Why crisis management is important for businesses

Crisis management is the process by which a company deals with a major incident that threatens to harm business, its stakeholders, or the general public. The large-scale industrial and environmental disasters in the 80’s triggered the study of crisis management and it is considered to be the most important process in public relations.

Crisis management is perhaps even more relevant and important to today’s businesses in terms of safeguarding data, ethical supply chains, cross-cultural communication, safe products and man-made environmental disasters. The technology advancements in today’s business world have transformed productivity and communication. Businesses struggle to keep up with the pace of technology development resulting in the mad rush and push to prove otherwise. It is this haste to keep up with the modern world where crisis management is key. Many businesses react to crises rather than planning for them. Crisis management in the modern world is now more important than ever.

A crisis is made up of 3 factors:

1. a threat to the organisation,

2. the element of surprise, and

3. a short decision time

Venette2 suggests that “crisis is a process of transformation where the old system can no longer be maintained.” Therefore, the fourth factor is the necessity for change. If change is not required, the event could more accurately be described as a failure or incident.

Current challenges in crisis management for businesses include resilience, human trauma, sustainable supply chains, decision fatigue, recovery processes, risk management and measurement methodologies and sustainable management. How a company manages a tough crisis often gives customers a far more honest look at how they are run than any meticulously fashioned press release could ever offer.

There are many examples of ineffective crisis management. For example, the FIFA crisis where some top-managers were arrested to have accepted millions of bribes; Krispy Kreme Klub, accused to have used an inappropriate and offensive name of a customer promotion; The recent VW crisis that falsified the results of cars performance; Sport Directors where top-managers were accused to have paid workers under the legal minimum wage and the more recent BHS collapse.

Failure to effectively manage a crisis can lead to serious company losses, harm to stakeholders or end the organisation’s very existence. The unsuccessful management of a crisis can damage the reputation of the company, its geographic location, its workers, management and even whole communities. The snowballing or ‘domino effect’ of crises in business can therefore impact in areas far beyond the business itself.

Large volumes have been written about crisis management by both practitioners and researchers from many different disciplines which make it a challenge when trying to synthesise our knowledge base. However, what we can do is learn from business mistakes and failure to effectively manage crises to inform the planning and implementing of business crisis management strategies. Initial processes and management style that I have researched include owning the mistake, providing frequent and transparent updates and adopting an ‘all-hands’ response (all your personnel having at least some knowledge of the crises and what is being done).

The importance of crisis management is being increasingly recognised in the researcher’s world as a field of study that has direct impact on businesses. Businesses want to know how to implement crisis management strategies that can save them from disasters that are sometimes unforeseeable.

Looking for crisis management for your business? Get in touch with Honest London today!