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Crisis Management Plan

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Numerous studies have been conducted on various facets of crisis management plan focusing on the dynamic of business environment that is constantly being confronted by many issues both internal and external. Consequently, a simple mistake could result to a catastrophic crisis that could possibly cripple or destroy the company`s performance. Naturally crises are unexpected and can be defined as an unplanned event that results to either loss of company’s profit and reputation among its customers or the general public. Therefore, organizations should be able to identify the different methods and causes of crisis and how it could impact the company’s progress (Aven & Cox, 2016).

However, the essay identifies crisis that pose a direct threat towards the progress of companies in the financial industries. In today’s business world, financial organizations continue to face cybercrime attacks and this in most cases results into crisis that at times leads to countless of huge losses by companies. Regardless of the nature of a crisis; either small or big, any crisis cause by human or natural induced could have a far greater impacts towards the company. Hence, the essay discusses both the external and internal factors that result to crisis in an organization. And further, develops a crisis management plan that explains the few challenges that an organization management team faces while implementing the crisis management plan.

Factors That Cause Crisis

A financial institution such as the commercial banks plays a crucial role in the financial stability and economic development of a countries or business organizations; therefore it is important to differentiate between the internal and external crisis that may have factor in the operation of a financial institution. In most cases, organizations can’t control the external crisis that may factor in the organization, but they must try to anticipate and adjust to these crises to be able to keep the organization from being vulnerable.

However, managers and business owners do not directly influence the internal crisis that may affect their businesses and how they handle it or adjust to these crises have a major impact on the success of their businesses. Financial institution should strive to minimize both the internal and external factors that may cause a crisis in the organization. Financial institutions like’s banks, credit unions, and other financial markets are under constant attack from external factors such as theft and cyber hacking that originates in the digital realm (Bergström, Uhr & Frykmer, 2016). Over the decades the improvement in digital landscape has increased the escalation in cyber-attacks in most business organizations. As such management strives to protect their valuable information, reputation, brand and customers by preventing any internal or external factors that may cause a crisis in the organization.

Consequently, attention paid to internal and external factors may pull management focus from the primary tasks in the organization. This could result into loss of productivity, which can lead to the loss in the profit margin. Therefore, management should come up with crisis management strategic plan that should aim at being well prepared for any crisis, ensuring a radical response mechanism, including maintenance of proper reports and communication during the time of crisis and the rules of crisis termination (Bergström, Uhr & Frykmer, 2016). The existing factors that may cause a crisis in a financial institution can be categorized into two; internal and external factors.

The Causes of the Internal Factors

The internal factors that take place within organization involved internal stakeholders and lack of other resources. These factors arise when a person’s morals, value or beliefs are tested or compromised. The internal factor may cause a great deal of stress to the workers involved and can impact worker’s performance level. The internal factors comprise of lists of things within the organization that may cause a potential crisis to arise. Unlike the external factors, internal factors can be controlled by the management. Managing internal factors that may cause organization crisis is key to business success since the management can actually manage these factors.

The management plays a very essential role in the internal factor that may lead to crisis. These internal factors may include;

Leadership factors; leadership refers to the individual in an organization that makes all the important decisions that concern the operation of the business including financing, sales, budget, human resource and marketing (Booth, 2015). The leadership styles of a business can greatly affect the performance of the organization either negatively or positively. Poor leadership can results into lack of strong visionary who is unable to properly manage the employees; this result to internal crisis that may greatly affect the success of the business.

Staff factors, employees are a major part of the company`s internal environment. Ensuring that your employees have the right skills to perform the job is essential to your organization success. Even if everyone`s capable and talented, internal social conflicts and poor communication can cripple a good company.

Funding factors, lack of money in any organization can determine whether the company will survive or close it operation. For example, when your cash resources are too limited, it affects all levels of your organization functionalities.

Culture factors, culture consists of the values, attitudes, and behaviors that the employees live by. For example, if you create a culture that every employee competes with one another it is a recipe for internal, but if you emphasize collaboration and teamwork it serve the desire result.

Communication factors are informational strategy form part of the administrative procedures of an organization which may include poor or inaccurate record keeping. It may also include outdated or faulty IT systems. These factors affect the organization ability to achieve its goals and objective. These factors pose a threat that can alter how potential customers perceive the organization. Internal cyber-hacking crime; some employees may leak internal data that may lead to the potential crisis that could threaten the future of the organization. It quite difficult for management to believe that employees would sabotage the organization data

The Cause of External Factors

The external factors occur outside the organization, which influences the smooth operation and success of the business. Unlike the internal factors, management has no control over external factors; but they must try to anticipate plan and adjust to these crises should in case they occur. A good example of an external factor includes; cybercrime or hacking, hackers could get access to the organizational system unnoticed and extracting or sabotage critical information and date. The main objective is to get credential information about the organization, customers, and employees through the system with complete access to the business financial affairs (Bundy & Pfarrer, 2015). The attempt could cause devastating risk that would result in the major crisis that would affect the business performances.

