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Managing Crisis Situations: No Company is Immune - How to Deal with Disaster

Companies should create detailed plans and guidelines to handle worst-case business crises, but disaster planning is the ultimate key.

Spring 2011
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Create a Plan
Once you have assessed risk, management must develop a plan based on risk tolerance. Crisis prevention and control procedures form the basis for crisis management plans. For example, if operations are susceptible to fire, be sure to regularly inspect alarm systems and fire fighting equipment to make sure they work properly and are in their proper places. Likewise, personnel training and fire drills will insure a prompt response to a fire.

"Crisis management plans are not only for the corporate office," says Carlos J. Cortez, manager of Kraft Foods' Global Security Program. "Threat management teams at the local plant level need a good understanding of the overall crisis management plan to properly respond to a local crisis."

Deloitte's Action Plan asks three key questions:
• How will we know if a risk is imminent?
• How will we respond to specific risk events?
• How can we appropriately allocate our risk management investment?

While Deloitte uses a matrix approach to help clients develop crisis management programs, any method you use must be comprehensive.

Make Your Message Heard
Developing effective communications is a third key to effective crisis management. "You need to first define the nature of the crisis. Make sure you know you are addressing the root of the problem and not symptoms before you make misstatements," Smith says.

O'Hearn advises against both jumping to conclusions and letting the problem fix itself: "Both are big mistakes."

"Be frank with your audiences," he says. "If you can't make a delivery to a customer, be up front and try to find a replacement supplier if possible. Your actions will be appreciated."

Tailoring your company's message to the appropriate audiences is another critical component, Smith says.

"Companies have several audiences that must be kept informed, but each audience requires different information. It's important to remember that the press is not an audience; it's a conduit to reach some of your audiences. The first 48 hours are crucial in a crisis situation."

And don't deny that the crisis is occurring at all.

"Create a culture of candor by being open and transparent," says Bill George, a management practice professor at Harvard Business School. "If you don't know the extent of the crisis, say so. Don't pretend everything is under control when future events will prove you wrong."

Finally, make sure your crisis management plan incorporates periodic reviews to ensure your plan is up-to-date and takes into account new circumstances.

Realistic Threats
While natural disasters, such as the Japanese earthquake, grab the world's attention, they are a rare threat to corporate operations and survival. "There's a whole other side of crisis management that may not generate as much worldwide coverage, but can be just as deadly to your company," says Jon Groussman, president of CAP Index, which forecasts and analyzes crime and security risk. "Workplace violence, sexual assault, stolen corporate documents, and a host of other problems can turn into crisis situations which affect employee morale, tarnish your brand, and cut into your bottom line."

Timothy Dimoff, president of SACS Consulting & Investigative Services, calls this, "a new era with more violence and aggression in the workplace."

"Employee-on-employee confrontation has increased tenfold in the past six years," Dimoff says.

Specialty chemical maker Lubrizol is already creating policies that incorporate these strategies.

"We're starting to integrate security risk into our overall crisis management program, and plan to roll it out to all U. S. plant sites this year," says Tom Scott, Lubrizol security manager. "We're training employees to spot warning signs, concentrate on prevention, and know how to respond to workplace violence in order to protect themselves and others."

Taking the time to make an effective crisis management plan is half the battle. You can't prevent every disaster, but you can be as prepared as possible to deal with the aftermath.

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