REPORT ON CRISIS MANAGEMENT

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A SEMINAR REPORT ON

CRISIS MANAGEMENT

Submitted By:

ADITHA PRAKASH

1BM09IM002

Submitted To:

Professor and Head of the Department

Department of IEM, BMSCE, Bangalore

Department ofINDUSTRIAL ENGINEERING AND MANAGEMENT

BMS COLLEGE OF ENGINEERING

Autonomous College under VTU

Accredited by NBA, Approved by AICTE

Bangalore-560019

MAY 2013


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Certificate

Department of INDUSTRIAL ENGINEERING AND MANAGEMENT

BMS COLLEGE OF ENGINEERING

Bangalore-560019

This is to certify that the Seminar (11IE8DCSEM)

Entitled

CRISIS MANAGEMENT

Has been successfully completed by

ADITHA PRAKASH

1BM09IM002

As a part of 8

th

Semester curriculum in Bachelor of Engineering in Industrial Engineering andManagement, BMS College of Engineering an Autonomous College under VTU

During the Academic Year 2012-2013

Signature

Guide and HOD

Dr. B Ravishankar

Prof and HOD, IEM, BMSCE

Semester End Examinations:

Name Signature

Examiner 1

Examiner 2


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DECLARATION

I ADITHA PRAKASH bearing USN: 1BM09IM002, of VIII semester B.E,

Department of Industrial Engineering and Management do hereby declare thatseminar report entitled "CRISIS MANAGEMENT" has been compiled by me.

This work and any part of this work have not been submitted anywhere for the

award of any degree.

Place: Bangalore Signature:

Date: 04/05/2013 Name: ADITHA PRAKASH


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CRISIS MANAGEMENT


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ACKNOWLEDGEMENT

Words are often too less to reveal ones deep regards. An understanding of

the work like this is never the outcome of the efforts of a single person. The

euphoria and satisfaction of the completion of any work will be incomplete

without thanking the people responsible for its venture. I take this opportunity

to express my profound sense of gratitude and respect to all those who helped

me through the duration of this seminar.

I would like to thank Dr B RAVISHANKAR, Professor, Head of theDepartment, Department of Industrial Engineering and Management, B M S

College of Engineering, Bangalore, for his constant encouragement for this

Seminar.

I would also like to thankDr

K MALLIKHARJUNA BABU

, Principal, B M S

College of Engineering, Bangalore, for giving us an opportunity to carry out

the seminar in this college.

I am also thankful to all the Faculty Members and Non-teaching staff in the

Department of Industrial Engineering and Management, B M S College of

Engineering, Bangalore, for their constant support.

I would like to thank my Parents for their moral support and Friends for their

suggestions. Last but not least, I would like to thank those, whose name may

not have been appeared here but their efforts have not gone unnoticed.


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ABSTRACT

Industry is an integral part of civilisation. .From time immemorial man has

been able to develop industries mostly by trial and error method. But with the

advancement in science and technology man has become more reasonable

and hence successful. The success of an industry lies in the well balanced

organisational skills of the management. It is not enough to have a thorough

know how of the infrastructure or the tips to increase production. It is

absolutely necessary for a management to anticipate crisis in the system and

to successfully be well prepared to overcome it, so that the industry may scale

great height. Hence the need of the hour is to know the in and out of crisis

management to maintain the reputation and well-being of the Industry.


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CONTENTS

Sl No. TOPIC PAGE No.

1 INTRODUCTION 6

2 WHAT IS CRISIS? 8

3 WHAT IS CRISIS MANAGEMENT? 10

4 PHASES OF CRISIS MANAGEMENT 12

5 CASE STUDIES 14

6 CONCLUSION 18

7 REFERENCES 19


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INTRODUCTION

The business world is becoming more and more complex, and results need to

be obtained more rapidly. Many organizations have taken a methodical

response to business disruptions- primarily a combination of planning and

insurance. They no longer have that luxury. Incidents are becoming more

common and less predictable, inside and outside the enterprise. Whats

needed is a way of managing any crisis regardless of its source.

People, processes and platforms are vital to managing a crisis successfully.

Underpinning these is the need to communicate effectively between all

participants and stake holders. Miss any of these and the crisis can rapidly

escalate out of control, increasing the damage to assets, including people and

brand.

A study conducted by the Oxford University and the Sedgwick Group to analyse

the long term effects of a crisis on an organization analysed the impact of

catastrophes on shareholder value, evaluating companies that responded well

to a crisis, as well as those that responded poorly. Not surprisingly, companies

that responded poorly suffered a decline in shareholder confidence. However,

the companies that responded well saw a 22% positive difference in stock

price.


