IBBusinessDPBusiness ManagementHLRevision Notes5. Operations Management5.7 Crisis Management & Contingency PlanningCrisis Management

Crisis Management (DP IB Business Management)

Revision Note

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Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Crisis Management Versus Contingency Planning

  • Contingency planning is the process that occurs when a business tries to predict risky or unwanted events, and then develops a process for how the business will respond to the occurrence of any such event

  • Crisis management refers to the immediate handling of a disruptive and unexpected event

    • It includes communication, coordination, resource mobilisation and decision-making under pressure

      • Short-term significant disruption is likely and long-term business survival affected

      • Radical solutions such as autocratic leadership and centralised decision-making could ensure business continuity

      • Work activity may need rapid reorganisation

        • For example, many businesses swiftly implemented remote working for staff during the Covid-19 pandemic

Diagram: examples of crisis situations

Business threats include data loss, fire, theft, natural disasters and IT systems failure
Businesses face threats from a range of sources including IT systems failure, natural disasters and theft

  •  If a business were to lose all of its customers data, this would be classed as a crisis and require an immediate response from management

Examiner Tip

Crisis management and contingency planning cannot eliminate the risk of business disruption - and even the best plans can go wrong when a crisis hits

The fact that businesses engage in this kind of planning does provide significant benefits

  • Business resilience can be improved

  • Negative impacts may be reduced

  • Stakeholders are likely to have greater confidence in the business

Factors that Influence Effective Crisis Management

  • The effectiveness of crisis management depends on a range of factors

Factors Affecting Crisis Management

Speed

Transparency

  • A rapid response can contain or reduce damage 

  • Procter and Gamble's crisis team responded rapidly when a viral challenge encouraged teenagers to film themselves eating Tide Pods detergent 

    • It quickly created a commercial featuring a well-known sports personality, immediately published warnings and updated disclaimers on its website

    • This quick response protected P&G from legal action

  • Keeping customers informed and telling the truth can protect reputation

  • Supply issues in 2018 caused KFC to run out of chicken leading to the temporary closure of half of its UK outlets

    • KFC used humour on social media to keep their customers informed at every stage

    • They apologised and quickly addressed customer concerns, turning the negative story into positive PR 

 Control

Communication 

  • Ensuring that leaders have the authority and resources to perform at the highest level in a crisis

  • Walmart's Emergency Operation Center operates 24 hours a day

    • It manages the company's response to events that could affect operations

    • Coordinated by senior Walmart leaders it can assemble support teams immediately

  • Rapid issue of communications such as press releases can reassure stakeholders and reduce recovery time

  • Scandinavia Airlines (SAS) used social media effectively during the 2010 Icelandic Eyjafjallajökull ash cloud crisis

    • Customers were directed to SAS's Facebook page

    • Staff responded to every message, comment and wall post

    • Problems were solved immediately and regular updates kept customers satisfied

Examiner Tip

Crises do not have to be large-scale 

The unexpected loss of a CEO, a warehouse fire or an outbreak of infection within a business can cause a significant crisis that requires a prompt, transparent and well-communicated response

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    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Author: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.