CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

9
Risk, Issues
And Crisis
CHAPTER Management
What is Ethics
LE ARNI NG OUTC OMES
By the end of this topic, you should be able to:

1. Crisis management issues;

2. The difference between risk/issues and crisis management;

3. Reputation risk-analysis.

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

INTRODUCTION
Crisis management is a critical organisational function. Failure can result in serious harm to
stakeholders, losses for an organisation, or end its very existence. Public relations practitioners
are an integral part of crisis management teams. So a set of best practices and lessons gleaned
from our knowledge of crisis management would be a very useful resource for those n public
relations. Volumes have been written about crisis management by both practitioners and re-
searchers from many different disciplines making it a challenge to synthesise what we know
about crisis management and public relations place in that knowledge base. The best place to
start this effort is by defining critical concepts.

RISK, ISSUES AND CRISIS MANAGEMENT

Thus, this chapter focuses on:

Crisis management issues;

The difference between risk/issues and crisis management;

Reputation risk-analysis.

WEBSITE

http://www.instituteforpr.org/files/uploads/Coombs_Crisis2.pdf

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

The Differences Between Risk/Issues and

9.1
Crisis Management

Marketing communication is the process by which information about an organisation and its
offerings is disseminated to selected markets. Communication plays important role in facilitat-
ing mutually beneficial exchange relationship between an organisation and prospective buyers.
The goal of communication is to induce initial purchases and also to achieve post purchase
satisfaction which will increase the probability of repeat sales. Figure 3.1 illustrates the goal of
communication.

Figure 9.1: Crisis communication

Public relations skills and techniques as shown in figure 9.2 are particularly important in man-
aging issues or crises which can confront a company, organisation, industry or even government
at any time.

Public relations practitioners play a crucial role in crisis situations, but it is essentially the same
role they have in the everyday life of the organisations for whom they work. In good times and
in bad, they are responsible for maintaining and improving their organisations relationships by
effectively communicating with their target audiences. A crisis merely increases the intensity of
the communication and induces stress in all parties and in their relationships.

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

Company

Public
Relations
Skills and
Techniques

Government Organisation

Figure 9.2: Public relations skills and techniques

Industry

Figure 9.2: Public relations skills and techniques

Usually, public relations

practitioners are NOT re-
sponsible for resolving
the underlying problems
that create crisis situa-
tions, nor do they deter-
mine what actions their
organisations should take.
They do not, for instance,
clean up oil spills or make
reparations to victims
families. Their role is to
communicate with the or-
Figure 9.3: Activities of public relation practitioner
ganisations publics about
those decisions and about any subsequent actions that are taken. And, at the same time, theyre
responsible for keeping the organisation appraised of its various publics reactions.

Crisis communications should be coordinated by the corporate communication function, and

communication professionals should be involved in crisis planning and crisis management.

Risk management is a structured approach to managing uncertainty related to a threat, a se-

quence of human activities as shown in figure 9.4 includes:

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

Risk Assessment

Strategies management to manage it.

Mitigation of risk using managerial resources.

Figure 9.4: Risk management

The objective of risk management as shown in figure 9.5 is to reduce different risks related to
a preselected domain to the level accepted by society. It may refer to numerous types of threats
caused by environment, technology, humans, organisations and politics. On the other hand it
involves all means available for humans, or in particular, for a risk management entity (person,
staff and organisation).

Politics Environment

Risk
management

Organisation
Technology

People

Figure 9.5: Objectives of risk management

WEBSITE

http://www.nku.edu/~turney/prclass/readings/crisis.html

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

9.2 Reputation Risk-Analysis

Where does Reputation come from? Figure 9.6 shows different kind of reputations.

