Types of Crisis

Crisis :- An unstable or crucial time or state of affairs in which a decisive

change is impending. More loosely, it is a term meaning "a testing time" or an
"emergency event". A crisis implies a situation where time is short and an
effective decision has to be taken immediately. The crisis perpetuates a sense of a
lack of control throughout the business worsening the whole situation. Thus crisis
management needs to be rapid and effective with the required flexibility to the
plans made to meet further shocks.

Types of Crisis
1. Financial Crisis - Financial Crisis occurs when the business is hit with
the crisis financially. Such a crisis arises when the business incurs losses
over considerable periods of time or when due to lack of accountability
loses consumers’ trust among other situations. Financial issues such as
bankruptcy, revenue losses, inflation or sudden change of trend in the
market can cause the financial crisis in an organization.

 For example - Kingfisher Airlines, Sahara, Punjab national bank etc .

2. Technological Crisis - Technological crisis arises as a result of

failure in technology. Problems in the overall systems lead to technological
crisis. Breakdown of machine, corrupted software and so on give rise to
technological crisis. The usual means of management would include
primarily mitigating the losses and stopping the effects of the failure from
affecting more people or elements.
 For example- Bhopal gas tragedy
3. Natural crisis - Natural crisis takes place because of the occurrence of
natural phenomena such as earthquake, volcano, floods, storms or any
other act of nature. Damages caused by these calamities are classified as a
natural crisis. Natural crisis are not in the hands of anyone. These crisis can
be on large scale. Tornadoes, Earthquakes, Hurricanes, Landslides,
Tsunamis, Flood, Drought all result in natural disaster.

 Example - The power of Jaiprakash associates at Nathpa in himachal

Pradesh was devastated by flood.

4. Confrontation Crisis- These types of crisis happen when a group of

people or an individual have certain demands and they fight against the
organization, institute or government to make them accept their demands
and fulfill their expectations. The common methods confrontation crises
are boycotts, strikes, blockade or occupation of a workplace, picketing
outside the organization, giving an ultimatum to the people in authority,
destroying the property of the organization. There is no cooked way to deal
with such situations. However, taking the help of police and law might help
to deal with confrontation crisis.

 Example- Rainbow/PUSH’s (People United to Serve Humanity) boycott of

Nike
5. Workplace Violence - These types of crisis happen very frequently
among the labor class of the organization. When employees of an
organization fight within the premises of the organization and disturb the
work – environment is called workplace violence. It is a crisis which has long
term influence and also disturbs the mental health of employees within an
organization and it should be dealt with harshly. Such a type of crisis arises
when employees are indulged in violent acts such as beating employees,
superiors in the office premises itself.

 Example: 1982 Chicago Tylenol murders, Procter and gamble’s logo

controversy
 6. Crisis of organizational misdeed- Organizations face crisis of
organizational misdeeds when management indulges in deliberate acts of
illegality like accepting bribes, passing on confidential information and so
on. Crises occur when management takes actions it knows will harm or
place stakeholders at risk for harm without adequate precautions.

Crises of skewed management values- Crises of skewed

management values are caused when managers favor short-term economic gain
and neglect broader social values and stakeholders other than investors. This
state of lopsided values is rooted in the classical business creed that focuses on
the interests of stockholders and tends to disregard the interests of its other
stakeholders such as customers, employees, and the community.

Example: Sears sacrifices customer trust

Crises of deception
In an organization, when thousands of people work together, it becomes difficult
to keep the important information secret. A crisis of deception can prove to be
outlandish for an organization. A person from the organization itself
misrepresents the information about the organization with the intent of causing
harm to the organization. These situations can be handled by discussing the
matter with the legal practitioner and taking the required steps to mitigate the
damage.

 Example: Dow Corning’s silicone-gel breast implant

Crises of management misconduct

Some crises are caused not only by skewed values and deception but deliberate
amorality and illegality. Changing company culture is the best way to address
organizational crises because these problems are typically caused by employees
who neglect customer needs. Embracing an organizational culture that's
dedicated to customer success can reduce the chances of encountering an
internal crisis. Additionally, backing this type of environment should result in the
hiring of employees who are closely aligned with your company's values.
How to deal crisis
 Gather facts
 Be prepared
 Communicate quickly and accurately conduct brainstorming.
 Develop policies to minimize crisis.
 Assemble and organize resources.
 Create a crisis management team

Rahul Ghosh
MA- APR 4th Semester