Did you know that 73% of CEOs expect at least one major crisis within the coming three years, according to PwC’s 21st CEO Survey? The number and frequency of threats, such as policy uncertainty, climate change, cyberattacks, geopolitical instability and overregulation, push organisations to prepare for all types of “troubling” scenarios.
But can we really prepare for something that “might” happen? The answer is yes, and it’s called Crisis Management.
Certainty and overconfidence aren’t allies in this case. Mitigation and resilience, instead, are words to always keep in mind when it comes to managing crisis.
In simple terms, crisis management is about identifying possible threats and drastic changes to the way organisations and their stakeholders do business, and the methods put in place to deal with these threats.
This usually translates into the ability of organisations to make decisions within a short time frame, under pressure, and often after an event or attack has already happened, like a data leakage or cyber attacks. As the number of threats continue to grow, it’s now crucial for companies to have a good, reliable and tested crisis-management plan. However, online or classroom training might not be enough if a business wants to explore in depth the reactivity of employees in the face of a crisis and how leaders take on, and delegate, responsibilities when stress levels and pressure are above the usual daily levels. This is where live scenarios prove their merit.
Imagine you and four friends go to an Escape room. You have 45 minutes to get out before the room is overrun by zombies. The key is well hidden among clues and puzzles you need to put together. While you might be consciously aware zombies don’t exist, in that particular situation, the levels of stress and pressure rise as the countdown begins. As the leader of your team, you know you need to act quickly, but with a cold head. You know you’ll be tested and you know you can’t give in to stress and panic. Can you do it?
A live crisis-management simulation follows more or less the same line of thought and strategy, but instead of finding a way to avoid being a zombie’s next meal, the simulation takes possible business crisis scenarios that can happen anytime, anywhere with anyone.
In this article, we dive into the different components of crisis management, its types and the unique advantages of live crisis simulations in business.
What’s a business crisis?
In short, a business crisis happens when the stability of a business is put at risk unexpectedly. A crisis can originate internally or can be brought on by external factors. While in some cases remaining silent or doing nothing is the right approach, in other situations, inaction can cause permanent damage to the business or, in a worst-case scenario, cause it to fail.
Good brand reputation is essential, but fragile. People and organisations take years to build it up, but it vanishes easily. Suddenly, when crises aren’t properly managed, it can lead to the loss of trust from clients and stakeholders. To avoid such an (zombie) apocalyptic situation, businesses need to pay more attention to crisis, think strategically and design mitigation plans for different scenarios.
The first step is to identify what business crisis looks like. According to this HubSpot article, there are three key factors that help identify a crisis:
The problem must pose a threat to the businesses and its reputation;
The situation is unexpected, involving an element of surprise or shock;
The severity of the problem will put pressure on the business to make timely and effective decisions.
By knowing how to identify a crisis, businesses can act more effectively and get a hand on the situation before it spirals out of their control.
Always holding the whip hand is desirable but it’s far from being always possible. Indeed, some crises can be predicted and avoided and others are unavoidable.
What are the possible sources of business crises?
You need to try and be off the danger list. For that, you need to know that crises can either caused by external forces or self-inflicted.
External forces are events that happen outside the walls of the organisation but still impact it, such as:
Security breaches, cyberattacks for instance.
Natural disasters, like earthquakes;
False information that damages brand and reputation.
Self-inflicted crises come from within the organisation. Among others, we can cite:
Issues related to employees, when, for example, an employee associated with the company is involved in illegal or unethical misconduct. Or even if they open or download questionable files on an office laptop.
Organisational predicaments where a company has significantly wronged its consumers.
Technological disaster, when the main company server or internal network crashes.
The main difference between these two groups is that an internal crisis can usually be managed and mitigated if organisations establish strict compliance guidelines, organisational controls and protocols of ethics, security and regulations among employees. However, for external forces, it’s practically impossible to predict if and when they can happen. Also, it’s harder to predict the consequences of such attacks. So, how can companies stay one step ahead?
The three types of Crisis Management
Now that we’ve identified a few situations that can affect your business, both internally and externally, the next step is to go into the different management types that are usually used when facing these crisis scenarios.
