Crisis Management How would you ‘cope’?

What disasters could your house face?

Possible disasters…

Business Disasters

If you were a terrorist, what business areas would you threaten? physical security document security personnel security hardware security telecommunications security software security

So what is Risk Analysis?

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).

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

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 them! You need to know this!

Disaster Avoidance….

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

So why should anyone bother with disaster management?

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

More recent crisis? 2008

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 £34.3m. 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

What other types of crisis might a business face? Hostile takeover Faulty/dangerous products Environmental disaster Major customer withdrawing orders Physical destruction e.g. bombing / earthquakes / Physical destruction e.g. bombing / earthquakes / fires Strikes by workforce

What areas of a business could a crisis affect? Marketing: public image under threat – PR Ad campaigns Promotions 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. Training Recruitment Operations: particularly if JIT Storage/warehousing Machinery Finance: ad campaigns; environment clean up; compensation

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!

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

Contingency 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 A CRISIS RARELY GOES AS PLANNED! 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?

Contingency 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 cost 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?

Contingency Plan Cadbury’s testing out of date Cadbury’s withdraws products made in China Cadbury’s is fined In each case: Identify the cause of each event Identify 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 answer BUSS4.8 Planning for Change

How would you cope?

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!

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

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

Strategy tactics – what if Richard Branson died in an accident? How should the Virgin conglomerate react?

Strategy tactics – what would the school do if the U6 revision trip were in London when a bomb goes off?

Strategy tactics – how would you have reacted If you were the MD of Bernard Matthews?

Strategy tactics What are the implications to TESCO of poor quality FUEL being sold? How would you have reacted?

Strategy tactics You are head of ICT at a bank and a ‘tape’ of all customer Data has been lost in transit!

Homework Revise for assessment next lesson!