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How important is a Crisis Management Plan to your organization?

By May 6, 2013February 19th, 2021Business Insurance, Contractors

In the wake of Hurricane Sandy and the horrific events in Boston and West, Texas, organizations are reminded to think about crisis management and specifically how to Identify, Avoid, and Plan to overcome a crisis.

At times, creating a crisis management plan may seem more art than science which adds to the complexity. At the very minimum, the crisis management plan must attempt to protect life and property in the most effective manner possible. Post-crisis, it should restore some form of normalcy immediately to the people and infrastructure affected.

Below are the foundations necessary for organizations to begin to formulate or further refine an effective crisis management plan:

1) Crisis Identification-

You can’t have a plan without a beginning or an end. By identifying upfront the many potential risks your organization faces, you will be able to develop one plan of action that will cover multiple types of crisis.

What are current or emerging sources of potential crises? Is there something inherent to the products, work, or services of the organization that makes it vulnerable to a particular type of crisis? What external and internal threats exist? These include natural, as well as, events caused by individuals or groups that threaten the people, property, and financial survival of the organization? Also consider in-direct effects such as how will a crisis impact the organization’s reputation? In short, question everything.

2) Crisis Avoidance- Should we? Shouldn’t we? What is the probability and financial impact?

Be realistic. Many of the things that people worry about have a low probability of causing injury and damage, whereas, many of the things people do every day have a very high probability of causing injury & damage. For example, think about the risk associated with flying versus your daily commute to work.

An effective crisis management plan must determine what activities can and cannot be realistically avoided. It must also prioritize the probability and financial impact of a particular risk. There are fairly effective ways to determine the financial impact, such as the expected value method or using net present value when deciding whether to avoid or engage in a project. However, there are limitations to these methods and the potential financial impact should not be ignored for high impact/low probability risks. Finally, certain types of risks should be transferred contractually or through an insurance program.

3) Continuity Planning-

Tragedy strikes, what’s next? Too often, organizations are caught dealing with major issues in real time. This leads to miscommunication, lost opportunities and poor brand implications. A simple outline of next steps prior to a major event can save an organization from costly confusion and gets things back to normal quickly.

Whenever possible, form a crisis prevention committee with input from managers in each major department. This will further help formulate a valid risk assessment. Taken with a sound avoidance analysis, management can refine and/or formulate a written crisis management program that makes the most sense.

It should be noted that many organizations need all resources directed toward the daily activities of the organization and might not necessarily have the time to formally plan for crisis. Knowledgeable risk management and insurance professionals can take away many of the burdens associated with this process and help put a crisis management plan in place.

Scott Harrigan

About Scott Harrigan

Scott started his career in insurance in 1988 and joined Rue Insurance in 2004 as a Marketing Specialist focusing on creating effective risk financing and risk transfer programs for companies and non-profit organizations. In addition to this he is a member of the Rue Insurance educational team that provides ongoing professional development in critical insurance concepts and programs to Rue employees. About Scott | More Posts by Scott