- IMD Business School
Leadership

What is crisis management and how to implement it in your business

Crisis situations can happen to any business, no matter how prepared they are. As a leader, it’s your responsibility to lead the charge in handling a crisis – but you don’t have to do it alone. In this article, you’ll learn the most effective crisis management strategies and how to implement them so your business is ready to weather the storm. 

  1. What is crisis management?
  2. How to prepare your business for a crisis
  3. Navigate critical moments for a stronger future

What is crisis management?

Crisis management is a strategic approach businesses use to identify key responders, reduce the negative impact of the crisis, and ensure employee well-being. Planning for crises is vital to mitigate risks during these challenges and maintain business continuity. 

Common types of crises businesses face include:

  • Natural disasters like hurricanes, tornadoes, and fires. In Mendocino County, California, during the August Complex Wildfire of 2020, the tribal clinic of the Round Valley Indian Reservation realized their emergency action plan needed improvement. With assistance from the California Department of Forestry and Fire Protection and National Forest Service, they were able to manage the wildfire threats and further develop their emergency action plan.
  • Financial crises like sudden economic downturns following a pandemic. As demand for Delta Air Lines’ services plummeted due to the pandemic, the company focused on its funding needs and capital structure. Through a series of actions, Delta reduced its cash “burn” from $100 million per day at the start of the pandemic​​.
  • Technological crises like cyberattacks and data breaches. In response to the severe Distributed Denial of Service (DDoS) attacks that occurred, Google, Cloudflare, and Amazon Web Services (AWS) implemented a number of measures to counter the malicious traffic and ensure the security of their networks.
  • Organizational crises like executive-level scandals. In 2018, Oxfam faced a sexual harassment and abuse scandal. In response to the scandal, Oxfam updated its safeguarding policies and practices, committed to improving its organizational culture, and became more transparent with its donors and the public.
  • Workplace violence like physical, verbal, psychological, or symbolic violence (behaviors that carry an intention for harm). HealthSouth published a Violence Prevention White Paper to guide its hospitals in recognizing the frequency and severity of workplace violence in health care, assessing the risk in each hospital, and providing recommendations and resources for prevention and response.

Since these problems can have far-reaching effects, having a crisis management plan in place is a crucial part of a business continuity plan. And when crisis planning is done right, your company has the best chance of emerging from the crisis even stronger. 

Why every business needs a crisis management plan

Potential crises can cause a domino effect of challenges that can affect your entire supply chain and stakeholders outside of your organization. Let’s consider a clothing retailer, for example:

If a supplier within its supply chain faces a disruption, the retailer’s production may come to a standstill. Consequently, the retailer’s ability to meet customer demands would be compromised, impacting customer satisfaction and its financial performance. This illustrates how a crisis situation’s impacts can damage a brand’s image as well as client and stakeholder loyalty.

Not having a crisis management plan in place can also reduce employees’ trust in management. Imagine a legal company facing the unfortunate incident of a data breach of highly sensitive client information. They don’t have a crisis management team, so once the cyberattack is discovered, employees don’t know which leader to turn to during the crisis situation.

Without a clear chain of command for who takes charge of crisis communication, precious crisis response time is lost. The BCI Crisis Management Report 2023 notes a trend toward centralizing crisis management approaches, which often proves more effective when paired with regional autonomy where needed. 

The importance of a solid PR and external communications strategy rises to the top of the priority list during a crisis, highlighting the need for a structured crisis management plan. The report also underscores the evolving role of technology, with a quarter of respondents now using specialized crisis management software for a more holistic and data-driven approach, indicating the imperative of timely and coordinated communication during a crisis​​. 
The longer emergency management takes, the greater risk the crisis poses to company stakeholders whose sensitive data might be compromised. This lack of preparedness can also cause employees to lose trust in their leadership, making a crisis management plan critical for guiding your lead during a crisis.

How to prepare your business for a crisis

Crisis management begins with a comprehensive risk assessment, evaluating potential crises and the impact they might have. This phase can be significantly enhanced with the use of specialized tools and platforms such as:

  • Resolver. A comprehensive risk management software that helps in identifying, assessing, and mitigating risks efficiently.
  • LogicGate. A platform that enables businesses to automate risk and compliance operations, making risk assessment a more streamlined process.
  • Spillman Technologies. Provides risk assessment tools tailored for public safety agencies but can be adapted for other sectors to assess and mitigate risks related to physical security and safety.

Develop contingency plans based on these insights, and outline the desired outcomes, response timelines, and corresponding actions for a variety of possible crisis scenarios.

In addition to universal crises (such as a natural disaster or global pandemic), assess industry-specific threats. For instance:

  • Health care leaders should strategize responses to sudden shortages of life-saving medications and consider alternative treatments. 
  • Talent agencies should plan for scandals involving star clients and strategically timing public relations (PR) messaging and press releases.
  • Financial institutions should develop contingency plans for cyberattacks that could compromise sensitive financial data.

In any industry, effective crisis management plans protect five key domains:

  • People: Prioritize personnel safety with notification and evacuation protocols.
  • Facilities: Secure campuses and identify vulnerable areas.
  • Technology: Prepare for disruptions like data breaches or service outages.
  • Business: Direct personnel in handling a crisis while maintaining essential operations.
  • Brand reputation: Employ social media and proactive messaging to safeguard public image.

Crafting a robust crisis management plan hinges on thorough assessment, strategic planning, and comprehensive coverage across these critical domains. Now, we’ll guide you through the steps involved in creating a crisis management plan to protect your business from potential threats to these areas.

