Preface

A crisis is an event or period that leads to instability and introduces dangerous circumstances to individuals, groups, or society in general. Since it is such a broad concept, crises are always different in their nature and depend on the actual circumstance. However, there are somewhat defined general sets of precautions and preparations that can be performed in order to get your business ready to face the crisis and successfully survive through it, emerging more resilient and focus than before. The key takeaway is to remember that remediation spans a long time after the actual crisis has passed.

Most companies confidently claim that they are prepared to face the crises. However, according to a study from Freshfields Bruckhaus Deringer, things are much more complicated:

⚑ Crises spread internationally within 1 hour in 28% of cases and reach other countries within 24 hours in the vast majority of the remaining cases.

⚑ On average, it takes 21 hours for a company to generate meaningful response to a crisis, and up to 48 hours for 18% of the businesses.

⚑ Even after one year, 53% of the companies struggle to see their share prices return to previous levels.

Crises classification

Even though every crisis originates from different circumstances, some general classification categories can be outlined for it. The most common types of crises can be defined as following:

I. Personnel

Potential consequences that a company can face if its employees engage in wrong or inappropriate actions. Such actions can range from illegal or unethical behavior that puts the business at risk, to smaller but still harmful behaviors such as mistreating a customer. If a company finds itself in this kind of crisis, the impact can be devastating. The harm can spread rapidly, particularly on social media, where users frequently share their experiences, reviews, and opinions. Negative posts, comments, and reviews can quickly go viral and damage the company's reputation.

II. Financial

A situation where the value of assets or financial instruments declines rapidly, often leading to a severe disruption in the financial system. Such a crisis can originate from a wide range of economic triggers, both internal issues within the company, as well as external factors beyond the company's control.

III. Organizational

This refers to a situation where an organization faces a significant threat to its operations, reputation, or viability. This type of crisis can result from various factors, including internal or external factors such as financial mismanagement, unethical behavior, natural disasters, or unexpected market changes. Some examples of organizational crises include product recalls, data breaches, and leadership crises.

IV. Malevolence

This type of company crisis is caused intentionally by an individual or group seeking to harm the organization. It can include criminal activities such as fraud, embezzlement, or cyber-attacks, as well as acts of sabotage by disgruntled employees, competitors, or other external actors. The triggers for such activities are often unpredictable and are hard to prevent, as they range from competitors, personal vendettas, or even for no apparent reason at all.

V. Natural

A business can face a crisis in the event of a natural disaster, such as an earthquake, flood, or the Covid-19 pandemic. How a company responds to such an event is crucial. While organizations that specialize in emergency preparedness may be better equipped to handle such situations, many companies have found themselves in difficult or even perilous circumstances due to their handling of natural disasters.

Crisis management: three stages

Managing a crisis is an ongoing and dynamic process that requires agility and readiness from a company. A comprehensive approach to crisis management starts well in advance of an incident and extends beyond the initial crisis period even after it has lost public attention.

The three stages of crisis management are:

☯ Preparation.

Involves identifying potential crises that could impact the organization, developing a crisis management plan, and conducting regular training and simulations to ensure readiness.

☯ Response.

Involves executing the crisis management plan, including activating the crisis management team, assessing the situation, communicating with stakeholders, and implementing strategies to mitigate the crisis.

☯ Recovery.

Involves returning the organization to normal operations after the crisis has been resolved. This includes evaluating the effectiveness of the crisis management plan, addressing any ongoing issues resulting from the crisis, and implementing strategies to prevent future crises.

Effective crisis management requires a proactive and coordinated approach, with clear lines of communication and decision-making processes. A well-executed crisis management plan can help to minimize the impact of a crisis, protect the organization's reputation, and ensure a speedy recovery.

Intermission

How often have you faced a crisis in your company? Please keep an eye out for our next article, where we will explore some effective strategies for crisis mitigation and tactical-level damage control.

And as always, we are working around the clock to lead you through a media crisis, if such unfortunate need arises. Stay safe!

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