Ad
ve uth
rt Mo
of

is

rd
in

Wo
g

Reputation
e

n ce
ag
er

rie
ov

pe
Ex
C
ct
s
e
w
Dir
Ne

Figure 9.6: Reputations

9.2.1 Risk Analysis Finance Definition

Risk analysis-Finance is
the process of determining
whether an investment or
9.2.1 business decision is worth
IT Systems
the financial risk involved.
Risk analysis for securities
portfolios involves using a
variety of statistical tech-
niques and other methods to
Risk judge how steep the losses
Analysis
could be, if certain events
Data Safety Buildings
Safety occur. Companies conduct
risk analysis of their infor-
mation technology systems,
in building safety, employee
safety, and data safety costs.
Numerous systems are used
Employee
to conduct risk analysis as
Safety shown in figure 9.7.
Figure 9.7: Risk Analysis

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

9.2.2 Risk Analysis Hacker Definition

In an IT security context, it is the process of determining the actual likelihood or risk that an
organisations security will be breached, and what kind of material or immaterial losses will
potentially result from such a security breach. Immaterial losses typically describe hard-to-
measure losses such as loss of reputation. An example for such a loss would be a successful
attack on a bank or financial institution in which data privacy was violated. The risk is typically
expressed as a financial risk as shown in figure 9.8 and used to budget for investments in IT
security technology, personnel, and processes; it is similar to insuring against a natural disaster
or a theft.

Figure 9.8: Financial risk

Risk Analysis is the process of examining a system and its operational context to determine pos-
sible exposures and the possible harm they can cause. A study of risk that a business or system
is subject to. A process to determine exposure and potential loss.

Risk communication is concerned with the problems arising from the communication of scien-
tific and technical assessments of risk to various sections of the public. These problems have
largely been construed as technical ones: how to transfer difficult material from experts to
people with the maximum effectiveness and the minimum loss of accuracy and content. Many
risk communicators think that members of the public and community groups perceive risks
differently from those who construct risk assessments or commission them, and assume that
expert risk assessments are accurate and correct. This being so, the self-imposed task of risk
communicators is to disseminate various truths to an audience that is deficient in some funda-
mental and obstructive way, beyond ignorance of the facts. They perceive those to whom risk
assessments need to be communicated as lacking reason or being hampered by an assortment of

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

psychological and political disabilities--bias, special interest, ideological commitment, and so

forth. The notion that risk assessments themselves might be socially constructed and politically
motivated is seldom contemplated.

Much risk communication is therefore purposefully undertaken to correct the publics false
view of risk and draw it more in line with the correct view of the risk experts. However an
analysis of any controversy shows that neither side seeks to portray a true view of the risks but
rather one that suits their agenda.

Public relations firms often classify local residents, as they do activists, into various publics so
that they can concentrate on those likely to be persuaded of the benefits of the proposed project
and marginalising those who are likely to oppose it. Figure 9.9 shows the activities of public
relation practitioner.

Figure 9.9: Activities of public relation practitioner

There is a growing literature on risk communication, much of which is aimed at advising cor-
porations on how to deal with the fears that their operations engender in the community. Many
risk communicators concentrate on developing ways to reassure the public.

Where risk communicators have recognised that trust people have in social institutions is a
crucial part of gaining acceptance for hazardous facilities or environmentally dubious develop-
ments, PR people have played a major role in advising government authorities and corporations
on how to cultivate the trust of local residents. This effort to gain their trust is inevitably manip-
ulative and cynically conducted and often that lack of sincerity is inadvertently communicated
to the community, although sometimes it needs to be exposed by opponents. Figure 9.10 shows
the risk control measures.

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

Evaluation of Solutions

Accept the Risk:

If the impact of a rare event is low it may be reasonable
to accept the risk, such as the occasional theft of compa-
ny property, which is unlikely to jeopardise the business.
Accept the Risk Some risks fall outside your control, such as governmen-
tal policy, and so must be accepted by default.

Manage the Risk:

For frequent low impact risks, The most sensible strategy
is to monitor and seek to reduce the risk. An example
Manage the Risk
would be development of new procedures to reduce er-
Risk Control ror.
Measures
Reduce the Risk:
A frequent potentially damaging event is a target for re-
Reduce the Risk duction measures. The hazardous procedure should be
re-engineered or carefully monitored to reduce risk. Al-
ternatively, you might choose to outsource the risk there-
by giving it to someone else better equipped to manage
it.

Planning:
Planning Business continuity planning addresses risks which are of
low probability, such as fire and flood, but whose poten-
tial impact is failure.

Figure 9.10: Risk control measures

The types of risk as shown in figure 9.11 to which Impact Low High
each is an appropriate reaction are shown in the
following table:
Probability
High Manage Reduce
Low Accept BC Plan
Figure 9.11: Types of risk

SELF-CHECK

Define risk from finance and IT perspective.