Market risk factors, is also a major factor that would result in a potential crisis. Such crisis involves the losses in the organization trading book as a result of the change in equity price, interest rates, foreign exchange rates, credit spreads and commodity price whose all value can’t be controlled by the management but are set by the public market. Dahles & Susilowati (2015) suggest that management should try to anticipant a plan and adjust to the crisis to be able to keep the organization on track should the crisis occur.

Customer factors, customers are unpredictable and uncontrollable. Customers can positively or negatively affect the business reputation and business should ensure that customers are well satisfied with the product or service afforded.

Business risk, business risk is the possibility that a financial institution would experience lower profit than anticipated or it will earn a loss rather than a profit. The financial institution is unpredictable and if not careful handle it may result in a potential crisis that may lead to the collapse of the institution

Crisis Management Plan

A crisis is any event that causes disruption of a company`s operation or business function for a period beyond the acceptable downtime. Management planning is a plan for and responds to internal and external factors that pose threat to a business such as mention above. Therefore organization should have strategic plans in placed as to ensure smooth transition from the effects of the crisis to normalcy. Antonacopoulou & Sheaffer (2013) argued that the environment in which companies operates today is often described as hostile, aggressive, uncertain, dynamic and complex.

Hence, the complexity of the business environments results to various different crisis events (Heller & Darling, 2012). Therefore, it is very important for managers to focus not only on when and how crisis could occur. To minimize such unanticipated impact on the organizations requires reasonable crisis management practice. According to Smith (1992) article reveal seven C`s of crisis management which demonstrates or proven elements to preventing crisis. In other word, the elements develops and discusses the five phases of crisis management plan but has categorized the phases in three classes. The five phases include; the signal identification, preparation, prevention, damage control, recovery and learning (Antonacopoulou & Sheaffer, 2013). However, for better analysis and understanding, I have summed up the phases into three groups. This includes crisis management, the second category is referred to as operational crisis team and the final category is referred to as crisis of legitimation.

Management Crisis

This division of people will often encompass the first three phases of the crisis management plan. That is signal identification, preparedness, and prevention phases. Therefore, this stage intent to bring about situations that poses a threat to the survival of an organization thus places the organization under what is referred to as time extreme pressure. Haller & Darling (2012) studies show that this phase represents the period where a crisis becomes incubated and it plays a crucial part in addressing the strategy and the system level that results to problem at functional and operational levels of the organization.

However, this phase occurs when a management team fails to consider the imminent situation that is about to occur that can pose a threat to the survival of the business. The important aspect in this stage is effective communication, great culture value and the decision making process and how they generate vulnerability. Failure by the management team to respond to incidents in a reasonable manner could possibly lead to a potential crisis. This phase represents a crucial stage where the decision adopted or not adopted by the company’s management team can hinder the growth of the company’s culture (Herbane, 2014)

The main issues addressed in this phase include the role played by management in creation of errors, weak management structures, restrained decision making and communication processes and issues that results from the interaction of the business environment. Therefore, organization should understand that any minor issue should be highly tackled as it could result to catastrophic failure in the organization. The organization should be able to identify signals that could result to potential crisis and the organization should be prepared to handle the issues and possibly come up with strategies that can be adopted to prevent the crisis from developing further hence minimizing the effects posed by the crisis. Consequently, such issues will reflect in the failures of the contingency plans that address the scope and scale of the issues faced by the organization in its operational phase of any crisis.

Operational Crisis

The Second category as referred to Operational Crisis is a result of the escalation of a problem to a point where the damage has resulted to damage the reputation of the organization or has threatened the organization reputation. This phase is characterized by human management in the reduction of the impacts faced by the organization due to the escalation of the crisis. This phase of the crisis management plan is by far the most visible and important as it indicates the damages already caused (R. Blevins, Lord & Bjerregaard, 2014).

Consequently, this phase requires additional resources to contain the intent demands of the events, and eventually return the company to normal operation. This phase is also characterized by the role played by external factors that in most cases act as rescuers who take short term control of the damaging event until situation lowered to a more manageable level by the management processes of the organization. In case the events have resulted to complete loss of business, this is the phases where all evidence is collected for further analysis.

