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5 Crisis management

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Crisis Management How would you ‘cope’?
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Crisis Management

How would you ‘cope’?

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What disasters could your house face?

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If you were a terrorist, what business areas would you threaten?

• physical security

• document security

• personnel security

• hardware security

• telecommunications security

• software security

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So what is Risk Analysis?

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So what is risk analysis?• Risk Analysis has been defined as:

"a formal process of determining risks and developing a plan to deal with them"

Risks do not arise all by themselves. A risk is normally a product of two factors:

• threats (something could go wrong) • and vulnerabilities (the information system/s

used by the business will allow things to do wrong).

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Threats & vulnerabilities

• Threats include• Deliberate manipulation of information • Impersonation of a legitimate user• Untrained or poorly trained staff

• Vulnerabilities include:- Poor website or network design (e.g. which can allow "hackers" into a system or web site)- Poor recruitment procedures

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Stages of Risk analysis

Risk Analyst's need to identify….

1. The potential cost of the loss of ‘data’

2. The probability of problem occurring

3. The cost of measures to protect

4. The inconvenience to staff – security

measures are useless if everyone bypasses


You need

to know this!

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Disaster Avoidance….

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What can a business do to avoid the following ‘disasters’?

• Fire in building

• Power supply breakdown

• Virus infection

• Theft of equipment

• Theft of customer data

Think of a HQ of a city bank

to set the context for

your answers

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So why should anyone bother with disaster management?

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Effects can be catastrophic

• 90% of businesses who suffer major loss of data go out of business within 2 years

• 43% go out of business almost immediately

• In the UK, company and directors may be prosecuted by the Health & Safety Executive

• In financial and insurance sectors, customer may well sue

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More recent crisis?


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Can you think of any businesses that have had to deal with a ‘crisis’ recently?

JJB Sports results: 72 store closures, 800 job

losses, adjusted operating profits down 28% at


Ikea, the Swedish retail chain, warned that the housing downturn is hitting sales of its flat-pack furniture and said it is scaling back some of

its expansion plans

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What other types of crisis might a business face?

Hostile takeover

Faulty/dangerous products

Environmental disaster

Major customer withdrawingorders

Physical destruction e.g. bombing / earthquakes / Physical destruction e.g. bombing / earthquakes / fires

Strikes by workforce

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What areas of a business could a crisis affect?

Marketing: public image under threat – PRAd campaignsPromotions to increase sales

Personnel: Leadership style …crisis usually requires direct authoritarian leadership;

internal and external communication that is rapid and direct; external communication that is informative and truthful.



Operations: particularly if JITStorage/warehousingMachinery

Finance: ad campaigns; environment clean up; compensation

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Can ‘crisis’ be avoided?

• Companies can have contingency plans established in order for staff to know how to deal with a crisis when it occurs!

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Contingency Plan content

• A list of the most critical business functions;• A list of the facilities

hardware, software, data, personnel and other equipment necessary to support those functions

• A Back-up procedure• A method for getting in touch with all key personnel• A Recovery procedure • Education and training of personnel involved in implementing the

plan• Regular drills to test the effectiveness of the plan

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Contingency PlanningContingency Planning• The very nature of this unit reflects that businesses

have to be able to respond to change and change can be unpredictable

• What is contingency planning?The process by which organisations try to prepare

for unexpected and potentially disastrous events

• What is crisis management?– The manner in which an organisation responds to an

unexpected and potentially disastrous event

BUSS4.8 Planning for Change


What steps can a restaurant take to avoid a crisis?What are the costs to a business?

Can a crisis be avoided?How important is it to limit any damage?

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Contingency PlansContingency Plans

• Value• Sense of security• Limits damage• Speeds up

recovery process• Informs staff

training• Preventative

measures can be part of CSR

• Limitations• Costly and time

consuming– Including opportunity


• Needs reviewing• Lack of predictability

BUSS4.8 Planning for Change

Fifa has a contingency plan in case South Africa is not ready

for the World Cup.Should there be a Contingency

plan in case London is not ready for the 2012 Olympics?

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Contingency PlanContingency Plan• Cadbury’s testing out of date

• Cadbury’s withdraws products made in China

• Cadbury’s is finedIn each case:

Identify the cause of each eventIdentify the potential threat

What actions could have been taken to prevent these events?Rank each event on a scale of 1 – 10 in terms of seriousness to

the future success of Cadbury’s. Justify your answerBUSS4.8 Planning for Change

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How would you cope?

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Group work

• In twos or threes

• You will be given a crisis to decide on a contingency plan

• Be prepared to feedback how you would react as the MD/BoD to your scenario

• You need to consider each stakeholder group!

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Long term strategy

• Need to consider the BIG picture!

• What will be the impact on ALL sectors of the business…

• HRM• Operational Management• Marketing• Finance

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Strategy issues include

• Profit margins – what will the impact be? (short term less important than the LONG TERM!)

• Risks & uncertainty – what is the business’ attitude to risks?

• Opportunity costs• Business objectives • Constraints – internal & external• Ethics• Business culture• Ansoff matrix & Boston matrix

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Strategy tactics – what if Richard Branson died in

an accident? How should the Virgin conglomerate react?

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Strategy tactics – what would the school do

if the U6 revision trip were in London

when a bomb goes off?

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Strategy tactics – how would you have reacted

If you were the MD of Bernard Matthews?

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Strategy tactics

What are the implications to TESCO of

poor quality FUEL being sold?How would you have reacted?

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Strategy tactics

You are head of ICT at a bank and a ‘tape’ of all customer

Data has been lost in transit!

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Revise for assessment next lesson!