1. http://www.mediatenor.com/smi_MT_tools_reputationscorecard.php
WEBSITE 2. http://www.yourdictionary.com/risk-analysis
3. http://www.mapcruzin.com/environment21/beder3.htm
4. http://www.sorm.state.tx.us/Risk_Management/Business_Continuity/
risk components.php

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

9.3 Risk Identification

Risk identification as shown in figure 9.12 can start with the source of problems or with the
problem itself.

Sources Analysis:
Risk sources may be internal or external to the system
Source that is the target of risk management. Examples of risk
Analysis sources are: stakeholders of a project, employees of a
company or the weather over an airport.
Risk
Identification
Problem Analysis:
Problem Risks are related to identified threats. For example: the
Analysis threat of losing money, the threat of abuse of privacy
information or the threat of accidents and casualties. The
threats may exist with various entities, most important
with shareholders, customers and legislative bodies such
as the government.

Figure 9.12: Types of risk identification

The chosen method of identifying risks may depend on culture, industry practice and compli-
ance. The identification methods as shown in figure 9.13 are formed by templates or the de-
velopment of templates for identifying source, problem or event. Common risk identification
methods are

Objectives-based Risk Identification:

Objectives-based Risk Organisations and project teams have objectives. Any
Identification event that may endanger achieving an objective partly
or completely is identified as risk.

Scenario-based Risk Identification:

In scenario analysis different scenarios are created. The
Scenario-based scenarios may be the alternative ways to achieve an ob-
Risk Identification jective, or an analysis of the interaction of forces in, for
example, a market or battle. Any event that triggers an
undesired scenario alternative is identified as risk.

Taxonomy-based Risk Identification:

The taxonomy in taxonomy-based risk identification is
a breakdown of possible risk sources. Based on the tax-
Taxonomy-based
onomy and knowledge of best practices, a questionnaire
Risk Identification
is compiled. The answers to the questions reveal risks.
Taxonomy-based risk identification in software industry
can be found in CMU/SEI-93-TR-6.

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

Common-Risk:
Checking In several industries lists with known risks are
available. Each risk in the list can be checked for ap-
Common-Risk plication to a particular situation. An example of known
risks in the software industry is the Common Vulnerabil-
ity and Exposures list found at http://cve.mitre.org.

Risk Charting:
This method combines the above approaches by listing
Resources at risk, Threats to those resources Modify-
ing Factors which may increase or reduce the risk and
Consequences it is wished to avoid. Creating a matrix
under these headings enables a variety of approaches.
Risk Charting One can begin with resources and consider the threats
they are exposed to and the consequences of each. Al-
ternatively one can start with the threats and examine
which resources they would affect, or one can begin
with the consequences and determine which combina-
tion of threats and resources would be involved to bring
them about.

Figure 9.13: Common risk identification methods

9.4 Risk and Globalisation

A recent poll of 20,000 people in 20 countries including developing countries such as Brazil,
China, India, and Nigeria found that by a margin of two to one people thought that globalisation
would materially benefit their families. But more than half of those polled are convinced that
globalisation as shown in figure 9.14 threatens their countrys unique culture.

Culture

Environment Society

Globalisation

Economy Politics

Figure 9.14: Globalisation

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

As societies integrate cultur-

ally, in many ways they be-
come more diverse: IKEA has
brought Swedish design to
Russians, coexisting with Rus-
sian design. Indian immigrants
and McDonalds have brought
chicken tikka and hamburgers
to the United Kingdom, co-
existing with fish and chips.
But without policies to foster
local and other cultural tradi-
tions, globalisation may lead
to dominance by US culture.

Globalisation as shown in fig-

ure 9.15 will usually weaken
monopolies. As countries
open their markets, national
monopoly producers face
Figure 9.15: Globalisation
competition from foreign firms.
But occasionally one firm will get a large enough global technological advantage that it ac-
quires a temporary global monopoly. More commonly, oligopolies exert global market power.
Such cases pose severe challenges to national antitrust regulators.

