5.7 Crisis Management and Contingency Planning (HL) Flashcards
Crisis
-Any unpredicted event that has widespread negative consequences.
Crisis Management
-Is about the response a business takes in the event of an actual threat, disaster or crisis. It is about how a business reacts during a real crisis.
Contingency Planning
-Is about devising and developing pre-arranged plans to deal with a crisis, in case it occurs. It involves the use of risk assessments to be better prepared for a crisis, such as a fire, should it ever happen.
Advantages of Contingency Planning
Cost:
-Far less expensive than dealing with a major crisis without a business continuity plan.
-crisis management without contingency planning can be extremely costly.
-Effective contingency planning minimises the chances of the organization making expensive mistakes during a period of immense pressure.
Time:
-A detailed contingency plan should help with making prompt and well-judged decisions at times of crisis.
Risks:
Effective contingency planning enables organizations to be in a better position to deal with a crisis should it occur, thereby reducing the risks arising from a crisis.
Disadvantages of Contingency Planning
Cost:
Contingency planning can be extremely costly, e.g. the management costs involved in the planning process and the need to train staff to deal with the crisis scenarios.
Time:
The crises planned for might never materialise, so may be of no real value to the organization but regarded as a waste of people’s time.
Risks:
Contingency plans cannot fully prepare businesses for all eventualities and risks, such as the impact of certain crises such as natural disasters, the outbreak of infectious diseases or terrorist attacks.
Four Factors that Affect Crisis Management
- Transparency
- Communication
- Speed
- Control
How does Transparency affect Crisis Management
Transparency is about being open and honest with all stakeholders during a crisis. It is about disclosing the truth, such as the scale or severity of the crisis situation
How does Communication affect Crisis Management
Effective communication is vital during a time of crisis. Internal communication with employees will help them to know and understand the issue, the course of action for business continuity and the role that workers play in this.
External communication is equally important as customers, suppliers and the general public are more likely to be understanding, sympathetic and supportive if they know what is going on.
How does Speed affect Crisis Management
-The purpose of crisis management is to return the business to its normal operations as soon as possible.
-Hence, a speedy response is needed during a crisis to contain the situation and to keep people safe. Decisive actions are easier to take if the business has an effective contingency plan that can be implemented.
How does Control affect Crisis Management
-Improved security measures can prevent the loss of stock and other valuable assets.
-Many businesses use a crisis management team to handle a crisis situation and ensure there is effective control.
-Taking control of a crisis situation is essential to prevent the matter from worsening or damaging news being spread beyond control via social media and other channels of communication.
