subject: Types Of Different Crisis [print this page] Operational crises are the day-to-day, minor crises of running the organization and serving individual customers. With good management these can be avoided or promptly resolved.
Sudden crises are events that occur unexpectedly and have a major effect on the organization. These include natural disasters, sabotage and outages of vital services such as power, water or computers. The CEO should have plans for managing crises and business continuity and test the plans through realistic scenario-based simulations. Operational crises may be symptoms of potential crises.
Potential crises are serious problems that grow larger over time and become critical if they are not addressed. They include declining sales, profits and share prices, failure to respond to new competition, investigations by regulators, and financial difficulties. These problems affect the long-term viability of the entire organization and should be addressed by the CEO through the strategic planning and risk management processes. These groupings of crises are linked.
Lerbinger categorized seven types of crises
1.Natural disaster
2.Technological crises
3.Confrontation
4.Malevolence (An organization faces a crisis of malevolence when opponents or miscreant individuals use criminal means or other extreme tactics for the purpose of expressing hostility or anger toward, or seeking gain from, a company, country, or economic system, perhaps with the aim of destabilizing or destroying it. Sample crises include product tampering, kidnapping, malicious rumors, terrorism, and espionage)
5.Organizational Misdeeds
6.Workplace Violence
7.Rumors
8.Terrorist attacks/man-made disasters
A crisis can be either intentional or unintentional.
Intentional crises
There are seven general categories for crises that are initiated by intentional acts designed to harm an organisation:
1.Terrorism
2.Sabotage
3.Workplace violence
4.Poor employee relationships
5.Poor risk management
6.Hostile takeovers
7.Unethical leadership
Terrorism - You must be aware of your vulnerability to terrorist acts which can potentially disrupt your business and Australia as a whole.
Sabotage - involves the intentional damaging of a product or the working capacity of the business by an employee. Typically, sabotage is done for revenge, such as a disgruntled staff member.
Workplace violence - results from staff being distressed over their treatment either by the company in general or by specific employees. It has the potential to result in injuries and deaths etc.
Poor employee relationships - If you cannot develop positive relationships with your staff, there is great potential for disruptive activities, such as a strike etc.
Poor risk management - a business with a culture of poor risk management, is usually short lived.
Hostile takeovers - Although not common now, especially with recent strong focus on change management,, hostile takeovers are still a major threat to any organization.
Unethical leadership - When an organizations leadership knowingly puts its workers, consumers, investors, or the surrounding community at risk without being honest about that risk, two events is likely to occur. First, a breakdown in the system occurs, which often results in a crisis. Second, when the public learns of the organizational leadership's dishonesty, the public is likely to be unforgiving.
Unintentional crises
Not all crises are intentional, as a matter of fact, many are simply unforeseeable or unavoidable. There are five categories of unintentional crises:
1.Natural disasters
2.Disease outbreaks
3.Unforeseeable technical interactions
4.Product failure
5.Downturns in the economy
Natural disasters - every business is vulnerable to natural disasters. These include things such as bush fires, floods and earthquakes. Although disasters are mostly unpredictable, some steps can be taken to reduce their impacts. For further information, go to the next chapter "Disaster Recovery".
Disease outbreaks - Recent examples include SARS and the Bird Flu.
Unforeseeable technical interactions - Many of the malfunctions that lead to crises are the result of unforeseeable technical interactions. For example, there has been an incident where a commercial aero plane was forced to crash land after a coffeemaker shorted out, causing electrical fire in a series of wires and disabling other safety equipment.
Product failure - Product recalls are very common. When a company discovers flaws in one of their products, they issue a recall, repair or replace the product and possible refund the purchase price. This task can be very costly and time consuming, not to mention the impact of adverse press.
Downturns in the economy - downturns in the economy are unavoidable and every business in some form or other gets affected by them. The most recent example was the global financial crisis. For further information, go to the "Managing through a downturn" module.
During a crisis, you have to be able to effectively communicate to all your stakeholders about the situation and keep them regularly updated. One of the greatest challenges you will have in this role is uncertainty. However, there are some strategies that can assist you in responding effectively to a crisis.
Determining your goals
One of the first things you need to do following a crisis is determine the goal of your crisis response. Goals are often broad value statements that can help guide decision making for the business. For example, your goal might be to reduce the impact of the crisis on those affected. Another can be to keep your business' image intact and maintain your customer base.
Determining goals is a key step in preparing for and responding to a crisis. This strategy can also reduce uncertainty because once goals are defined; you'll be better able to consciously think about what strategies are available to accomplish what you want.
Understanding your stakeholders
In order to communicate effectively during a crisis, you have to consider the various stakeholders for your business. The following is a list of potential stakeholders:
employees
competitors
creditors
customers
the community
stockholders
the media
However, this list can become quite lengthy so it is necessary for you to determine which stakeholders are primary and secondary in order to prioritize accordingly.
Primary stakeholders are those groups that are most important to your business' success
Secondary stakeholders are key groups that do not play an active role in the day-to-day activities of the business but are still important to its overall success.
Many businesses are aware of their stakeholders but do not communicate with them or, if they do, they converse only on rare occasions. Thus, when businesses need to communicate following a crisis, they are often communicating with groups they do not know very well. This lack of familiarity exists because the business has not established any prior relationships and has no base for the communication. If you have not formed a partnership with stakeholders prior to a crisis, the communication following one can be quite awkward and often ineffective. Therefore, it is crucial that you be proactive and establishes strong, positive relationships with all your stakeholders before a crisis arises.
