Crisis Management

How would you ‘cope’?

What disasters could your house
face?
Possible disasters…
Business Disasters
If you were a terrorist, what business
areas would you threaten?
• physical security
• document security
• personnel security
• hardware security
• telecommunications security
• software security
So what is Risk Analysis?
So what is risk analysis?
• Risk Analysis has been defined as:

"a formal process of determining risks and

developing a plan to deal with them"

Risks do not arise all by themselves. A risk is

normally a product of two factors:

• threats (something could go wrong)

• and vulnerabilities (the information system/s

used by the business will allow things to do
wrong).
Threats & vulnerabilities
• Threats include
• Deliberate manipulation of information
• Impersonation of a legitimate user
• Untrained or poorly trained staff

• Vulnerabilities include:
- Poor website or network design (e.g. which can
allow "hackers" into a system or web site)
- Poor recruitment procedures
 You
Stages of Risk analysis need to
know
this!
Risk Analyst's need to identify….
1. The potential cost of the loss of ‘data’
2. The probability of problem occurring
3. The cost of measures to protect
4. The inconvenience to staff – security
measures are useless if everyone bypasses
them!
Disaster Avoidance….
What can a business do to avoid the
following ‘disasters’?

• Fire in building
• Power supply breakdown
• Virus infection
• Theft of equipment
• Theft of customer data
Think of a HQ of
a city bank to set
the context for
your answers
So why should anyone bother
with disaster management?
Effects can be catastrophic
• 90% of businesses who suffer major loss of data
go out of business within 2 years

• 43% go out of business almost immediately

• In the UK, company and directors may be

prosecuted by the Health & Safety Executive

• In financial and insurance sectors, customer

may well sue
More recent crisis?

2008
 Can you think of any businesses that
have had to deal with a ‘crisis’
recently?
JJB Sports results: 72
store closures, 800 job
losses, adjusted operating
profits down 28% at
£34.3m.

Ikea, the Swedish retail chain,

warned that the housing downturn is
hitting sales of its flat-pack furniture
and said it is scaling back some of
its expansion plans
 Environmental disaster
Hostile takeover

Faulty/dangerous Major customer

What other types of withdrawing
products
crisis might a business face? orders

Physical destruction e.g. bombing /

Strikes by workforce earthquakes / Physical destruction e.g.
bombing / earthquakes / fires
 Personnel: Finance:
Leadership style …crisis ad campaigns;
usually requires direct environment clean up;
authoritarian leadership; compensation

internal and external

communication that is rapid
and direct; external
communication that is
informative and truthful.

Training What areas of a business

Recruitment
could a crisis affect?

Operations:
particularly if JIT
Storage/warehousing
Machinery Marketing:
public image under threat – PR
Ad campaigns
Promotions to increase sales
Can ‘crisis’ be avoided?
• Companies can have contingency plans
established in order for staff to know how
to deal with a crisis when it occurs!
Contingency Plan content
• A list of the most critical business functions;
• A list of the facilities
hardware, software, data, personnel and other equipment
necessary to support those functions
• A Back-up procedure
• A method for getting in touch with all key personnel
• A Recovery procedure
• Education and training of personnel involved in implementing the
plan
• Regular drills to test the effectiveness of the plan
 Contingency Planning
• The very nature of this unit reflects that businesses
have to be able to respond to change and change can
be unpredictable
• What is contingency planning?
 The process by which organisations try to prepare
for unexpected and potentially disastrous events
• What is crisis management?
– The manner in which an organisation responds to an
unexpected and potentially disastrous event

A CRISIS RARELY GOES AS PLANNED!

What steps can a restaurant take to avoid a crisis?

What are the costs to a business?
Can a crisis be avoided?
How important is it to limit any damage?
BUSS4.8 Planning for Change
Contingency Plans
• Value • Limitations
• Sense of security • Costly and time
• Limits damage consuming
• Speeds up recovery – Including opportunity
process cost

• Informs staff • Needs reviewing

training • Lack of predictability
• Preventative Fifa has a contingency plan in case
measures can be South Africa is not ready for the World
Cup.
part of CSR Should there be a Contingency plan in
case London is not ready for the 2012
Olympics?
BUSS4.8 Planning for Change
 Contingency Plan
• Cadbury’s testing out of date

• Cadbury’s withdraws products made in

China

• Cadbury’s is fined
In each case:
Identify the cause of each event
Identify the potential threat
What actions could have been taken to prevent these events?
Rank each event on a scale of 1 – 10 in terms of seriousness to the future
success of Cadbury’s. Justify your answer
BUSS4.8 Planning for Change
How would you cope?
Group work
• In twos or threes

• You will be given a crisis to decide on a

contingency plan

• Be prepared to feedback how you would react

as the MD/BoD to your scenario

• You need to consider each stakeholder group!

Long term strategy
• Need to consider the BIG picture!
• What will be the impact on ALL sectors of
the business…

• HRM
• Operational Management
• Marketing
• Finance
Strategy issues include
• Profit margins – what will the impact be?
(short term less important than the LONG
TERM!)
• Risks & uncertainty
– what is the business’ attitude to risks?
• Opportunity costs
• Business objectives
• Constraints – internal & external
• Ethics
• Business culture
• Ansoff matrix & Boston matrix
 Strategy tactics
– what if Richard Branson died in
an accident?
How should the Virgin
conglomerate react?
 Strategy tactics
– what would the school do
if the U6 revision trip
were in London
when a bomb goes off?
 Strategy tactics
– how would you have reacted
If you were the MD of
Bernard Matthews?
 Strategy tactics
What are the
implications to TESCO of
poor quality
FUEL being sold?
How would you
have reacted?
 Strategy tactics
You are head of ICT at a bank
and a ‘tape’ of all customer
Data has been lost in transit!
 Homework

Revise for assessment next

lesson!