As global trade becomes more firmly based on a legal framework, the power of developing
countries could increase: the weak need rules more than the strong. But there is a danger that
the rules will favor the strong for example, rich and poor countries have different interests when
it comes to intellectual property rights and global warming. Poor countries want to keep some
knowledge as a public good, while rich countries want to turn it into a private good to reward
innovation. Poor countries will suffer the most from global warming, while rich countries are
generating most of the carbon dioxide that is causing the problem. In bargaining to achieve fair
rules on such issues, poor countries are handicapped by their poverty and fragmentation.

Still, despite widespread fears, there is no evidence that environmental standards are falling.
In fact, a recent study of air quality in major industrial centers of the new globalisers found
that air quality has improved significantly in all of them. Increased integration can help in this
regard for example, communities can exchange successful strategies for controlling pollution.
As with core labor standards, some groups in rich countries are proposing that environmental
regulations be policed through World Trade Organisation sanctions. But such sanctions would
risk being hijacked by protectionist lobbies in rich countries, restricting the opportunities of
poor ones.

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

ACTIVITY The risks of globalisation, in fact, are greater and more varied than the risks of
domestic commerce. Managing them is the key.

Visit: http://www.chinariskmanagement.com/Global.html.

WEBSITE

http://www.worldbank.org/html/prddr/trans/JulAugSep01/boxpg6.htm.

9.5 A Different Environment for Risk

CEOs and CFOs who feel confident about their US risk, often feel a vague tension about the un-
known risks related to worldwide operations. For good reason: the legal and cultural landscape
can be completely foreign in more ways than one. Below are a few of the issues that need to
be considered. Managing them includes awareness of and reduction of loss, the use and tailor-
ing of insurance coverages, and control of liability via contract. Figure 9.16 shows the issues of
the environment risk

Political
Risk

Contract Property
language Loss

A Different
Environment
Risk

Admitted
or Non- Liability
admitted Loss
Insurance

Employee
injury

Figure 9.16: Environment risk

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

9.5.1 Political Risk

In the US, a stable government with known rules and regulations is presumed. This is not neces-
sarily the case in all parts of the world. The possibility of nationalisation of industries needs to
be considered. Similarly, there are the risks of confiscation, expropriation, currency inconvert-
ibility and contract repudiation. Currency devaluation and rampant inflation are possible sce-
narios, wreaking havoc on the adequacy of insurance limits, as one of many potential problems.
There is also risk to company employees of personal harm or kidnapping, and risk to the firm
of extortion attempts. Figure 9.17 shows the political risk.

Figure 9.17: Political risk

9.5.2 Property Loss

Areas of the world are subject to different levels of loss from natural disasters as shown in
figure 9.18 such as windstorm, hail, earthquake, flood, etc. There is neither necessarily the rat-
ing information nor the insurance availability that exists in the US, and insurance terms and
conditions are different. Theft and vandalism exposures can be higher than what we are ac-
customed to as well. In cases of reliance on one or a few foreign suppliers or customers, there
is a contingent business interruption exposure that should be considered and possibly insured.
This refers to business loss a company would suffer as a result of an incident at their suppliers
or customers facility. Attention must be given to the question of what currency losses will be
paid in, and insurance limits will need to be carefully monitored in a high inflation environment.
Personal property being shipped to and from the US needs to be insured in transit, and control
over the insurance should be maintained if possible. If the transit insurance will be handled by
the foreign party, the sale should be on terms whereby risk of non-insurance or poor insurance
falls to the party arranging the coverage, not to the innocent party.

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

Figure 9.18: Property loss

9.5.3 Liability Loss

Automobile liability is controlled in most countries and insurance must be purchased from ap-
proved local insurers. The laws addressing general liability, including product liability, are not
necessarily the same at home, some countries using the Napoleonic Code and related systems.
Chinas law is a hybrid, adopting some Code law and some Anglo-Saxon principles, and is
evolving and developing as we speak. In some countries, China being one, the law cannot be
totally relied on as it is subject to various interpretations depending on local politics. Addition-
ally, in some countries civil law and criminal law overlap to an extent we are not used to. Busi-
ness managers are jailed for unpaid business debts and for violations of employment laws, for
example. None of this, of course, should be taken lightly. Experts are required to understand the
exposures and to make sure coverage dovetails with the exposures and with the domestically
purchased Umbrella insurance. Figure 9.19 shows the liability loss.

