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How to manage a business crisis

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Most organizations today are battling some kind of crisis — a situation triggered by significant internal or external factors, or several small incidents that build and have an enterprise-wide, multifunctional impact.

These crises disrupt normal business operations and have the potential to harm or damage the reputation of the organization. Crises don’t discriminate and can threaten the existence of the organization if not contained in time.

In my more than two-decade professional career, I have seen many such crises and have come to categorize companies into four groups:

  • Those who go down with a crisis
  • Those who are able to weather the storm but suffer significant damage that leaves them lagging behind their peers, almost forever
  • Those who emerge stronger by turning a crisis into an advantage
  • Those who do not change at all and continue to face crisis after crisis until fighting crises becomes a part of their routine
“Crises don’t discriminate and can threaten the existence of the organization if not contained in time.”

The most intriguing are companies that fight a crisis and emerge stronger and more successful. Almost all of the companies that seem to thrive after a crisis have something in common — they make dedicated efforts to prepare themselves for a crisis in advance.

Owning the crisis response

When a crisis hits, it’s natural for the C-suite, most likely the CEO, to own the crisis response. However, many different teams — finance, IT, legal, for example — are involved in crisis remediation.

Without a clearly appointed leader, it can become a situation of too many cooks spoiling the broth. Similarly, a lack of clarity about who is supposed to do what and how to swing into action creates confusion.

Crisis-ready organizations identify a leader for crisis response, along with a designated team with clearly defined roles and responsibilities. Such organizations invest in the development of crisis management plans and test and continuously update them.

Naturally, such organizations run crisis preparedness as a program with an owner who is responsible for testing crisis management plans through simulations. A good crisis management plan recognizes that a crisis is never a single isolated event.

It always has a domino effect on various aspects of the organization, with internal as well as external stakeholders the most affected. Simulations reveal gaps in the organization, and organizations that learn from and fix these gaps before it’s too late are much more confident during a crisis.

“A good crisis management plan recognizes that a crisis is never a single isolated event.”

A timely and authentic response

Rapid adoption of technology creates interconnected organizations, and the consequences of a crisis reverberate in real time. This impact has a human dimension and again affects relationships with internal and external stakeholders the most.

Today, news about an important event instantly goes viral. It is therefore vital that crisis response is timely and authentic — something that can only be achieved if the response to a crisis is based on facts. Gathering accurate facts quickly during a crisis is imperative for an effective response.

Crises come in all shapes and sizes, and they do not discriminate. Typically, larger organizations are more vulnerable to crises.

“Crises will increasingly become harder to contain and more complex to solve and address.”

Surveying crisis response

PwC’s first-ever Global Crisis Survey involved more than 2,000 companies, including views from more than 150 C-suite executives from large, publicly listed companies in India and companies receiving private equity funding.

Almost all the respondents in India (97 percent) anticipated a crisis in the near future; 80 percent said they had faced at least one crisis in the past five years.

The survey findings indicate that close to four in 10 of the companies in India that are in a better place post-crisis have allocated a budget for crisis management before the crisis hit — and nearly half saw their revenue grow as a result. In addition, 87 percent of the respondents in India not only recognize the importance of gathering facts but also realize the benefits of gathering accurate facts quickly.

Respondents who were in a better place after a crisis performed a root-cause analysis of their crisis response: Nearly all (98 percent) acted on the results, one-third made a few changes, a quarter defined several projects for completion and others (16 percent) are taking substantial action.

A huge majority of companies in India who self-identify as “in a better place” (94 percent, including 59 percent that agreed strongly) confirmed they acted as a team in response to the crisis, with a similar majority (92 percent) agreeing they acted with integrity.

Crises will increasingly become harder to contain and more complex to solve and address. With continuous scrutiny from stakeholders, regulators and the media, there is even less room for error, thus making organizations and leaders responsible for doing the right thing from the outset.

Republished with permission, this article first appeared on World Economic Forum.

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