employees is involved in illegal, immoral or unethical affairs, or if a senior manager makes a public gaffe, or if an advertising campaign misses its mark and causes offence or hurt. The resulting backlash can make a seriously big dent in the business.

·   Product failure: if your product fails to deliver what you promised or if it threatens the safety of your customers, this is one of the worst crisis scenarios your business can face. Expect a deluge of negative comments all over social media and online review pages such as Trustpilot, as well as brand and reputation damage among key stakeholders and customers.

·   Tech glitches: When tech systems stop functioning, servers crash, software stops working, or companies breach data or are victims of cyber-attacks, the financial damage can be catastrophic for reputation and future business. 

What is crisis management in business?

Crisis management essentially means preparing for and dealing with any situation that is potentially harmful to your company, its employees, customers, stakeholders or investors. It usually involves creating a business continuity plan and a comprehensive crisis management plan (including a crisis communication plan) that can be put into action at times of crisis.

The first step is usually to carry out a risk assessment on the business’s operations. To do this, business leaders need to identify any potential risks of adverse events and any vulnerabilities and estimate how likely they are to actually happen. Simulations can be useful here to assess the probability of a threat occurring in the future, the best and worst case scenarios and the potential damage that could be done to the business if the worst happens. 

Once you know what you’re dealing with, your crisis management team can develop contingency plans to contain the emergencies your company might face and take on advance decision-making to prepare and adapt to adverse unexpected events.

For example, if you’ve pinpointed a high probability of flooding within your company’s area of operation, the worst case scenario might be destruction of computer systems and loss of essential data on customers, suppliers and ongoing projects. Your plan might involve creating a back-up system for all your computers to preserve a record of your company’s data and processes.

What is described above is risk management, however crisis management is not necessarily the same because it involves reacting to negative events as they’re occurring, and post-crisis damage limitation.

Here, Investopedia gives one scenario of how risk management can turn to crisis management: “An oil company, for example, may have a plan in place to deal with the possibility of an oil spill. If such a disaster actually occurs, the magnitude of the spill, the backlash of public opinion, and the cost of cleanup can vary greatly and may exceed expectations. The scale makes it a crisis.”

Crisis communications

An important part of a crisis management strategy is having a crisis communication plan which focuses on clear communication with team members, customers and stakeholders before, during and after an event. This can help to cushion the impact of the crisis.

“Effective crisis communication helps to minimise confusion, maintain public trust, and protect your organization's reputation. In essence, crisis management is the shield that protects your organization, while crisis communication is the voice that guides stakeholders through the storm,” explains BCM Institute crisis management expert, Moh Heng Goh.

It can be incredibly difficult to speak and write with assurance and clarity while trying to preserve your company’s brand and reputation under harsh media scrutiny. According to media training specialists The Broadcast Institute, the so-called five Cs of a crisis communication strategy that all spokespeople should display during press conferences or interviews and across all communication channels are:

Composure: it’s important to over-ride your natural freeze, fight or flight instincts in a crisis situation and stay calm and composed. You must show that you are an expert and you’ll appear competent if you are prepared and know the circumstances of the occurrence.

Clarity. Clearly explaining the situation to your stakeholders and staff and acknowledging their worries will enable them to accept the situation more readily and realise that you share their concerns

Confidence. The public must believe that you can handle the problem and maintain faith in you and the business if you are to weather the storm.

Concern. Relate to your community and show that you care about them and anyone who’s been negatively impacted by the crisis.

Commitment. You must be sincere and prove that you are serious about being open and engaging in dialogue with the public about the crisis, even if feels like there are many other competing priorities in that moment. 

The future: building resilience to future hazards

“Successful business leaders realize now, more than ever, that businesses have a greater responsibility to play an active part in tackling the planet’s biggest problems. That means facing our uncertain world, ensuring resilience, thinking big and developing growth strategies that are purpose-driven and focused on long-term value creation, not just short-term profits,” says the World Economic Forum.

In the conclusions of its 2023 Business Resilience Survey, PwC recommends that businesses should “embrace and invest in resilience to transform the way they operate in the era of constant disruption.” Three key takeaway points from the report are:

Integration is essential: Today’s risks are complex and interconnected, so organisations must break out of the silos they currently sit in and develop a centrally governed and aligned approach to resilience, centring capabilities around what matters most to business and embedding it into operations and corporate culture.

Leadership: an ‘upskilled’ team will be needed to thrive in the ‘permacrisis’ that we are living through. This should include executive sponsorship from the C-suite, a senior leader with clear responsibility for the resilience programme and a team with the skills to drive the programme across the organisation.

Focus on what matters most: companies should build operational resilience by protecting what matters most to the organisation and its stakeholders and prioritising investment accordingly. This allows organisations to manage risks with high reliability and to drive efficiency. 

Secure the skills to steer your business through a crisis

Executives in today's dynamic and competitive business landscape need to be versatile and visionary leaders with the diverse skills to navigate complexities, drive innovation, inspire teams, and steer towards success, even in the face of unexpected crises.

The 100% online MBA from Queen Margaret University is for professionals looking to further their careers and deepen their knowledge in strategy, marketing, operations management, accounting and finance, human resource management, leadership, business analytics, and entrepreneurship. Enrol on this master’s degree and you’ll develop into a future senior manager, director or CEO who is socially responsible and capable of driving positive change.

The 100% online course, which can be studied from anywhere, also offers established industry connections worldwide and features regular guest lectures by experts from all over the world to enhance your learning experience. Find out more