Crisis management

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Crisis management involves identifying a crisis, planning a response to the crisis and confronting and resolving the crisis. Crisis management can be applied in almost any field of endeavor, but it is most commonly used in international relations, political science and management. For more about crisis management in international relations, see International crisis.

Many school districts also have developed crisis response guides, which identify potential situations such as fires and other disasters, bomb threats, confronting unwelcome visitors, violence (and threats thereof) and the death of a student.

In general terms, the theory of crisis management can be divided into crisis bargaining and negotiation, crisis decision making, and crisis dynamics.

In management

In business there are three main types of crisis:

Financial crisis - short term liquidity or cash flow problems; and long term bankruptcy problems
Public relations crisis - negative publicity that could adversely effect the success of the company
Strategic crisis - changes in the business environment that call the viability of the company into question - for example the introduction of the automobile was a strategic crisis for buggy-whip manufacturers

Certain preliminary measures need to be taken to prevent a crisis. Companies should always plan ahead and project likely outcomes. They should avoid decisions that have the potential to turn into a crisis. They should know their "worst case scenarios" and have a contingency plan for it.

If prevention has not been successful, then the following six steps should be undertaken immediately:

Do an objective assessment of the cause(s) of the crisis.
Determine whether the cause(s) will have a long term effect or whether it will be a short term phenomena.
Project the most likely course of events.
Focus all the most capable people (including yourself) on activities that will mitigate or eliminate the problem.
Look for opportunities - there could be a "silver lining"
Immediately act to guard cash flow.

If it is a financial crisis do not wait for further evidence before acting. Immediately take actions to maintain or increase cash flow. These could include:

accelerate accounts receivable payments even if this requires the granting of discounts
decelerate accounts payable payments even if this means losing discounts
increase short term sales
maintain or increase profit margins on sales if possible
reduce expenses:
* eliminate non-essential expenses
* sell non-mission critical assets
* reduce payroll
* outsource non-mission critical operations
renegotiate loans and other debts wherever possible - obtain interest-only loans or extended payment terms

If it is a public relations crisis, act immediately to prevent or counter the spread of the negative information. Containment may require intense media activities. Use every media available to you to provide a counter argument or question the credibility of the original negative publicity.

Crisis management

In management

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