Figure 9.18: Property loss

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

9.5.4 Employee Injury

Some US based workers compensation may be available for US employees temporarily out-
side of the country, but beyond that separate insurance must be obtained based on the laws of
the specific country. In many countries, the insurance of employee injury is reserved to state
institutions, and cannot be provided by private insurers. Diligence should be applied to satisfy-
ing these requirements. No assumptions should be made. For example the laws of China gov-
erning Employment of Foreigners in China call for regulation of foreign employees in China
of any duration unless they are representatives of permanent offices of foreign enterprises in
China. Further, you must be aware of how the law treats independent contractors or pseudo
independent contractors. In other words, compliance with other countries workers compensa-
tion laws is a complicated process. Additionally, a master policy should be purchased in the US
supplementing the foreign coverage with Foreign Voluntary Compensation, Endemic Disease
and Repatriation Expense. Figure 9.20 shows the employee injury.

Figure 9.20: Employee injury

9.5.5 Admitted or Non-Admitted Insurance

Most countries require that at least some of the insurance purchased in that country be pur-
chased from insurers licensed (or admitted) in that country. Sometimes the only admitted
insurers are the insurers based in that country, quite often unknown or unrated entities. Many
US firms purchase only insurance types and limits to meet minimum government requirements
from these admitted insurers, while purchasing the rest of their program from US insurers. This
may or may not be strictly legal from the point of view of the country where the exposures are
located, and can pose the following tax issues as shown in figure 9.21:

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CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

Tax issues include:

The premium paid in the US may not be a deductible expense in the US, or in
the foreign country either.

Non-admitted premiums may be considered additional capitalisation of a

subsidiary and subject to local taxation.

Payment of the loss by the non-admitted insurer could be considered subject

to local income tax.

Replacement equipment shipped into the foreign jurisdiction could be subject

to import taxes.

Figure 9.21: Tax issues

Non-Tax issues include:

Penalties may be levied for the purchase of illegal non-admitted insurance.

Defense by a non-admitted insurer of a liability claim may not be allowed - this

would have to be known in advance so policies can to be amended to provide
for reimbursement rather than direct defense. Clearly, structure of the interna-
tional program has to match actual country conditions and requirements.

Figure 9.22: Non-tax issues

9.5.6 Contract Language

Flows of liabilities, and in fact the business deal it-

self, are controlled by the contract between the par-
ties. Care should be taken in understanding contract
law of the countries where one will be conducting
business. In Code countries, act of God will ex-
cuse contract performance; this is somewhat analo-
gous to our concept of force Majeure, but the for-
mer is outside the actual language of the contract
as shown in figure 9.23 and is therefore out of the
control of the parties to negotiate. Specific contract
issues apply to individual countries. In China, for
example, contract law is unreliable and one may
want to make contracts in China subject to Hong
Kong law, with Hong Kong as the venue for dispute
resolution. Also, arbitration may be a more reliable
solution for disputes, rather than litigation.
Figure 9.23: Contract language

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

9.6 Rumour Analysis

A rumour or rumor is often viewed as an unverified account or explanation of events circulat-

ing from person to person and pertaining to an object, event, or issue in public concern. How-
ever, a review of the research on rumor conducted by Pendleton in 1998 found that research
across sociology, psychology, and communication studies had widely varying definitions of
rumor. Thus, rumor is a concept that lacks a particular definition in the social sciences. But most
theories agree that rumor involves some kind of a statement whose veracity is not quickly or
ever confirmed. In addition, some scholars have identified rumor as a subset of propaganda, the
latter another notoriously difficult concept to define. A pioneer of propaganda studies, Harold
Lasswell defined propaganda in 1927 as referring solely to the control of opinion by significant
symbols, or, to speak more concretely and less accurately, by stories, rumors, reports, pictures,
and other forms of social communication (1927:9). Rumors are also often discussed with re-
gard to misinformation and disinformation (the former often seen as simply false and the
latter seen as deliberately false, though usually from a government source given to the media or
a foreign government). Rumors thus have often been viewed as particular forms of other com-
munication concepts. Figure 9.24 depicts the rumours.

