Murphy's Law, which suggests that anything that can go wrong will go wrong, significantly influences our lives, including the business world. In today's environment, businesses face an unprecedented number of challenges, with potential problems constantly looming across all industries.
PricewaterhouseCoopers (PwC) revealed in their Global Crisis and Resilience Survey 2023, that a whopping 96% of organisations have experienced disruptions in the past two years - even after the massive transformations after Covid-19. More importantly, 76% admitted that the most serious cases had a medium-to-high impact on operations.
So Where Are All These Crises Coming From?
In 2019, PwC's Global Crisis Survey identified 19 potential crisis triggers, categorised into seven broad areas: operational, technological, humanitarian, financial, legal, human capital, and reputational. This wide range highlights why all industries need to be vigilant. Kristin Rivera, PwC's Global Leader, underscored this by stating, "Crisis can happen to anyone, anywhere, and at any time. Being ready is vital to mitigating its impact on customers and your organisation."
Crisis online is amplified on social media. Brand, product, and service crises can be catalysed and magnified by collective opinion on the Internet. Such marks the age of doing business on the Internet, where online crises can develop in the blink of an eye and affect a brand’s online reputation. What’s important is to learn how to proactively navigate the intricacies of online reputation and crisis management, ensuring organisational success in an ever-evolving digital landscape.
The World Economic Forum took this one step further, and calculated existing data to arrive at five emerging and rapidly evolving risk clusters across various domains. The Global Risks Report 2023 reviewed those in the economic, environmental, societal, geopolitical, and technological domains, and identified a set of clusters that pose significant to crises in the near future, and the implications when they do. They include:
Natural ecosystems: Risks to natural capital, such as water, forests, and biodiversity are increasing due to demand outpacing supply, and exacerbated by the effects of climate change and dawdling regulation policies.
Human health: Risks arising from increasingly strained healthcare systems still grappling with the fallout of the social, economic, and health aftermath from COVID-19 pandemic.
Human security: A concerning trend towards increased militarisation amidst growing geopolitical tension, coupled with heightened vulnerability of nuclear-armed states to emerging technologies and new forms of weaponry, leading to increased risks of multi-domain conflicts both internally and externally.
Digital rights: With digitalisation taking over all forms of businesses and communications, there is a potential risk with personal data and cyber security, with individuals losing not just digital autonomy but assets as well. When data breach strikes as crisis for organisations, the cost of damage is not just in dollars but in trust and intrusion of privacy. It is important to manage perceptions and reputations, manage stakeholder communication and understand the hallmarks of a well-handled crisis.
Economic stability: Mounting debt can quickly collapse financial and social systems, and cascade into a global reckoning that causes severe social distress.
How Do We Move Forward With These Risks in Mind?
With multiple threats hovering on the horizon, it becomes not a question of "if", but "when" a crisis will hit. Crises can strike at any moment, disrupting operations, damaging reputations, and threatening the very survival of businesses in the blink of an eye. From natural disasters and cyberattacks to pandemics and economic downturns, the range of potential crises is so vast and diverse that it leaves no businesses safe.
One can even say that we are currently in a state of permacrisis - with sustained disruption encounters flowing and ebbing like waves at different strengths, leaving organisations in constant flux. This is why crisis management has emerged as a priority with businesses investing in training, in order to learn and develop suitable frameworks that allow them to navigate these challenges more effectively. The nature of a crisis is often unexpected, and so recognising risks proactively is the best way to mitigate their impact and steer towards a more resilient future.
Companies which do this are not just investing in a skill - it's adding a welcomed defining characteristic in today's successful organisations. It's less about avoiding crises altogether but raising testament to their capacity in managing them effectively and coming out stronger on the other side, demonstrating resilience, adaptability, and leadership. This can leave a profoundly positive impact on its stakeholders, including shareholders.
For example, in 2018, Starbucks faced a public relations crisis after an incident that resulted in the wrongful arrest of two African American men at one of its stores. In response, Starbucks took swift and decisive action, closing thousands of stores for a day to conduct anti-bias training for its employees. This dramatic and proactive approach not only helped the company address the immediate issue, but also demonstrated to the public its commitment to diversity and inclusion. Following the training initiative, Starbucks saw an increase in positive sentiment and customer loyalty.
Internally, crisis management cases like these can lead to innovation as well. It's a chance for the company to reassess priorities, realign strategies, and reinvent business models. In this way, opportunities could emerge from new pathways. This can contribute to growth and transformation, and more importantly, in a sustainable way that promotes business longevity.
While the processes are rich with techniques, tools and strategies, the fundamentals of crisis management can be essentially broken down into three parts.
1. Crisis Identification and Preparation
When looking to set up a crisis management framework, the first step for organisations is to undertake thorough risk assessments to pinpoint potential threats. Businesses must look both inward and outward to assess risky items that are linked to their performance, objectives, or values, and render the likelihood and impact of different scenarios. To do this, Fortune 500 companies use methods such as SWOT analysis or PESTLE analysis. The insight from these identifications will then guide a renewal in existing protocols and strategies, so as to minimise the potential of the risks.
Following this, a crisis team is established and they will be responsible for coordinating and communicating the organisation's response to a crisis. This team should include representatives from different functions and levels to ensure a comprehensive framework, such as those from senior management and legal, to public relations, human resources, and IT. The crisis team will not only be in charge of communication, but also the implementation of monitoring systems and early warning mechanisms aids in order for organisations to respond swiftly and effectively. This proactive approach, encompassing risk assessment, protocol establishment, and early detection, lays the foundation for successful crisis management.
2. Crisis Management and Communication
When an event strikes, the crisis team is activated, and moves into the second phase of crisis management. Swift and decisive action is imperative upon identifying a crisis to contain and minimise impact. This can be sending out immediate emails to users when the business website is down, or crafting a quick statement, or enhancing preparedness for media communications in response to a social media allegation.
Engaging the crisis management team to develop and execute a strategic communication strategy for an engaged and evolving audience, all while securing valuable time to gather crucial information for subsequent actions. This is why a well-crafted communication strategy is paramount, maintaining transparency and consistency to keep stakeholders informed and the necessary ones activated throughout the crisis. This should happen on all levels. For instance, if a hacker has been detected syphoning money from bank accounts, a public statement, emails and app notifications can alert all users, while bank representatives speak to specific victims to plan for reconciliation. Even after the crisis is over, the team needs to continue monitoring the space (both offline and online) to nip any new developments in the bud.
Communication practitioners and management teams to adopt a proactive stance in developing and executing a strategic communications approach for an engaged and evolving audience.
3. Crisis Recovery and Evaluation
In the aftermath of a crisis, effective recovery and evaluation strategies are crucial for establishing organisational resilience and growth. In short, it's a teaching moment for the business.
Recovery planning involves the development of comprehensive strategies aimed at restoring normal operations from short-term effects, as well as installing those used to mitigate long-term impact. It applies not just for the areas affected, but also existing crisis management plans and protocols to review and update risk assessments. As important as it is to uncover and attribute accountability, it is even more so to be as transparent as possible to rebuild trust among stakeholders and find alignment again after a crisis event. That's why a set of diverse initiatives such as feedback mechanisms, audits and employee engagement is often used to evaluate sentiments and solidify a united position in the face of adversity.
By embracing a proactive mindset and demonstrating their strengths during a crisis, organisations can turn adversity into advantage and emerge from crises stronger, more agile, and most importantly sustainably profitable.
Emerge from crises a winner. Learn more about Crisis Management at SMU Academy.
