5.7 Crisis management and Contingency planning (hl)

Question 1

Crisis management

Answer 1

is the process of managing the business as a reaction to an event that has taken place. It is a strategy that places the business in a better position to recover following the crisis. It creates systematic steps and efforts to limit the damage from the crisis. It is therefore reactive to an event.

Question 2

Contingency planning

Answer 2

is the process of identifying potential risks to the business and thereby developing a plan and put in place procedures that allows the business to fall back to the plan in the event of a crisis. This is therefore proactive planning.

Question 3

difference between crisis management and contingency planning

Answer 3

Contingency planning and crisis management are two complimentary elements used in business to handle a crisis.

Although one is reactive (crisis Management) and the other is proactive (contingency planning) if companies do not operate both these two strategies at the same time, the consequences may involve failure to fully recover from the event.

Question 4

phases of crisis management

Answer 4

Because crisis management is designed to prevent or diminish the damage of a crisis, it has a number of phases that include:
Pre-crisis - prevention,
Crisis- response, and
Post-crisis – preparation and planning for the next crisis.
The post-crisis phases of crisis management is essentially contingency planning which now identifies, plans and rehearses the response to potential threats that may reoccur.

Question 5

why may crisis management occur

Answer 5

due to different reasons; such as: Human activity (financial crisis 2008), Industrial accidents (BP golf of Mexico disaster 2010) or natural disasters (tsunami in japan 2010). A Pandemic like COVID-19 is the latest example.

Question 6

what does effective crisis management require

Answer 6

a) transparency
b) communication
c) speed
d) control

Question 7

Contingency planning could be compared with a list of “what if…?” scenarios, with simulations and procedures in place. The following factors are particularly important:

Answer 7

a) Cost
b) Time
c) Risks
d) Safety

Question 8

advantages of contingency planning

Answer 8

• Reassures employees, customers and local residents that concerns for safety are a priority
• Minimizes negative impact on customers and suppliers in the event of a major disaster
• Promotes a culture of safety within the organization andreduces the risk of accidents causing serious damage and injuries
• Public relations response is much more likely to be speedy, transparent and appropriate.

Question 9

disadvantages of contingency planning

Answer 9

• Costly and time-consuming: the planning process, the need to train employees and undertake practice drills all cost time and money
• Needs to beconstantly updated as the number and range of potential disasters can change over time.
• Employee trainingneeds to be increased if labour turnover is high or if the nature of potential risks changes.

Question 10

transparency aspect of crisis management

Answer 10

Following the occurrence of an event, full disclosure involves being transparent and being truthful to all stakeholders. If companies fail to be transparent, the aftermath of when the truth emerges can harm the business and have more detrimental consequences on the company. In addition, not being transparent may further deepen the crisis .

Question 11

communication aspect of crisis management

Answer 11

This is most likely the single most important aspect in Crisis Management.
The way that the business is able to communicate during the crisis will determine if the event itself or the consequences of the ongoing event will spiral and escalate out of control.
By developing a crisis communication plan, understanding how media works, taking advantage of the “golden hour” (the hour immediately following the crisis event) the business will prevent the wrong information from circulating.

Question 12

speed aspect of crisis management

Answer 12

this refers to how much time there is to respond to a crisis or incident breaking in the media. This is impacted bysocial media, eyewitness of events or rumours appearing on Twitter at a speed once unimaginable.
As mentioned before the “golden hour” refers to the speed of the response. Hence, a swift response within the shortest period of time will ensure that the damage is minimized and damage control measures are in place.

Question 13

control aspect of crisis management

Answer 13

keep in control of the crisis and not be swept along by events helps to present an image of calm and confidence. This will help restore the image of the organization once the crisis has passed. Having a contingency plan will greatly help keeping control.

Question 14

cost aspect of contingency planning

Answer 14

Although the planning costsfor a possible crisis can be frustrating, expensive and overwhelming, the cost of not having a plan in place can be catastrophic.
Despite the costs, contingency planning helps firms be better prepared and eliminates the indecision and uncertainty that usually follows an event.

Question 15

time aspect of contingency planning

Answer 15

Depending on the number of contingency related events that a firm may wish to prepare for, the opportunity cost of the time spent to identify the events, plan the events, and rehearse the events can require months or years. A business that spends too much time and excessive resources on planning the contingency plan may find itself unable to execute it.
On the other hand, the more time spend on contingency planning, the more prepared a business is and therefore able to recover from the crisis. A balance between time spent on contingency planning and dedication to the core business activity must be well planned

Question 16

risks aspect of contingency planning

Answer 16

• Contingency planning begins with identifying the potential risks and involves minimizing the risk itself and its outcome. Similar to any planning, the time and effort spent it risk aversion may become excessive and obstruct the core business activity.
  However, if risks are identified and risk preparation is at its optimum, the outcome of the risky event will be easily contained.

Question 17

safety aspect of contingency planning

Answer 17

The preparation of focused and practical contingency plans requires the help of all those involved in an organization and can not function without this involvement. Managers and employees therefore must collectively take part in identifying the proper processes and their safety related qualities in order to ensure the long-term prospects of the business.
After all, the most valuable resource of any business is its labour. Hence, safety to all is of supreme importance.