Figure 9.24: Rumours

WEBSITE

http://en.wikipedia.org/wiki/Rumor

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

9.7 The Nature of Crisis

A crisis is any event or situation that could:

Hinder a hospice or palliative care programs ability to operate.
Damage an organisations reputation with stakeholders whose support is essential to its
ongoing operation and success.
The term CRISIS has its roots in a Greek word meaning decision, or more broadly speaking,
a turning point. Crisis is a common human condition which displays itself in varying degrees
of intensity and can not be taken as a peculiar state of individual pathology, rather a genuine
struggle of a person who is responding to real life situations.

Those who do not learn from history will repeat the same mistake. Not every family problem is
the same. No problem of any political organisation is the same. The nature of any crisis at any
given time within or between political groups differs. What was a problem yesterday is not a
problem today and time is a big factor. Figure 9.25 depicts the crisis communication.

Figure 9.25: Crisis communication

9.7.1 Recognition of the Existence of a Problem

The basic and first question is, do we have a problem? Most of the mistakes originate from the
lack of recognition and admittance of the existence of a problem or problems. When problems are
covered up, through time they will get compounded and will be difficult to untangle. There are
affairs of the people which do not need the involvement of every individual. Some affairs dont

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

need to come out

to the public. Some
need public rec-
ognition and rem-
edy. If there was no
problem there is no
need even to pro-
ceed further. This
area is subjective.
Recognition does
not need much work
but proper commu-
nication within or
between members
of any organisation.
Figure 9.26 shows
Figure 9.26: Recognising the existence of a problem

how to recognise the existing problem.

9.7.2 Identification of the Nature and Origin of the Problem

The identification of the problem as shown in figure 9.27 is critical to its management. Ideo-
logical or philosophical problems are not main concerns and what are we left with? If ideology
(east and west) which was the
mother of all irreconcilable
differences is out, we will be
left with the rest. Namely, is
the source of the problem on
the line of the future, Ethi-
cal, Moral principle, religion,
power, money? etc. This is
the crux of the matter. To take
time and analyse the nature of
the problem is the main task.
If the disease is not known,
the medical Doctor cant pre-
scribe the medicine. Once this
Figure 9.27: Identification of a problem
is identified, the big work of
management will be easy to handle.

Resolution of the problem (Crisis) being the major task, once the nature and sources are identi-
fied, the first step to take is to control the problem Damage Control, before further damage

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

ensues. If immediate steps are not taken, the next step of problem resolution will be more dif-
ficult. What are the areas which feed the fire? Can they be controlled or confined? Is there any
possibility if minimizing what is to follow? etc.

9.7.3 Resolution of the Problem

There are no two problems in time which have the same nature. Any problem which creates a
draw back even in the smallest amount of time possible, delay in activity, is a problem. Time
is nothing but life itself, if you
call it money, your life is money,
simple as that. Bureaucracy is
nothing but time. The tyrannical
system survives in dividing the
children of the people and buy-
ing time to create more problems
and division.

Any political organisation must

have a mechanism of resolu-
tion of a crisis. This is where the
rules and regulations of any po-
litical organisation come. There
Figure 9.28: Resolution of the problem is no need to elaborate on this. If
it is not been worked out, then there is more problem.

For every action an individual or group takes there is a consequence and repercussion. Some
mistake are genuine, not premeditated and might arise from lack of or depth of knowledge.
Misunderstandings, lack of communication are other sources. etc. Some are calculated, orches-
trated pre-meditated and grave in their consequences.

It is important to stress that, some political organisations in the country and abroad are organised
for one basic and cardinal principle. To help the poor of the country and for the main objective
goal of safeguarding National Security and Integrity, now and in the future. If this is the case,
any difference within and between political groups and organisations, in one form or another,
will have an impact on the well being, the future of the people and the integrity and security of
the a Nation. One doesnt have to be myopic of the result of ones action. Care has to be taken
not to ruin when trying to build. Figure 9.28 shows how to the problem.

