2.7 Crisis Management and Contingency Planning
Learning Goal
I can explain the difference between crisis management and contingency planning.
Introduction
Unplanned events can have a devastating effect on businesses. Crises such as fire, floods, damage to stock, illness, technology issues or accidents involving the business can make it difficult or impossible to continue normal activities. In some cases, important customers might be lost or the firm could go out of business altogether. Crisis management – steps taken by an organization to limit the damage from a crisis by handling, retaining and resolving it.
Contingency planning – preparing the immediate steps to be taken by an organization in the event of a crisis or emergency – helps with crisis management. When a business is prepared with a series of procedures to be put into effect if an emergency occurs, it will be better able to manage most crisis situations. Effective contingency planning allows a business to take steps to minimize the potential impact of a disaster – and ideally prevent it from happening in the first place.
2.7 ESSENTIALS
KEY TERMS
contingency planning
crisis management
CAN YOU...
evaluate explain the difference between crisis management and contingency planning.
Learning Goal
I can evaluate the costs and benefits of contingency planning.
Key Steps in Contingency Planning
1. Identify the potential disasters that could affect the business. Some of these are common to all businesses, but others will be specific to certain industries.
2. Assess the likelihood of these occurring. Some incidents are more likely to occur than others and the degree of impact on business operations varies too. It seems obvious to plan for the most ‘common’ disasters, but the most unlikely occurrences can have the greatest total risk to a business’s future.
3. Minimize the potential impact of crises. Effective planning can sometimes remove a potential risk altogether. When this is not possible, the key is to minimize the damage a disaster can do. This means protecting fixed assets and people, as well as the company’s reputation and public goodwill, as far as possible.
4. Plan for continued operations of the business. Prior planning can help with alternative accommodation and IT data – the sooner the business can begin trading again, the less the impact is likely to be on customer relationships.
CAN YOU...
evaluate the benefits and limitations of contingency planning.