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Need for the study:

Crisis Management prepares the individuals to face unexpecteddevelopments and adverse conditions in the organization with courage

and determination. Employees adjust well to the sudden changes in the organization. Employees can understand and analyse the causes of crisis and cope

with it in the best possible way.

Crisis Management helps the managers to devise strategies to come outof uncertain conditions and also decide on the future course of action.

Crisis Management helps the managers to feel the early signs of crisis,warn the employees against the aftermaths and take necessary

precautions for the same.

Ultimately crisis management plays an important role in maintaining the

stability and well-being of an organization.


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WHAT IS CRISIS?

What is Crisis?

A sudden and unexpected event leading to major unrest amongst the

individuals at the workplace is called as organization crisis. In other words,

crisis is defined as any emergency situation which disturbs the employees as

well as leads to instability in the organization. Crisis affects an individual,

group, organization or society on the whole.

Characteristics of Crisis

Some of the characteristics of crises are:

Crisis is a sequence of sudden disturbing events harming theorganization.

Crisis generally arises on a short notice.Crisis triggers a feeling of fear and threat amongst the individuals

Why Crisis?

Crisis can arise in an organization due to any of the following reasons:

Technological failure and Breakdown of machines lead to crisis.Problems in internet, corruption in the software, errors in

passwords all result in crisis.

Crisis arises when employees do not agree to each other and fightamongst themselves. Crisis arises as a result of boycott, strikes for

indefinite periods, disputes and so on.

Violence, thefts and terrorism at the workplace result inorganization crisis.


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Neglecting minor issues in the beginning can lead to major crisisand a situation of uncertainty at the work place. The management

must have complete control on its employees and should not

adopt a casual attitude at work.

Illegal behaviours such as accepting bribes, frauds, data orinformation tampering all lead to organization crisis.

Crisis arises when organization fails to pay its creditors and declaresitself a bankrupt organization.

Types of crises

Crises can be categorized as follows:

1) Natural crises2) Technological crises3) Confrontation4) Malevolence5) Organizational misdeeds6) Workplace violence7) Rumours8) Terrorist attacks/man-made disasters


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WHAT IS CRISIS MANAGEMENT?

Crisis management can be defined as a, "Holistic management process that

identifies potential impacts that threaten an organization and provides a

framework for building resilience, with the capability for an effective response

that safeguards the interests of its key stakeholders, reputation, brand, and

value-creating activities- as well as effectively restoring operational

capabilities."

Essentially, it is the process by which an organization deals with a major event

that threatens to harm the organization, its stakeholders, or the general public.

Three elements are common to most definitions of crisis:

(a) A threat to the organization,

(b) The element of surprise, and

(c) A short decision time

Crisis management can also be expressed as crisis is a process of

transformation where the old system can no longer be maintained. Therefore

the fourth defining quality is the need for change. If change is not needed, the

event could more accurately be described as a failure or incident.

In contrast to risk management, which involves assessing potential threats and

finding the best ways to avoid those threats, crisis management involves

dealing with threats before, during, and after they have occurred. It is a

discipline within the broader context of management consisting of skills and

techniques required to identify, assess, understand, and cope with a serious

situation, especially from the moment it first occurs to the point that recovery

procedures start.


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Crisis management consists of:

Methods used to respond to both the reality and perception of crises. Establishing metrics to define what scenarios constitute a crisis and should

consequently trigger the necessary response mechanisms. Communication that occurs within the response phase of emergency

management scenarios.

Crisis management methods of a business or an organization are called Crisis

Management Plan.

A crisis mind set requires the ability to think of the worst-case scenario whilesimultaneously suggesting numerous solutions. Trial and error is an accepted

discipline, as the first line of defence might not work. It is necessary to

maintain a list of contingency plans and to be always on alert. Organizations

and individuals should always be prepared with a rapid response plan to

emergencies which would require analysis, drills and exercises.

The credibility and reputation of organizations is heavily influenced by the

perception of their responses during crisis situations. The organization andcommunication involved in responding to a crisis in a timely fashion makes for

a challenge in businesses. There must be open and consistent communication

throughout the hierarchy to contribute to a successful crisis communication

process.

