Crisis is inevitable. And unfortunately, crises have increased in kind, cost, and intensity, making crisis management an essential business function. But what is crisis management, exactly?
Crisis management is the task of preparing for, managing, and recovering from crisis, or the integrated processes designed to prevent or minimize the damage crisis can inflict on an organization. Given the stakes involved in crisis management, i.e., business viability, we have decided to write an article offering a primer on (1) the importance of crisis management, (2) how crisis management works, (3) how to create a crisis management team and (5) crisis management plan, as well as (5) how to leverage crisis management software to stay ahead of crisis.
The importance of crisis management
So, what is the purpose of crisis management? Simply put, crisis management helps companies prevent and/or mitigate the cataclysmic damage associated with crises.
And in this business environment, that rationale for crisis management matters, because crises have become inevitable. According to PWC, 69 per cent of business leaders reported experiencing a crisis over a period of five years.
Add to that, 95 per cent of respondents said they expected a crisis to hit within the next two years.
Organizations without an integrated crisis management capability in a business environment marked by constant crisis fare worse. They suffer greater reputational damage leading to more severe losses in business value.
Indeed, according to Deloitte, over a third of businesses that have already experienced a crisis say the most important lessons they learned or would do differently are doing more to identify crisis scenarios.
As a result, crisis management delivers a competitive advantage to companies over their competitors who don’t prioritize crisis management.
In fact, according to PWC, seven out of 10 organizations report plans to increase their investments in building resilience.
How does crisis management work?
Given the importance of crisis management, one might ask how does crisis management work to achieve resilience benefits for organizations?
Crisis management consists of three phases, (1) prevention and preparation, (2) response, and (3) recovery. During each stage of this crisis management lifecycle, organizations pursue a strategy-based approach, informed by an assessment of their crisis risk.
That approach looks like the following:
1. Prevention and preparation
This pre-crisis phase involves reducing the known risks that can lead to crisis. This stage begins with identifying a crisis management team to create and enact a crisis management plan, as well as to deal with the problems not covered by it, when a crisis does arise. The plan tends to include information regarding potential crises, policies for prevention, as well as strategies and tactics on how to deal with each crisis.
2. Response
The response stage is when management puts the crisis management plan in action to respond to a crisis. Teams at this phase communicate information about the crisis to the public, media, and employees as quickly, forthrightly, and often as possible.
3. Recovery
This post-crisis, or post-mortem phase, refers to when companies look for ways to better improve preparations for the next crisis as well as fulfil commitments made during the crisis response. This is typically when organizations evaluate how their plan performed during the crisis, correct errors, and update and revise the plan.
How do you create a crisis management team?
Given the centrality of the crisis management team to pursuing a strategy-based crisis management approach, it’s fair to inquire how to create a crisis management team.
Firstly, note that the crisis management effort benefits when the entire staff is onboard, whether detecting early signs of a potential crisis or helping in the response and recovery. And so, despite the need for a specialized team, the entire organization should be prepared.
Of course, a core team with specialized skills will take the lead in planning for certain types of
disturbances, e.g., the product team for product recall emergencies.
As for that core crisis management team, i.e., the people driving the crisis management planning effort, organizations will require C-suite and Board representation, as well as senior managers from the company’s most important business units:
- Finance
- HR
- Operations
- IT
- Risk
- Communications
- Legal
- Crisis Management
How do you build a crisis management plan?
How does this team come together to build the crisis management plan?
Well, they start with a firm grasp of performance objectives for the crisis management plan, i.e., what constitutes success and what KPIs will be tracked.
These responses depend on the results of the vulnerability audit. This audit is a multi-disciplinary risk assessment crisis management teams undertake to determine areas of operational weakness and come up with solutions.
The purpose of the audit is to uncover current and potential threats in a variety of forms, e.g., those arising from normal operations, those most common in your industry, as well as unexpected external events.
The risk assessment also helps to determine a list of potential crises and to rank them in order of likelihood of occurring and associated costs of dealing with the impact.
From there, the components and sections that are typically included in a crisis management plan:
Activation guidelines
This is documentation of all the criteria and indicators the team will use to determine whether a crisis has occurred.
Contact list
This includes critical information (including emergency contacts,) not just of employees but also for other relevant stakeholders.
Communications plan
These are often a set of pre-fab messages (including press releases) based on likely crisis scenarios. The crisis communications plan also designates company spokesperson (usually the CEO) to serve as the face and voice of the crisis response.
Playbooks and action plans
These are individual playbooks (or action plans) for the specific crisis scenarios outlined in the risk assessment. Like the larger crisis management plan, these playbooks should be flexible, responsive modules.
How do you test a crisis management plan?
Of course, organizations will still need to test the crisis management plan. And that’s because the crisis management team should be comfortable performing the tasks assigned to it.
Regular training exercises include effective simulations lasting around four to six hours, per incident. The purpose of these exercises is for organizations to identify flaws in their planning and approach.
Once those flaws have been identified, findings should be incorporated into the latest edition of the plan.
Discover Noggin’s Crisis Management Software today
Crisis management plan testing also involves attention to resource management. And one of the most important resources you will need is crisis management software.
Best practice crisis management software to manage any crisis that may arise, like Noggin’s, help you efficiently plan for, respond to, and improve the management of critical events, crisis situations, and exercises. In particular, our crisis management software enables faster response and improved collaboration between your crisis management teams and stakeholders, by creating an in-depth crisis and emergency management plan to face any incident.
But don’t just take our word for it, request a demonstration to see what Noggin can do for you.
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