The operational crisis stage will often deal with controlling the damage caused by the escalation of the crisis to a point of threatening or even damaging the image of the company (Antonacopoulou & Sheaffer, 2013). Due to the nature of the threat and effects causes, the crisis will often not end at this stage but could escalate further to a reputational building. Consequently, the operational crisis stage will often address issues that are as a result of an occurrence of damage due to the escalation of a problem to become a crisis. This escalation of the problem to a crisis then poses a threat or even results to the damaging of the company’s reputation and image.

Legitimation of the Crisis

The essential support of this stage will often address the issues that deals with the turnaround time of management, recovery of the company’s reputation, and various processes aimed at securing the company’s validity among the internal and external shareholders. This creates an opportunity for the management team to come up with strategies that can be used by the organization to tackle future crisis that occurs in the first stage of crisis management plan. Moreover, this stage often characterized by organizational learning hence coming up with strategies that can be used in the future to help curb any possible threat to the company’s image (Antonacopoulou & Sheaffer, 2013). In this stage the company will try and restore the already damage image towards its internal and external stakeholders. The company will take precaution and preventive measures thus restoring confidence among its partners, customers and stakeholders.

In this phase most companies will often utilize the recovery and learning process to identify the factors that resulted to the escalation of the crisis and come up with strategies by which the management team can improve for the future use. In addition, due to the already damaged company’s reputation, the organization will often take advantage of this phase to restore the company’s image and reputation among the public as well as its internal stakeholders. Hence, learning can be described as an integral aspect of a crisis where companies try to learn from their previous mistakes as a guiding action plan. Further, the company could improvise feedbacks both positive and negative on their performance in regards to the crisis and help in developing a better action plan (Vardarlıer, 2016).

Challenges

Considering the crisis management plan phases, it is quite difficult to understand or determine the most challenging phases an organization faces when dealing with a crisis. However, analyzing these phases independently, the last two stages; the recovery and learning which can be quite challenge. In most cases, the post crisis phase can continue up to breeding another crisis and company`s management team should consider the structure and culture of the company to ensure learning occur. When comparing the crisis management plan with the seven C model by Smith, I identify two major categories which fall under this phase, this include the company’s culture and structure. Therefore, studies have identified five solutions to curb such issues (Vardarlıer, 2016). This include restructuring the company’s responsive team, the organization’s management style to be reviewed as a preventive tactics, restructuring of the management personnel so as to avoid such crisis in the future.

Finally, in adverse situation acquisition of the company by another successful company, depending on the size of the firm, the impact of a single crisis can be so devastating. For instance in 2008, Lehman Brothers Bank filed bankruptcy after it was affected by post world war financial crisis (Herbane, 2014). Therefore, it would be challenging for organization to implement the crisis management plan. Further, another challenge that the company will face when implementing their crisis management plan includes rebuilding their company’s image and reputation especially if the crisis was related to their products. In most cases, customers will often shy away from the company’s products or services and the organization has to improve better marketing strategies to create and assure the customers on the safety of the company.

In regards to signal identification, the management team could in most cases not identify signals that pose a threat to a possible crisis. Lack of timely identification of threat signals is the beginning of the onset of an escalated issue. After the crisis has occurred and the management team did not identify the signals, the company will therefore not be prepared thus resulting to inability to prevention of the crisis (Aven & Cox, 2016). In most cases, the damage control will often not pose any challenges towards the management team as this will tend to be a contingency plan to prevent further image and reputation damage.

Consequently, after the company has faced a crisis there are different challenges that occurs and results to inability of the company to handle the crisis adequately. The identification of crisis signal. Poor preparedness by top management team is what results to the escalation of an issue to crisis that poses a threat to the proper and smooth flow of an organization (Bergström, Uhr & Frykmer, 2016). Finally, recovery and learning is another stage that poses a challenge in a company in regards to crisis management plan. This is mostly because some of the issues could be catastrophic resulting to the collapse of the company

Conclusion

The paper has discussed issues that relate to crisis management and how model improvised by Smith on crisis management plan can determine how effective the management team is in containing and preventing the escalation of the issue. The paper has identified the various internal and external factors that results to creation of a crisis in a company and the various phases that can be used to tackle and mitigate the company’s picture and reputation. Further, the paper has identified some of the challenges that the management team could face in regards to the company’s crisis management plan. The essay identifies resolving and learning as a challenging phase. Finally, the paper has identified that a company’s culture should play a huge role in the mitigation of a possible crisis.

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