How A Crisis Management Plan Could Give You A Competitive Advantage

HSBC - Global

The global pandemic forced business owners in every sector to consider the impact of sudden disruption to their cash flow. But most corporate crises don’t affect the entire planet: there are data breaches, regulatory changes, product failures, viral media stories, labour disputes and other issues that could affect the health of your business.

While no company is immune to such events, a crisis management plan could increase your resilience when one hits and, if you’re especially well prepared, even give you a competitive advantage on the other side.

Bouncing back

A good working definition of a crisis is any event that’s triggered by internal or external factors that disrupt your whole business and threaten its reputation.

PwC’s Global Crisis Survey 2019, which polled over 2,000 executives across 43 countries, showed that almost 7 in 10 companies experienced at least one crisis matching this description in the last five years (pre-coronavirus).

It’s a startling statistic but the report also highlighted something positive: 42 percent of businesses said they were in a better place post-crisis, with some even reporting revenue growth as a direct result of how they handled the disruption.

The common thread among those who thrived post-crisis was being prepared; they took specific steps ahead of the disruption to predict the risks and put contingency plans in place.

Identify the risks

The first step in forming a crisis management plan is risk assessment.
It can be a good idea to decide who will ultimately “own” the responsibility of crisis management while still seeking the input of department leaders across your business, as well as key external stakeholders.
Together, you should list the threats that are most likely to affect your business across seven categories.

  • Operational – e.g. supply chain disruptions, product failures, marketplace disruption
  • Technological – e.g. cybercrime, data breaches, tech outages
  • Humanitarian – e.g. earthquakes, storms, geopolitical disruptions
  • Financial – e.g. liquidity, shareholder activism
  • Legal – e.g. ethical misconduct, regulatory changes
  • Human Capital – e.g. workplace violence or abuse
  • Reputational – e.g. leadership misconduct, viral social media stories

Predict the business impact

Once you have a shortlist of threats across relevant categories, you can use a Business Impact Analysis to determine the likely consequences of each disruption, including:

  • Lost or delayed sales and income
  • Increased expenses (e.g. overtime, outsourcing, expediting costs)
  • Regulatory fines
  • Customer dissatisfaction
  • Delayed business plans, including marketing and product launches

A crisis could create a chain reaction of negative consequences, too. If this happens, taking a swift, unified approach to crisis management is essential. For instance, in 2019, a star basketball player suffered a knee injury when the Nike shoe he was wearing fell apart during a game. Media outlets swarmed on the story and Nike's stock dropped 1.8% the next day. Nike responded with a public statement expressing its concern and well wishes for the player, but that wasn't all. Nike also sent a team to where the basketball game took place to collect information on the incident, then visited its manufacturing site in China, returning with numerous suggestions. A month later, the player returned to the court with custom-made shoes from Nike which he described as "incredible" to reporters, thanking Nike for what they'd done.

Plan your responses

What steps would you need to take in the event of a crisis?
A disruption that threatens the whole company is likely to require the combined efforts of managers across departments.

For instance, a social media blunder might require your digital team to quickly issue statements across all your social platforms. At the same time, customer service needs to be briefed on what to say on incoming calls.

  • Assign team members to critical tasks, such as assessing the impact and contacting suppliers, before the crisis, so there’s no delay in initiating responsive communications internally and externally.
  • Pre-approved communications could help speed up your response, including holding statements and signposts that direct customers to helpful information.
  • Put systems in place to track recovery progress, e.g. a dedicated internal chat channel.
  • Be ready to compile reports that monitor the fall-out, e.g. Google Alerts that track your business name in the news, social media mentions, and customer sentiment indicators.
  • Your crisis management plan should be kept up-to-date so that it not only reflects changes in your business (e.g. new products, supplier relationships, and technologies) but also changes to your workforce. Everyone who will play a key role in reacting, responding and rebuilding should be aware of the plan.

While business disruptions may seem more likely than ever, with the right preparation and planning, it’s possible to be a crisis optimist. Crisis management is increasingly a type of strategic risk intelligence and therefore represents an opportunity to boost your immunity to adversity and, ultimately, pave the way for growth.

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