Business 5.7

Question 1

What is crisis management

Answer 1

involves the steps a business or any organisation can take to limit the damage caused by an unpredicted event or crisis.

• Reactive - Return to normal ASAP.

Possible crisis include cyber attack, war, employe conflict, natural disaster, lawsuit, etc. It usually is on a global scale.

Question 2

What is contingency planning

Answer 2

Contingency planning involves preparing a plan for unexpected events that might happen and setting out how to respond in this situation so that the business can return back to normal ASAP.

• Preemptive and preventative. - Think of it as ‘our plan B if plan A goes wrong’. Essentially, predicting potential issues and addressing them before they arise.

→ Risk management at an investment bank

→ Safety management at a factory

→ Training employees in several tasks so they can take over from others if there are major absences, illnesses or strikes

Question 3

Effective crisis management

This is dependent on four main factors:

Answer 3

Communication

Internal: First, one-way communication with employees. Second, two-way communication to listen viewpoints of employees for managers to fully understand the situation and find possible solutions. This is also to engage staff and have them feel valued and empowered.

External: Inform suppliers, customers and the public can earn goodwill. If no proper communication, trust may be broken.

Transparency

Full disclosure of seriousness of situation.

Clarity to employees on how and why decisions are made.

Ethical to be transparent. Mandated by governments and stakeholders.

Speed

Return to normal as quickly as possible, rapid decision making, effective implementation to respond to unfolding crisis.

Prevent biased/false version of crisis reported.

Control

Delegation of competent managers.

Dependent on organisation’s type of chain of command.

→ Narrow span of control and well-defined hierarchy may delegate responds to crisis quickly. This is only if the crisis does not involve the leaders themselves.

Question 4

Negative impact of contingency planning

Answer 4

Negative

Cost

• Costly→ Regular and relevant updates→ Training of staff→ Insurance, certain risks are unquantifiable

→ Planning potential “what if” situations can be costly

Time

→ Planning is time consuming

→ Crisis may never materialise, no real value to organisation.

Risk

→ Can never be fully prepared for every eventualities.

Safety

→ Cost of ensuring safety can be extremely high, e.g. first-aid training.

Question 5

positive impact of contingency planning

Answer 5

Cost

• Far less expensive than dealing with major crisis.
• Can include contingency financial funds.
• Decreases chance of making expensive mistakers pressure.

Time

• Supports decision making under pressure, reassure stakeholders things will be dealt with effectively.

Risk

• Better position to deal with risks as they are minimised, less loss incurred.

Safety

• Help protect safety of staff and customers.
• Less damage done.