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You are a newly appointed vice president in a large chemical firm. One of your first tasks is to develop a crisis management program for the company. Outline the steps in such a program.
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Business and Its Environment
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Crisis management has five components: avoidance, preparedness, root cause analysis, response, and resolution. The following paragraphs highlight a crisis management program for our company.
Avoidance: The most important component of a crisis management program is avoidance, and the next most important component is preparedness. The best approach to crisis management is to reduce the likelihood of a crisis developing, and an important precursor to doing so is an assessment of its internal risks and the exposure of the company in its nonmarket environment. The company must have internal audits to assess the various processes involved and take appropriate action to fix things. The company can also engage in risk assessment; it will include risk analysis as well as risk of litigations and regulatory actions. We understand that reputations are difficult to evaluate in terms of both their importance and the extent to which they can be damaged by a crisis and the company's response to it. Thus, reputation risk can also be done to assess the potential impacts of a crisis on the stakeholders of the company and our reputation with them, the public, and government. A chemical firm must be careful in the marketplace, in relations with business partners, and with respect to groups and institutions in the nonmarket environment. We recognize the importance of openness, forthright conduct, and transparency on brand reputation.
In addition to this, the company must understand the asymmetry involved in public reaction to a crisis; trust usually favors activist groups rather than the company. This must inspire the company to take immediate and effective actions to a crisis.
Preparedness: To prepare the organization for any crisis, the company will appoint a crisis management team that can be mobilized quickly and can substantively address the root cause of a crisis. The company will also appoint a knowledgeable and effective spokesperson. The other aspect of an organization is policies that help team members as well as others to act effectively in response to developments. The company will earmark resources that can be mobilized if a crisis occursphysical resources to contain any chemical accident, fire or explosion. An important part of preparedness is organizational learning. The chemical industry is prone to criticism so the management needs to learn from any past mistakes to help avoid such situations.
Root Cause Analysis: To develop an effective response, the company needs to analyze the crisis. It will include identifying the issues involved in the crisis and then identifying the causes of the crisis. This will provide a basis for resolution of the present crisis, avoidance of future crises, and preparedness for crises that do result.
Response: Any response to a crisis needs effective communication and rectification. Since crises often develop quickly, information is often incomplete and speculation and rumors can fly. Even when information is complete or the crisis self-evident, it is important to communicate effectively with those affected as well as the public more broadly. A chemical firm needs to follow the industry rules and regulations for better relations with the government, public and stakeholders. We should not underestimate the cost of reputation damage and harm to our brand name. In formulating a strategy for addressing a crisis, we must consider both its exposure to liability and its response to stakeholders and the public.
Resolution: An important lesson for resolution is that the problem should be fixed before we begin to resume our normal marketing activities. Once a crisis has been resolved, we must also reassess our crisis avoidance measures and preparedness.
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