The related terms emergency management and business continuity

management focus respectively on the prompt but short lived "first aid" type

of response (e.g. putting the fire out) and the longer term recovery andrestoration phases (e.g. moving operations to another site). Crisis is also a facet

ofrisk management, although it is probably untrue to say that Crisis

Management represents a failure of Risk Management since it will never be

possible to totally mitigate the chances of catastrophes occurring.
http://en.wikipedia.org/wiki/Trial_and_errorhttp://en.wikipedia.org/wiki/Crisis_communicationhttp://en.wikipedia.org/wiki/Emergency_managementhttp://en.wikipedia.org/wiki/Business_continuity_managementhttp://en.wikipedia.org/wiki/Business_continuity_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Business_continuity_managementhttp://en.wikipedia.org/wiki/Business_continuity_managementhttp://en.wikipedia.org/wiki/Emergency_managementhttp://en.wikipedia.org/wiki/Crisis_communicationhttp://en.wikipedia.org/wiki/Trial_and_error


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PHASES OF CRISIS MANAGEMENT

PRECRISIS PHASE:

The pre-crisis phase is concerned with prevention and preparation. Prevention involves seeking to reduce known risks that could lead to a

crisis. This is part of an organizations risk management program.

Preparation involves creating the crisis management plan. Selecting and training the crisis management team, and conducting

exercises to test the Crisis management plan and crisis managementteam.

CRISIS RESPONSE PHASE:

The crisis response is what management does and says after the crisishits.

Public relations play a critical role in the crisis response by helping todevelop the messages that are sent to various people.

PHASES OFCRISIS

MANAGEMENT

PRECRISIS

POST

CRISISCRISIS

RESPONSE


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A great deal of research has examined the crisis response.That research has been divided into two sections:

the initial crisis response and Reputation repair and behavioural intentions

POST CRISIS PHASE:

In the post-crisis phase, the organization is returning to business asusual.

The crisis is no longer the focal point of managements attention but stillrequires some attention.


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CASE STUDIES

Examples of successful crisis management

1)Tylenol (Johnson and Johnson)In the fall of 1982, a murderer added 65 milligrams of cyanide to

some Tylenolcapsules on store shelves, killing seven people, including three in

one family. Johnson & Johnson recalled and destroyed 31 million capsules at a

cost of $100 million. The affable CEO, James Burke, appeared in television ads

and at news conferences informing consumers of the company's actions.

Tamper-resistant packaging was rapidly introduced, and Tylenol sales swiftly

bounced back to near pre-crisis levels.

When another bottle of tainted Tylenol was discovered in a store, it took only a

matter of minutes for the manufacturer to issue a nationwide warning that

people should not use the medication in its capsule form.

2)Odwalla FoodsWhen Odwalla's apple juice was thought to be the cause of an outbreak of E.

coli infection, the company lost a third of its market value. In October 1996, an

outbreak of E. coli bacteria in Washington State, California, Colorado and

British Columbia was traced to unpasteurized apple juice manufactured by

natural juice maker Odwalla Inc. Forty-nine cases were reported, including the

death of a small child. Within 24 hours, Odwalla conferred with the FDA and

Washington state health officials; established a schedule of daily press

briefings; sent out press releases which announced the recall; expressed

remorse, concern and apology, and took responsibility for anyone harmed by

their products; detailed symptoms of E. coli poisoning; and explained what

consumers should do with any affected products. Odwalla then developed -

through the help of consultants - effective thermal processes that would not

harm the products' flavours when production resumed. All of these steps were
http://en.wikipedia.org/wiki/Tylenolhttp://en.wikipedia.org/wiki/Tylenolhttp://en.wikipedia.org/wiki/Tylenolhttp://en.wikipedia.org/wiki/Odwallahttp://en.wikipedia.org/wiki/Odwallahttp://en.wikipedia.org/wiki/Tylenol


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communicated through close relations with the media and through full-page

newspaper.

3)PepsiThe Pepsi Corporation faced a crisis in 1993 which started with claims of

syringes being found in cans of diet Pepsi. Pepsi urged stores not to remove

the product from shelves while it had the cans and the situation investigated.