When developing a crisis management plan, we recommend you to consider at least one of these three types but ideally all of them:
Proactive crisis management
It’s about anticipating a potential crisis and working to prepare for it or prevent it. For example, to prepare for a natural crisis, like an earthquake, sharing an evacuation plan and security measures with employees is one possible solution. While not all crises can be prevented, businesses can actively monitor possible threats and reduce the impact in case of an unexpected and damaging surprise.
Responsive crisis management
When a crisis hits, it’s crucial to have a clear action plan that matches the situation at hand. Responsive crisis management is about executing that plan and handle unexpected roadblocks. It also includes informing employees and stakeholders and creating adaptive solutions. Responsive crisis management should be used in personnel and organisational crisis where a timely response is imperative.
Recovery crisis management
As the title implies, this type is for when the crisis happens and it’s too late to prevent the damage it caused. Technological and personnel crisis can often blindside a business, and cause long-term damage to the brand and its reputation. While the damage might be extensive, there’s always something to salvage. The recovery crisis management serves that purpose, and it can be a public apology and conduct an investigation to find the root cause of the crisis that occurred.
Why is good crisis preparedness so rare?
Probably because a close collaboration across organisational boundaries is needed, along with raising awareness of potential issues and closing the gap between strategy and execution.
Fortunately, even the most devastating events generally start as small incidents. The sooner your company can identify and recognise incidents’ potential for trouble, the more effectively it can respond. To build up th ability to respond, businesses need to consider three dimensions:
People (your governance structure and relationships),
Preparedness (planning and execution)
Testing (rehearsing your actions in advance).
As you gain proficiency in all three dimensions, you become better equipped for managing crisis before one is already upon you. Then, it will be too late to learn; now, you still have time.
Learn by doing with live crisis simulation
Classroom and online training can offer a good base to learn the fundamentals and the tools a business needs to design and put in place crisis management strategies or plans. However, a learning-by-doing approach is likely more appropriate. Live experiences are effective for knowledge retention. This is where live simulation of scenarios comes in.
Much like an Escape Room, the idea is to create an environment that simulates a real business-crisis scenario, which should go in line with possible occurrences in or with the business. The crisis management live simulation should include the members of the crisis management team (CMT), and the top management members, main actors in case of a very real business crisis.
The objective of these simulations is to challenge the participants’ communications skills towards media, social networks, regulatory authorities, clients and employees. CMT members also learn how to handle stress and pressure during intense situations and distribute their roles and responsibilities to effectively manage a crisis.
To keep the experience real, gamification might be the best technique. Why gamification? Because it makes the learning process more appealing since it’s innovative, fun and increases productivity. Also, helps in the development of new skills in crisis management, like prioritising, delegating and managing time.
To support the learning experience, it’s recommended to use situation- tailored videos, simulations of live press statements and media conferences. During the scenario playout, simulated calls from regulators or company shareholders, social media statements and announcements, and pre-recorded TV newsflashes can be used to elevate the participants’ stress levels.
Additionally, if you include a team of facilitators and external observers through the simulation exercise, the participants can be debriefed after the exercise on their crisis communication and management skills, and receive detailed comments and suggestions on what worked, what needs to be improved and what should become good reflexes when in crisis mode.
Businesses need to have a response ready to handle crisis situations. Having a crisis management team in place is highly recommended as they can proactively prepare the business for a crisis. Understanding what constitutes a business crisis, the different types and the different approaches to crisis management is pivotal for the success of this team and their business.
What we think
Thomas Wittische, Risk Assurance Director at PwC Luxembourg
The likelihood that your business will be hit by a highly threatening, unexpected event has never been higher. Whether the original crisis is self-inflicted or caused by external events, lack of preparation almost always makes the outcome much worse. Although businesses can’t know what type of crisis you will encounter, you can specify many of the tasks that must be handled under altered circumstances, and who will handle them. With live crisis simulations, participants need to learn how to divide to conquer, assigning specific tasks to specific people and act in a collected way under stressful and pressured situations. Ultimately, these simulations can help businesses improve and enhance their crisis response strategy and capabilities. They’ll be equipped with the governance, processes, tools and technology to respond with confidence to any crisis they might face.
