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It seems for the last couple of years as though we’ve been constantly running in crisis mode. To put it mildly, the worldwide economic situation got out of control 2-3 years ago and it doesn’t show signs of improving soon. Uncertainty abounds, fingers are pointed in every direction, and many of us feel powerless to do anything but wait and worry.
“What? Me worry?”
Alfred E. Newman
Crisis Management Is a Response…
The economic crisis has occurred and whether it was through our fault or not, we have to get it under control and fix it quickly as possible — that’s what crisis management is. Depending on the nature and extent of a problem, it may take considerable resources to fix. As we’ve seen, our current economic crisis has used up an enormous amount of resources and promises to swallow up many more before we even come close to a solution.
Unfortunately, it looks like many companies — but especially small-to-medium businesses – will simply have to do their best to ride out the economic storm. Too much is beyond their knowledge or control.
…Whereas Risk Management Is Strategic
Many people have laid the lion’s share of the blame for the economic crisis on the financial sector, or on government policies. Certainly they weren’t the only causes, however. Companies in every sector took unnecessary risks and didn’t implement a system of effective controls and oversight. Good risk management practices existed but they weren’t followed.
Risk management consists of identifying potential threats, assessing their likelihood and their impact (if they were to occur), and taking the necessary steps to eliminate or minimize risks. There are risks we’ll always be powerless to avoid or control (severe weather, earthquake, etc.), but we can cope with them — and many others — better simply by implementing effective risk management systems.
Management Philosophy
There is a management philosophy, mirrored by ISO 9001, that merely correcting a problem isn’t as good as identifying its root cause and taking steps to make sure the problem doesn’t recur. That’s called “taking corrective action“.
That philosophy also says that making sure a problem doesn’t happen again isn’t as good as preventing it from happening in the first place (aka, “preventive action“). It follows, then, that risk management is markedly preferable to crisis management. This is not to say you shouldn’t prepare to manage crises (after all, the best-laid risk management plans aren’t going to prevent every crisis…like they say, “Stuff happens”) but that crisis management should be your fall-back position.
Comments, anyone?
Peter, I think you made my point very well. Any organization can’t do without a crisis management or risk management plan. Your crisis management plan is improved immeasurably when you have a risk management plan.
In other words, understand what you’re dealing with BEFORE you deal with it.
Thank you for your comment.
So true that crisis management is a response and risk management (is) strategic. But the big question when it comes to dealing with a crisis is, “Are you proactive or reactive?” Though many organisations had proper risk management structures in place, managers made the mistake of only focusing on achieving the set goals and objectives.
One would say they were blinded by short term profits at the expense of long tern survival of the organisation. In their quest to achieve their strategies, managers should have questioned the existence of threats and their level of impact. Crisis management would have then lent a helping hand here.
Having identified and quantified any levels of losses, management would then have been able to plan ahead and minimise the overall damage. But as it turned out, many managers were caught unaware. A lesson for managers for when the next crisis hits: “Risk management, crisis management, and strategic planning should all be aligned together to improve business performance”.