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Crisis Management - Planning & Action

Author: Jim Riley  Last updated: Sunday 23 September, 2012

Contingency planning

Organisations prepare contingency plans in recognition of the fact that things do go wrong from time to time
Contingency planning involves:

  • Preparing for predictable and quantifiable crises
  • Preparing for unexpected and unwelcome events

The aim is to minimise the impact of a foreseeable event and to plan for how the organisation will resume normal operations after the crisis

Contingency plans

The contingency plan:

  • Identifies alternative courses of action that can be taken if circumstances change with time
  • Details standby procedures to enable the continuation of essential activities and services during the period of the emergency
  • Includes programmes for improving the business in the longer term once the immediate situation has been resolved

Steps in drawing up a contingency plan

  • Recognise the need for contingency planning
  • Identify possible contingencies - all the possible adverse and crisis scenarios
  • Specify the likely consequences
  • Assess of the degree of risk to each eventuality
  • Determine risk strategy to prevent a crisis & to deal with a crisis should one occur
  • Draft the plan and identify responsibilities
  • Simulate crises and the operate of each plan

Dealing with the “what if” question
Scenario analysis:

  • This involves constructing multiple but equally plausible views of the future
  • The scenario consists of a “story” from which managers can plan

Sensitivity analysis

  • Involves testing the effect of a plan on alternative values of key variables
  • e.g. the effect of a 50% loss of capacity

Crisis management

  • Crisis management involves:
  • Identifying a crisis
  • Planning a response
  • Responding to a sudden event that poses a significant threat to the firm
  • Limiting the damage
  • Selecting an individual and team to deal with the crisis
  • Resolving a crisis

Stages of a crisis

Pre-crisis

Prior to the event

Warning

Indications that there is or may be or could be an event liable to cause a significant impact on the organisation

Crisis point

When the event begins to cause significant impact on the organisation

Recovery

The acute stage of crisis has passed and the organisation is able to focus on a return to normal operations

Post crisis

Evaluation of the effects
Repair to the organisation

Role of the crisis manager

  • Crisis assessment
  • Event tracking
  • Managing human considerations
  • Damage assessment
  • Assessment or resources and options
  • Development of contingencies
  • Managing communications
  • Co-ordination with external bodies
  • Controlling information
  • Controlling expectations
  • Managing legal requirements

Advice on handling a crisis

  • Appoint a crisis manager
  • Recognise that the crisis manager is likely to adopt a  more authoritarian style than is normal
  • Do an objective assessment of the cause (s) of the crisis
  • Determine whether the cause (s) will have a long term effect or whether it will be a short term phenomenon
  • Project the most likely cause of events
  • Focus on activities that will mitigate or eliminate the problem
  • “Look for the silver lining”- opportunities in the aftermath
  • Act to guard cash flow

Dealing with the financial aspects of a crisis

  • Accelerate accounts receivable (payment by debtor)- by offering a discount if necessary.
  • Slow up payment to creditors where possible.
  • Increase short term, sales
  • Reduces expenses - especially “non mission critical” expenses
  • Outsource non mission critical operations.
  • Re-schedule loans

Dealing with the “people” aspects of a crisis

  • Form a crisis team
  • Designate one person only to speak about the crisis to the outside world
  • Act to prevent or counter the spread of negative information
  • Make use of the media to provide a counter argument
  • Do not tell untruths - trying to manipulate or distort the information will backfire




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