By Rose Marie Quintos
74% of companies who faced a major crisis from 2014-2019
sought outside help either during or after their most serious crisis. (PWC)
Once or more in your life, you experienced losing something that you value, be it your job, house, car, money, or even someone that you did not expect to lose. It is devastating and leaves an impact on the financial, psychological, spiritual, and other areas of your life.
Like humans, businesses experience loss and unplanned events that destroy and cause a disturbance and challenge to its life. And that is what we call a CRISIS.
As owners, entrepreneurs, or business-minded people, it is expected for us to be curious about how to manage and prevent a business crisis that might strike and destroy a business. But what about its types? Is it also essential to identify and understand the type of crisis that might be encountered by your business?
The first rule of war and business is to know your enemy.
-Harold Meachum
A crisis is also your enemy. Or I could say, one of your greatest enemies in the business world. You don’t know when and how it will appear and start to knock down every effort you exert in your business. However, getting to know and understanding each type will give you a better idea of how to manage and resolve these.
The book Your Plan is Your Parachute: A Simplified Guide to Business Continuity and Crisis Management lists down the types of business crises that you should be aware of:
- Natural Disasters
- Industrial Disasters
- Health-Based Crises
- Equipment/production breaks
- Image and reputation injuries
- Human resources issues
- Terrorism
- Criminal attacks
- Cyberattacks
- Proprietary information losses
- Sensitive information losses
- Economic threats
- Legal challenges
- Regulatory environment crises
Natural disasters can appear in the form of hurricanes, tornadoes, floods, blizzards, electrical storms, geomagnetic storms, sinkholes, mudslides, tsunamis, or earthquakes, among others. Any one of these events has the potential to deny an organization of personnel, physical facilities, and data. Inaccessibility can last for days, months, or even years.
Industrial disasters can be major contamination, oil spills, explosions, or fires. Small businesses need not consider catastrophes of the proportions of the Exxon oil spill near Valdez, Alaska.
Health-related crises are similar to industrial disasters, except that the event is job-related. Job-related health issues can have an impact on a small business, especially if it is in health care or emergency services, or if it is in another line of business, such as security screening, where its personnel is in constant contact with potentially infected people.
An epidemic, a rapidly spreading contagious disease in your area, or a pandemic if it spreads to other countries, is another health threat to a business. This type can also include Coronavirus disease (COVID-19), an infectious disease that affects people globally.
With the introduction of complex electronic systems, equipment/production breakdowns have become more common. Companies that provide information and services rely almost entirely on data and the digital data systems that store it. And an unexpected breakdown or damage will have an impact on the entire production and performance of the business.
Image and reputation injuries. The entire brand’s reputation and finances can suffer if the incidents are not quickly controlled.
Human resource issues may not immediately appear to be a source of crisis events, but they have the potential to be.
Ineffective human resources management at a company can result in negative publicity and costly lawsuits filed by its employees.
Terrorism, once a threat that primarily targeted governments and societies prominent, now can indiscriminately affect any business, large, small, or micro. A business might be targeted because of its symbolism, or it can just be in the wrong place.
In recent years, a growing number of bombings, kidnappings, extortion cases, and other significant criminal acts have targeted British, American, and Japanese firms in particular. Unfortunately, many managers and owners lack the formal training required to implement a proactive program that protects assets and workers from potential terrorists.
Criminal attacks can have a greater impact on a small business than a large one, but no one is immune. Common robberies and workplace shootings, sabotage of company facilities, product tampering, counterfeiting, and piracy, all belong to this category.
Cyber-attacks are also criminal but they are virtual, nebulous nature differentiates them from traditional crime.
Proprietary information losses can be severe. The risk is especially true if the company produces only one service or product. Diversity only lessens the impact of such a loss.
Economic threats can take the form of boycotts, strikes, hostile takeovers, or stock devaluations. Each can cripple an organization financially or can hurt its reputation or image.
Legal challenges such as a major corporate lawsuit, an individual or class-action lawsuit by present or former employees, a defective product, a service error or omission, lawsuits from vendors or distributors, or malfeasance by company officers, can happen to any business.
Regulatory environment crises tend to affect new applications of existing products or the introduction of new ones. They may conflict with social customs expressed are laws or ordinances.
“A crisis is not necessarily the initial event itself; rather, the greatest damage from a crisis results from the negative consequences of poor preparation and inappropriate reactions to the event.”
-Jacques Island, Your Plan is Your Parachute
For you, what type of crisis do you fear most to encounter by your business?
Learn more about the types and examples of crises and the crisis management cycle that can be applied to overcome one in our book Your Plan is Your Parachute: A Simplified Guide to Business Continuity and Crisis Management by Jacques Island
Rose Marie Quintos is a Publishing Assistant and the Marketing Director for Quest Publishing,a division of the Inquesta Corporation. (She can be reached at rquintos@inquesta.com.)
