Why You Need a Crisis Management Plan

Man in business suit with head in hands sitting in front of a laptop with colleagues behind him.

A crisis is a significant, unexpected and disruptive event that can undermine an organization if the crisis is not handled properly, according to consulting service Paradigm Solutions International. The event can be large or small in nature, internal or external to the company and a natural disaster or human in origin. A crisis often receives extensive media coverage and can lead to public scrutiny.

The following sections detail why you need a crisis management plan and should prepare for a crisis.

Reasons for a Crisis Management Plan

“Unlike Fortune 500 firms, smaller companies are often unprepared and usually do not have a crisis plan in place,” Bruce Condit of the Professional Retail Store Maintenance Association wrote at Inc. “They believe it will never happen to them. But, what if it does?”

“How well would your company fare if you died in an auto accident on the way to work? Who would assume your role and continue operations? Suppose you own a retail company and you discover that one of your primary products or services has created a major health issue—what would you do? If you operate a construction company and an industrial accident has killed several key members of your team—how would you react?”

A crisis can damage nearly any part of an organization. Potential effects include:

  • Personnel, facilities, information systems or critical records impacted
  • Business operations suspended
  • Public perception of the company diminishes
  • Profitability lessens or is momentarily eliminated
  • Legal, political and governmental risks assumed
  • Penalties received for non-compliance in specific industries and if the organization is publicly traded

Samsung, ranked 15th on the Fortune 500 list, illustrated the risks involved in crisis management when responding in September 2016 to reports of its Galaxy Note 7 phones spontaneously combusting into flames for no reason. Several airlines and safety regulators issued warnings about the phones not being in checked luggage, as well as not turning on the phones or plugging them into the USB port for charging during a flight.

Samsung quickly released a statement in Hong Kong assuring customers that phones used a different battery than the ones being reported, but the very next day the company had to retract the statement after realizing that 500 phones in Hong Kong had been affected. Another swift response in the United States frustrated regulators, as the Consumer Product Safety Commission’s recall guidelines and protocols were not followed.

“While I believe that their intentions for a swift response to this important issue were honorable, their rashness resulted in frustrating their customers and regulators, as well as continued and renewed media attention which has impacted their reputation,” crisis management speaker Melissa Agnes reported in Forbes. Samsung also lost billions in market value. Agnes stressed that crisis management requires both timeliness and accuracy.

Crisis Management Steps

There are seven critical steps to crisis management that every company should have in place, according to Condit.

  1. Have a plan. Every plan begins with clear objectives that protect any individual (employee or in the public) who may be endangered by the crisis. It ensures key audiences are kept informed and that the organization survives. The written plan should include specific actions to take if a crisis occurs.
  2. Identify a spokesperson. Media attention could result if the crisis impacts the health or well-being of customers, the general public or employees. Identify a spokesperson to ensure your company speaks with one voice and is able to deliver a clear, consistent message and participate in interviews.
  3. Be honest and open. A lack of honesty and transparency is a recipe for negative media coverage. Stop rumors and defuse a potential media frenzy by being as open and transparent as possible. Project this transparency through all communication channels, including news interviews, social media and internal announcements.
  4. Keep employees informed. An informed workforce helps ensure that business continues to flow as smoothly as possible. It also minimizes internal rumors that could lead to employees posting false reports on social media.
  5. Communicate with customers and suppliers. Information about any crisis should come from you first; not the media. Your crisis communication plan must include customers and suppliers and how they will be regularly updated during the event.
  6. Update early and often. Over-communicating is better than allowing rumors to fill the void. “Issue summary statements, updated action plans and new developments as early and as often as possible,” Condit said. “Remember that with today’s social media and cable news outlets, we live in a time of the 24/7 news cycle. Your crisis plan must do the same.”
  7. Don’t forget social media. This is one of the most important channels of communication. Have a social media team monitor, post and react to social media activity throughout the crisis.

Crisis Management Plan Examples

The National Mining Association (NMA) published a media and community crisis communication planning template that can help businesses develop a crisis management plan. It is specific to mining, but flexible enough for other industries to alter. Sections like the NMA’s guidelines for interacting with the media can be applied directly for many types of businesses.

Another example from Caesar’s Entertainment demonstrates what a crisis management plan looks like in another industry. This plan includes several examples of contingency plans that can affect the health and safety of guests, such as medical emergencies, natural disasters, criminal activity and more. It also includes several checklists that departments can use to ensure that they are following established protocol.

Whether you use a template or develop a crisis management plan from scratch, have legal counsel review it. Because these plans can cover safety concerns and regulations as well as impact the well-being and perception of the organization, seeking professional advice can make a big difference in the event of a crisis.

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