Form a crisis management team

Your crisis management team is the personnel at the front lines of emergency response. These key people are typically departmental heads with leadership experience who can stay calm in the face of stressful situations. Think of them as first responders, each bringing their unique expertise to crisis situations.

As such, you’ll want to select a diverse skill set when choosing team members for your crisis management team. For example, your human resources personnel will likely be skilled at empathy and personal relations when it comes to answering employee concerns.

Make sure all your employees and any relevant key stakeholders know who to contact in various types of crisis situations and that they have their current contact information.

Identify key stakeholders and their needs

Every organization has certain individuals, groups, or entities that have vested interests in their operations, reputation, and outcomes during a crisis. So, your crisis management plan needs to include how and what you’ll communicate with them when problems arise. 

Begin by categorizing stakeholders into primary groups such as employees, customers, suppliers, shareholders, regulatory bodies, and local communities. Next,  discern their specific communication needs. Employees, for instance, might require real-time updates on safety procedures and instructions. Customers may seek transparent and accurate information about service disruptions. Regulatory bodies will need you to adhere to legal reporting obligations. 

As you categorize stakeholders and discern their communication needs, it’s pivotal to establish a robust crisis management team. Here’s a template to guide you in identifying the roles and qualifications necessary for an effective crisis management team:

Role

Qualifications

Responsibilities

Team Leader

- Strategic thinker

- Oversee crisis management planning and execution

- Experienced in crisis management

- Coordinate with external stakeholders

Communications Coordinator

- Excellent communication skills

- Manage internal and external communications

- Media relations experience

- Draft and disseminate public statements

Operations Coordinator

- Operational management experience

- Ensure continuity of critical operations

- Problem-solving skills

- Coordinate resources and personnel

Legal Advisor

- Legal expertise in relevant areas

- Advise on legal obligations and implications

- Experience in crisis scenarios

- Ensure compliance with laws and regulations

Technology Coordinator

- IT management experience

- Manage technological aspects and cybersecurity

- Cybersecurity expertise

- Ensure data integrity and availability

Human Resources Coordinator

- HR management experience

- Address personnel concerns

- Crisis support training

- Coordinate support services for employees

This template lays down a structured approach for assembling a crisis management team with diverse skills and expertise. By filling these roles with qualified individuals, your organization is better positioned to manage crises effectively and ensure clear communication with all stakeholders.

Craft a crisis communication strategy

Communication is key in a crisis. Designate a spokesperson on your crisis management team to be the main point of contact for public relations, ensuring consistent and controlled communication during challenging situations.

Speed is paramount in a crisis, so consider investing in a text alert messaging system to send company-wide notifications of ongoing incidents and instructions for how to proceed. Some reliable text alert messaging systems include:

  • Everbridge. A comprehensive notification system that enables rapid dissemination of critical information through text messages, emails, and other channels.
  • One Call Now. A messaging service that allows for quick communication through text messages, phone calls, and emails.
  • RedFlag. Enables you to send emergency alerts via text, email, voice calls, social media, and more.

Keep a close eye on social media channels as well, since these can be an indispensable tool for quickly relating key information to the public and responding to their questions in real time. For effective social media management during a crisis, consider the following tools:

  • Sprout Social. Offers a crisis communication plan feature that can help manage and coordinate messaging across various social media platforms.
  • Hootsuite. Provides a single dashboard for managing all social media channels, making it easier to monitor and respond to social media activity during a crisis.
  • Buffer. Allows for scheduling posts, monitoring social media conversations, and analyzing social media performance, which can be beneficial in managing crisis communication.

Real-time crisis management is the only way to take charge of the scenario and adapt to quickly changing conditions. Consider ways to increase the efficiency of your response through templates, such as a standard PR statement in the event of a scandal involving a high-level executive. 

Practice crisis simulations

Once your plan is in place, create mock exercises to practice your crisis management process and disaster recovery procedures. Host training days with your crisis management team to make sure they know how to handle a variety of crisis situations. Simulate potential scenarios such as natural disasters, active shooters, and PR crises

These tests make quick, appropriate crisis responses second nature and ensure your messaging plan and systems will work as intended. After each test, look for opportunities to improve your system for speed and efficiency. Practice makes perfect!

Measure success for continuous improvement

Use each crisis your company faces as an opportunity to improve your response for next time. To evaluate the effectiveness of your crisis management process, identify key metrics such as crisis response time, impact on business operations (such as production), and stakeholder engagement.

One effective way to measure stakeholder engagement as a metric for continuously improving crisis response is by conducting post-crisis surveys or feedback sessions with stakeholders. This way, you can gather insights into how they perceive your organization’s response, their level of satisfaction, and any suggestions for improvement. Analyzing these inputs provides valuable data to refine crisis strategies and enhance stakeholder engagement in future crisis situations.

Navigate critical moments for a stronger future

Through this article, we’ve unearthed the essence of crisis management and its pivotal role in safeguarding an organization’s integrity during unforeseen adversities. We’ve touched on different types of crises, from natural disasters to organizational scandals, and explained how a well-structured crisis management plan is instrumental in navigating these challenges.

By understanding and implementing the strategies discussed — comprehensive risk assessment, stakeholder communication, technological preparedness, real-time response, crisis simulations, and continuous improvement — businesses can fortify their resilience against potential crises.

Moreover, the importance of a knowledgeable and skilled crisis management team has been emphasized, showcasing the value of diverse expertise in tackling crisis scenarios effectively.

For those keen on elevating their crisis management acumen, programs like IMD’s Crisis Management learning journey can be a valuable resource. The online program, intertwining theory and hands-on experience, aligns with the strategies outlined in this article, providing a deeper understanding and practical skills necessary for effective crisis management.