This led to an arrest, which Pepsi made public and then followed with their first

video news release, showing the production process to demonstrate that such

tampering was impossible within their factories. A second video news releasedisplayed the man arrested. A third video news release showed surveillance

from a convenience store where a woman was caught replicating the

tampering incident. The company simultaneously publicly worked with the FDA

during the crisis. The corporation was completely open with the public

throughout, and every employee of Pepsi was kept aware of the details. This

made public communications effective throughout the crisis. After the crisis

had been resolved, the corporation ran a series of special campaigns designed

to thank the public for standing by the corporation, along with coupons forfurther compensation. This case served as a design for how to handle other

crisis situations.
http://en.wikipedia.org/wiki/Pepsihttp://en.wikipedia.org/wiki/Convenience_storehttp://en.wikipedia.org/wiki/Convenience_storehttp://en.wikipedia.org/wiki/Pepsi


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Examples of unsuccessful crisis management

1) Bhopal gas tragedyThe Bhopal disaster in which poor communication before, during, and after thecrisis cost thousands of lives, illustrates the importance of incorporating cross-

cultural communication in crisis management plans. According to American

Universitys Trade Environmental Database Case Studies (1997), local residents

were not sure how to react to warnings of potential threats from the Union

Carbide plant. Operating manuals printed only in English is an extreme

example of mismanagement but indicative of systemic barriers to information

diffusion. According to Union Carbides own chronology of the incident (2006),

a day after the crisis Union Carbides upper management arrived in India but

was unable to assist in the relief efforts because they were placed under house

arrest by the Indian government. Symbolic intervention can be

counterproductive; a crisis management strategy can help upper management

make more calculated decisions in how they should respond to disaster

scenarios. The Bhopal incident illustrates the difficulty in consistently applying

management standards to multi-national operations and the blame shifting

that often results from the lack of a clear management plan.

2)Ford and Firestone Tire and Rubber CompanyThe Ford-Firestone Tire and Rubber Company dispute transpired in August

2000. In response to claims that their 15-inch Wilderness AT, radial ATX and

ATX II tire treads were separating from the tire coreleading to grisly,

spectacular crashesBridgestone/Firestone recalled 6.5 million tires. These

tires were mostly used on the Ford Explorer, the world's top-selling sport utility

vehicle (SUV).

The two companies committed three major blunders early on, say crisis

experts. First, they blamed consumers for not inflating their tires properly.

Then they blamed each other for faulty tires and faulty vehicle design. Then

they said very little about what they were doing to solve a problem that had

caused more than 100 deathsuntil they got called to Washington to testify

before Congress.
http://en.wikipedia.org/wiki/Bhopal_disasterhttp://en.wikipedia.org/wiki/Cross-cultural_communicationhttp://en.wikipedia.org/wiki/Cross-cultural_communicationhttp://en.wikipedia.org/wiki/Fordhttp://en.wikipedia.org/wiki/Firestone_Tire_and_Rubber_Companyhttp://en.wikipedia.org/wiki/Firestone_Tire_and_Rubber_Companyhttp://en.wikipedia.org/wiki/Fordhttp://en.wikipedia.org/wiki/Cross-cultural_communicationhttp://en.wikipedia.org/wiki/Cross-cultural_communicationhttp://en.wikipedia.org/wiki/Bhopal_disaster


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CONCLUSION

To conclude, here are some tips to overcome crises through effective

communication in an organization:

Have a crisis plan ready to go.

Build the crisis support infrastructure

Speak with one voice

Be prepared before you talk

Remembers social media

Be there

Protect the record

Keep reading the situation

Dont go quiet

Learn and tweak

A crisis management plan generates order out of chaos. It needs strongleadership by well-trained and rehearsed individuals. Everyone within an

organisation should know what his or her role is in a crisis and should be

prepared to deal with one.


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REFERENCES

oCorporate crisis management: how to minimize thechaos by Elizabeth Stevens

ohttp://archive.adl.org/security/crisis%20management.pdf

ohttp://www.managementstudyguide.com/crisis-management.htm

ohttp://www.bernsteincrisismanagement.com/oWikipedia.org
http://archive.adl.org/security/crisis%20management.pdfhttp://archive.adl.org/security/crisis%20management.pdfhttp://archive.adl.org/security/crisis%20management.pdfhttp://archive.adl.org/security/crisis%20management.pdfhttp://www.managementstudyguide.com/crisis-management.htmhttp://www.managementstudyguide.com/crisis-management.htmhttp://www.managementstudyguide.com/crisis-management.htmhttp://www.managementstudyguide.com/crisis-management.htmhttp://www.bernsteincrisismanagement.com/http://www.bernsteincrisismanagement.com/http://www.managementstudyguide.com/crisis-management.htmhttp://www.managementstudyguide.com/crisis-management.htmhttp://archive.adl.org/security/crisis%20management.pdfhttp://archive.adl.org/security/crisis%20management.pdf

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