Basics of Crisis Management

People often confuse crisis management and contingency planning, using the terms interchangeably. Crisis management (or disaster recovery) occurs during and after an event (such as the outbreak of a fire). Crisis management asks ‘What now?’ questions. Contingency planning happens before (planning a fire drill). Contingency planning asks ‘What if?’ questions, such as what the firm should do if exchange rates or interest rates rise.

What is crisis management?

Crisis management, or disaster recovery, refers to the response of a business organization to a crisis situation.

It is about being reactive to events, that can cause serious harm to the business or affect it in a negative manner, by taking actions to maintain its credibility and good reputation.

Otherwise, sales of products might be greatly reduced threatening the market position of the firm.

Example 1: There have been several serious crises in the first decade of the 21st century including the attacks of September 11, 2000 in the USA, the SARS outbreak in Hong Kong, a tsunami in Southeast Asia, world oil prices reaching historical highs as well as global pandemics of avian flu, swine flu and COVID-19.

How to manage crisis?

Crisis management is reactive rather than proactive.

Crisis management typically involves formulating the best response to a crisis under difficult circumstances, radical…