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Crisis Management Plan

Date published: March 24, 2021
Being able to rebound after a catastrophe is a skill that's earned through hard work and preparation. A big part of that is implementing a crisis management plan. Learn how below.
Business Tips

Crisis management.

Change is inevitable. More and more companies today encounter a vibrant and growing environment that will push them towards more change. Thriving companies promote a positive approach towards change by anticipating it and efficiently planning.

Planning for the worst is called having a crisis management plan.

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What is a Crisis Management Plan?

A crisis management plan (CMP) details how a business will respond to a certain dilemma. The plan includes the personnel involved and their respective responsibilities. The plan aims to reduce damage and recover operations as fast as possible.

Damage caused by a crisis can include:

  • harm to the organization's reputation
  • damage of operations
  • legal complications

Crises can appear in several forms — from a financing failure to a natural disaster like a global pandemic. This is why implementing a plan is fundamental for an efficient emergency protocol. According to the Deloitte survey of large companies completed in 2018, 84% have a crisis management plan, which is a substantial increase from 49% in 2015.

Importance of a Crisis Management Plan

Possessing an emergency management plan is important because, without one, company personnel may exercise poor judgment and make bad decisions. In fact, making speedy, effective decisions during a disaster is paramount to a fast recovery.

As a change is taking place, a well-set plan typically keeps the employees centered on the organization's highest priorities. It mitigates indecision that can increase the damage. Furthermore, the practice of devising a strategy helps companies in identifying future threats and minimizing their likelihood.

Likelihood of a Disaster

A powerful CMP is necessary, as emergencies and accidents are more prevalent than most people recognize. In fact, in 2019, the consulting company PwC completed a survey with more than 2,000 senior executives globally. Their study concluded that 69% of the managers encountered at least one corporate disaster in the last five years.

The problems faced fell into one of 20 distinct categories, the most frequent being:

  • Financial difficulties
  • technology breakdown
  • the collapse of an operation

Other potential crises included:

  • cybercrime
  • natural hazards
  • viral social media
  • leadership mischief

These crises can shut down a company.

Enron: A Bad Communication Model

How to manage a crisis at work.

Enron was the seventh-largest company in the U.S., and it failed in the early 2000s due to forged accounting. Its downfall is one of the business world's most infamous cases, with its repercussions still being felt to this day.

Enron was thought of as one of the best companies to work at in its heyday. However, it was infested with problems.

One of its biggest problems was decentralized decision-making and a financial command composition that made it difficult to assess the company.

To avoid Enron's famous collapse, companies should use communication to:

  • create a moral climate
  • inform about organizational operations
  • maintaining openness to signs of problems

Better communication practices may have sent Enron down a different path.

Researchers from the University of Sydney's School of Civil Engineering examined over a quarter of a million emails of Enron's internal employees, starting from three and a half years heading up to its 2001 bankruptcy.

During this time, the staff started to communicate more often within small gatherings of peers. The researchers found that the company moved from a deeply centralized system to a chiefly decentralized and distributed operation.

Companies can learn from Enron's mistake by omitting decentralized systems and ensuring efficient communication among all levels of the corporation.

Purpose of a Crisis Management Plan

A CMP is often regarded as contingency planning, which equips an organization with the right tools to manage an unexpected disaster. The goal is to shorten and reduce the impact of a dilemma.

The plan is meant to:

  • protect affected employees
  • help maintain operations and productivity
  • improve team stress management
  • preserve a company's reputation

Contingency planning also strives to make a company more adaptable and able to endure the long-term impacts of a disaster.

Who Should Execute a CMP?

Ideally, the CEO and other senior managers are responsible for creating a crisis management strategy. With that being said, it should be noted that help may also come from the risk management team, legal team, and other sectors.

A Crisis Management Plan Example

Writing out a crisis management plan.

There are plenty of CMP examples floating around the internet. While we won't go into a lot of depth here, there are a few key features worth mentioning.

An effective emergency control system should include the five fundamental components mentioned below.

  1. Risk Analysis

This initial step helps to describe the situations that the organization may encounter. This will help in gaining a more precise understanding of these possible circumstances where a disaster may happen, which will, in turn, guide your plan preparation.

