How to Create a Business Crisis Management Plan

Business Crisis Management March 07, 2022

Jin Hyun

Writer

When crisis strikes, it can have devastating consequences on a business. While these events can be sudden, unpredictable, and erratic, a crisis management plan allows companies to identify potential threats to their organizations and their stakeholders to create solutions.

No matter the size of the business, these plans are vital and can temper the catastrophic effects of any crisis, from a natural disaster to a data breach. By enacting a well-thought-out plan, businesses can minimize the impact and provide security and certainty.

Potential Threats

Crisis management plans work best when a company has identified all potential types of threats that could impact the business. The following list contains the most likely crises to affect operations.

Financial crisis - A drastic drop in sales, a sudden lack of demand,` or even a change in the business sector that makes a company's stock redundant - can lead to a financial crisis and a company's inability to pay debts and salaries. External financial crises (for example a global financial crisis) can also precipitate financial problems.

Pandemics and global outbreaks - A worldwide pandemic or virus outbreak can have a significant roll-on effect for businesses across a swathe of industries. Resulting in staff shortages, slashed sales, or an inability to operate due to quarantine restrictions.

Staff crisis - This can span from a sudden loss of personnel to dealing with wrongful misconduct or the unethical/ illegal behavior of an employee. This could occur in the workplace or personal life of someone involved.

Organizational crisis - This type of crisis emerges when a business behaves unethically or does something that negatively impacts the customers. This can include withholding vital details from consumers, overcharging clients, or even selling faulty or contaminated goods.

Technological crisis - We live in a digital world. So when the server crashes, the software glitches or the drives are corrupted, the ensuing problems can span from lost production time through to the disappearance of vital information.

Natural crisis - Natural disasters are unpredictable and can wreak havoc on a business by causing power outages, flooding, and even deaths. They can destroy the company's physical location and set back a business significantly. A business might also be susceptible to a higher number of natural disasters depending on its location (in an earthquake corridor or a locale prone to hurricanes for example).

From Pre-Crisis to Post-Crisis

Many companies will face a crisis once, twice, or even multiple times throughout the life of the business. So how can these crises be managed and what plans work best in the face of disasters?

First things first, it's important to devise a crisis management plan and separate it into three parts- pre-crisis, during the crisis, and crisis recovery.

Pre-crisis
While it's important to respond to a crisis appropriately, its the preventative planning before it actually occurs that has the biggest potential to save a company.

In this crucial stage, business decision-makers must identify potential threats or crises that could impact their operations (including natural disasters and pandemics) and then draft and test an appropriate response plan. Furthermore, all stakeholders and staff must be regularly educated and trained on the procedures outlined in these plans.

The creation of this plan is not only vital to protecting and salvaging a business when disaster strikes, but to the company's reputation as well. While little good can come of a crisis, the adoption and enaction of a good management plan will show both clients and potential clients how well the business can handle itself when the chips are down.
Before devising the crisis management plan, first, brainstorm the company's vulnerabilities. Involve all managers across multiple sections to ensure every possibility is acknowledged.

The plan should further address-

Internal and external stakeholders
Key spokespeople (this is where the PR team comes in) and what internal and external communication channels will be used
A clear chain of command
Emergency funds
Contingency plans
Holding statements

Finally, a solid crisis management plan implements the right people for the right job. The crisis communicator should be able to perform well under pressure and a social monitor should be tasked with ensuring the communications response team keeps abreast of potentially negative backlash.

Once the crisis management procedures have been drawn up, tested and distributed to all management and stakeholders, assemble a professional crisis management team that is led by the CEO and staffed with senior members, department heads, a legal team, and public relations consultants.

During the crisis
At this point, the crisis management team will split to cover the two key response areas resolving problems resulting from the crisis.

Place one team in charge of discovering what caused the problem and then resolving it. With natural disasters and pandemics, this role is a little different and will be focused more on fixing the problem and addressing ongoing consequences. This team should also include members of the financial and legal departments in case of reparation.

The crisis communication team needs to include a mix of spokespeople, data crunchers, and social media monitors with the knowledge that different audiences may need different details (more data-heavy, more technically strong, or purely business-centric). With that said, one spokesperson should be pre-selected as the overall company voice and the single point of contact both internally and externally. Good communication is vital to calming chaos and stopping misinformation.

Crisis recovery
Once the crisis has been managed, a company must repair any damage to its reputation, specifically online. This can mean combatting negative reviews and re-building the online image with the assistance of online reputation management services or post-crisis PR specialists. This is also a good time to look at the crisis management plan, see where it fell short, or excelled, and make changes accordingly.

The Importance of Forecasting

Simply drafting and devising a management plan isn't enough when it comes to protecting a business against financial setbacks due to unforeseen crises.

The plan should be regularly revised and updated to reflect new information, personnel changes, or new threats on the horizon. Post-crisis is a perfect time to assess and make necessary changes for the future, however, updates should be implemented regularly throughout the year.

Business management and forecasting software can also be incredibly useful when managing the changing supply and demand during these unprecedented times.

Demand planning and inventory and labor projections should accompany crisis plans to ensure the business is able to keep up with the potential dips in sales and demand. This information will help management to plan their budgets and resources sparingly to avoid overstaffing or over-ordering.