Why Crisis Management is Critical For Business Survival

Why Crisis Management is Critical For Business Survival

According to the results of a survey on more than 5,800 small businesses published on the website of the Proceedings of the National Academy of Sciences (PNAS), it was revealed that mass layoffs and business closures happened just a few weeks after the COVID-19 pandemic began. Meanwhile, Yelp’s Economic Impact Report released in September 2020 showed that around 60 percent of business closures attributed to the ongoing pandemic crisis is deemed permanent.

These grim realities point to the fact that businesses, whether small or big, are highly vulnerable to crises. And since there are big organizations such as the European Union that have warned about future pandemics, businesses should take a long, hard look at their crisis management structure and how prepared they are in case of another big blow to the industry.

Here are some reasons why crisis management is critical to your business survival no matter what the nature of the crisis you’re faced with:

Crises are inevitable

Any business owner who claims that his or her business can’t possibly be negatively affected by any crisis can be considered as living in dreamland. In another dimension, that can be true; but in today’s reality, crises happen almost everywhere, at any given time, and in different forms. Case in point: your company car suddenly figured in a collision incident where you’ll need legal help. If your Crisis Management Plan (CMP) has factored in such a possibility, you’ve most likely allocated a part of your contingency budget for a car accident lawyer. Another scenario is a future pandemic crisis similar to COVID-19 — given its devastating effect on businesses globally, you should have a part of your plan dealing with health emergencies with potential catastrophic impact on industries such as yours.

Crisis management minimizes potential losses

Again taking a cue from the ongoing pandemic that caused numerous businesses to close shop for good, you have to put in place a sensible and comprehensive Crisis Management Plan. If your CMP has factored in every possible crisis scenario, you’ll have a better chance of minimizing your possible losses given a certain situation. Whether it’s a fire incident, hurricane, or economic recession, your CMP will make sure that measures are in place and a contingency fund is available to quickly respond to the crisis.

There would a clear chain of command during a crisis

Businesses should take inspiration from theories and structures used in the Incident Command System (ICS). ICS is an excellent crisis management tool that can be adapted for use in any event where a clear chain of command is imperative, such as in a crisis involving one’s business. When you a crisis management structure that follows ICS principles, you’ll know who is in charge (in ICS lingo, that person is called an Incident Commander) when a specific crisis occurs. Just be sure that the person you’ll put in charge of a certain crisis has a relevant background that would be critical in resolving the crisis quickly and effectively.

You can protect your business reputation and financial standing

problem to the solution

A business with a readily-available CMP can expect to weather any crisis scenario with relative ease compared with those without one. If your business particularly prides itself on its resiliency and dependability, the last thing you’ll want happening is being clueless and helpless in a given crisis. Your clientele or market would know about this and would probably just seek whatever products or services they get from you elsewhere. Additionally, having a crisis management structure in place will help you manage financial emergencies as a result of the crisis you’re currently faced. If you can survive days and weeks by following the identified contingency measures in your CMP, then you know you have an effective plan.

Effective crisis management puts everyone at ease

And by everyone, it means your rank-and-file employees, your clients, and your top management. A business that does not have clear measures in place when a crisis strikes is bound to fail. If people involved in your business can see that you’re managing the situation well despite all other similar businesses struggling to stay afloat, you’ll enjoy their trust and confidence in the business’ ability to get through such a dire scenario. And in the business world, trust and confidence are commodities that not everyone enjoys.

It’s pretty clear how having a crisis management plan and structure could help your business in every possible crisis scenario. So, be sure to put one in place and probably stress-test it to make the needed changes and have the CMP ready for use when necessary.

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