  1. Activation Rules

Triggers are a must-have for a disaster aversion strategy. They let you know when to start using the plan. It's best to include levels of urgency to determine a particular crisis response. Moreover, there should be a clear description of how the response should escalate if necessary.

  1. Chain of Command

When tackling a complicated challenge, orders may get lost, and hierarchy may be ignored. However, that should never be the case if you wish to execute a fully functional change aversion strategy. The plan must show who is in charge and how they will communicate. The plan should clearly define who holds ultimate authorization and who reports to whom. Establishing a sharp organizational chart promotes coordination and consistency, which, in turn, helps a business achieve its goals during a disaster.

As determined by the enormity of the situation, a plan may require supplementary levels of command. For instance, a situation contained to one section or location may require a contingency response team and leader only at that precise site; however, a company-wide emergency may demand a headquarters-based emergency command unit.

  1. Command Center Plan

When facing a crisis situation, it is important to assert what will be viewed and serve as the center of operations for the entire team. Furthermore, the plan should indicate what supplies and utilities the team will need to execute the plan efficiently. A plan always calls for a backup plan as well. In the event that the first command center is unreachable, there should be an appointed backup command center.

  1. Response Action Plans

This particular section of the crisis management plan template revolves around setting a comprehensive strategic approach to how each scenario will be dealt with. This preparation entails allocating responsibility for each job. Regina Phelps, founder of crisis management consulting firm Emergency Management & Safety Solutions states that some of the best plans utilize an "all-hazard approach." This means that there shouldn't be a plan for one specific trial. It should include all probable crises that may occur.

  1. Funding Options

A crisis may lead to a temporary or permanent decrease in revenue. It might be necessary to borrow money. If that means using a short-term business loan, then make sure your CMP outlines your preferred process. Having several options available may make it easier to acquire the money during an emergency.

When setting a personalized plan for your organization, be sure that it correlates with your business continuity plan.

Crisis management planning involves preparation, process improvement, experimentation, and training.

Use the following steps to create a powerful CMP:

  • Determine the team members that will tackle the crisis.
  • Document the standards for concluding the crisis that has transpired.
  • Install monitoring operations and systems for immediate notification of potential crisis conditions.
  • Designate a respective spokesperson in the event of a crisis.
  • Present a list of the chief emergency contacts for direct use.
  • Specify who should be sought out during a crisis and how this notification should happen.
  • Set a distinguished process for evaluating the incident, its implied austerity, and how it will transform the building and employees.
  • Generate an efficient approach for posting and replying on social media.
  • Develop a method to examine the efficacy of the crisis management plan and modernize it on a regular basis.

Business Continuity Preparation

In addition to executing and holding a well-efficient CMP, an organization must also have a reliable plan to sustain operations through recovery.

Business continuity preparation (BCP) minimizes the impact of possible losses. It secures dependable rehabilitation strategies and restoration systems while ensuring the continuation of services. The plan may address temporary gaps in working capital through a business line of credit.

The method of producing a BCP is quite similar to that of developing a CMP. The BCP includes all hazards from human-caused accidents to technological problems to natural hazards. Risk assessment is needed to surmise the business's influence on personnel, infrastructure, operations, the environment, economic circumstances, administrative engagements, and reputation.

The analysis distinguishes an acceptable level of destruction for information, important processes, functions, and applications, among other factors.

Senior management is obliged to establish a prevention plan based on the results of danger identification and risk assessment, impact examination, program limitations, operational practice, and cost-benefit analysis.

Prevention covers preparation, training, monitoring the quality management system, examining the BCP at a measured frequency, and conducting tests to assure the program is running.

When creating a BCP, you should consider factors such as the administrative landscape, contractual commitments, financial means, and infrastructure.

Final Thoughts

Once the plan is drafted, established, and tested, it is vital to always revisit the plan regularly. The plan must be held up to date, particularly as employees enter or depart the company, technologies improve, and other developments transpire. It is necessary to evaluate and examine the plan at least yearly.

Ethan James   Lead Writer
Ethan James is an experienced Financial Writer at Lendza with over a decade of experience.