Crisis management

Crisis management
See also
Crisis in the enterprise Strategic risk Emergence plan Financial planning Business plan Marketing planning rules ASTRA analysis TOWS analysis Investment planning

Crisis management occurs when managers are dealing with a crisis destroying the organization, and the previous attempts at repair failed. Healing the company should start after preparing its new strategy, structure and operations. Thinking only about liquidity does not guarantee development and success. In crisis management requires a focus on strategic issues. Implementation of the strategy in the crisis therefore requires resolving the situation within the company in relation to the environment, careful planning and decision making.

In a crisis situation the most important is quick decision making resulting in improving company's competitive position. This requires parallel actions not only to respond to problems arising from the current situation, but also to address issues related to the future development.

The success of anti-crisis measures is dependent on many different factors, among which the most important are:

• the real causes of the crisis and their correct identification,
• the main symptoms of the crisis,
• severity and duration of the crisis,
• present strategy of the company and its adaptation to the requirements of the environment,
• phase of growth of the organization
• characteristics of the sector and the current situation in the market,
• cost and price structure,
• structure and culture of the organization,
• currently applied anti-crisis measures.

Types of crisis management

Basically there are four types of crisis management:

• Strategic crisis management requires a reorientation of the company's strategy (reduction of new investments, consolidation, diversification),
• Operational crisis management demand solutions to the problems of sales and production resulting in increased productivity, reduced costs, effective advertising,
• Financial crisis management deals with creating a bridge to allow flow of new capital needed for financial restructuring and new investments,
• Crisis management in terms of the insolvency deals with protection of company by successful arrangement with creditors and management of bankruptcy,

In assessing the effectiveness of anti-crisis campaign worth mentioning are at least four common scenarios:

• failure of the restructuring,
• survival in the short term,
• rescue from bankruptcy,
• permanent healing of the company,

The central element of crisis management in the enterprise is well-structured program to combat the crisis. To prepare this program managers should do following steps:

• diagnosis indicating the type of hazards,
• identification of the causes of the crisis and its symptoms,
• identification of ways to counter the effects of the crisis
• preparing strategy to return to state of balance.

Proper actions of managers allows the company a chance to stay on market and successfully face another crisis.

References

• Pearson, C. M., & Clair, J. A. (1998). Reframing crisis management. Academy of management review, 23(1), 59-76.