WEBSITE 1. http://www.nhpco.org/files/public/communications/crisis_guide.pdf
2. http://www.womanabuseprevention.com/html/crisis_intervention.html
3. http://ethiomedia.com/ace/management_of_crisis.html

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

9.8 The Characteristics of a Crisis

All crises have common characteristics. First, they are nearly always negative. They cast shad-
ows of doubt about the credibility of an organisation in the eyes of the public. Second, a crisis
can create improper or distorted perceptions. A crisis may involve allegations that tell only part
of the story and stimulate negative impressions by the public about the organisation. Unfortu-
nately, perception is too often reality. An organisation, therefore, must be prepared to deal with
erroneous comments

Third, crisis situations are almost always disruptive to the organisation. Work is placed on hold
until the crisis is resolved. Last, a crisis generally takes the organisation by surprise. The or-
ganisation is placed in a react mode, where it reacts to the situation, rumors, comments, and
potentially hostile interviews. Figure 9.29 shows the characteristics of crisis.

Characteristics
of a Crisis

Disruptive to the Improper or Distorted

Always Negative
Organisation Perceptions

Figure 9.29: Characteristics of crisis

WEBSITE

http://mediarelations.ifas.ufl.edu/crisis.htm

9.9 Handling a Crisis

A well-designed communications plan reflects your organisations commitment to quality. By

having a plan in place, you are preparing your staff to effectively handle communications re-

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

lated issues that arise during a crisis. A crisis communications plan should be a key component
of an organisations overall disaster response plan.
Pre-Crisis Phase:
Prevention involves seeking to reduce known risks that could lead to a crisis. This is part of an
organisations 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 management team. Both Barton (2001) and Coombs (2006)
document that organisations are better able to handle crises when they. Figure 9.30 shows the
crisis communication plan.

Have a crisis management plan that is updated at least annually.

Have a designated crisis management team.

Conduct exercises to test the plans and teams at least annually.

Pre-draft some crisis messages.

Figure 9.30: Crisis communication plan

Table 9.1 lists the Crisis Preparation Best Practices. The planning and preparation allow crisis
teams to react faster and to make more effective decisions. Refer to Bartons (2001) Crisis in
Organisations II or Coombs (2006) Code Red in the Boardroom for more information on these
four lessons.
Table 9.1: Crisis Preparation Best Practices

Have a crisis management plan and update it at least annually.

Have a designate crisis management team that is properly trained.
Conduct exercise at least annually to test the crisis management plan and team.
Pre-draft select crisis management messages including content for dark web sites and
templates for crisis statements.
Have the legal department review and pre-approve these messages.

9.9.1 Crisis Management Plan

A crisis management plan (CMP) as shown in figure 9.31 is a reference tool, not a blueprint. A
CMP provides lists of key contact information, reminders of what typically should be done in a
crisis, and forms to be used to document the crisis response. A CMP is not a step-by-step guide
to how to manage a crisis. Barton (2001), Coombs (2007a), and Fearn-Banks (2001) have noted
how a CMP saves time during a crisis by pre-assigning some tasks, pre-collecting some infor-
mation, and serving as a reference source. Pre-assigning tasks presumes there is a designated
crisis team. The team members should know what tasks and responsibilities they have during
a crisis.

23
 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

e Re
ns c

po

ov
s

er
Re

y
Crisis
Management
Plan
Pre

ion
ve

t
ra
nt

on

pa
e
i

Pr

Figure 9.31: Crisis management plan

9.9.2 Crisis Management Team

Barton (2001) identifies the

common members of the crisis
team as public relations, legal,
security, operations, finance, and
human resources as shown in
figure 9.32. However, the com-
position will vary based on the
nature of the crisis. For instance,
information technology would
be required if the crisis involved
the computer system. Time is
saved because the team has al-
Figure 9.32: Crisis management team ready decided on who will do the
basic tasks required in a crisis. Augustine (1995) notes that plans and teams are of little value if
they are never tested. Management does not know if or how well an untested crisis management
plan with work or if the crisis team can perform to expectations. Mitroff, Harrington, and Gia
(1996) emphasise that training is needed so that team members can practice making decisions
in a crisis situation.

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

9.9.3 Spokesperson

A key component of crisis team training is spokesperson training as shown in figure 9.33. Or-
ganisational members must be prepared to talk to the news media during a crisis. Lerbinger
(1997), Feran-Banks (2001), and Coombs (2007a) devote considerable attention to media rela-
tions in a crisis. Media training should be provided before a crisis hits. The Crisis Media Train-
ing Best Practices in Table 2 were drawn from these three books:
1. Avoid the phrase no comment because people think it means the organisation is guilty and
trying to hide something.

2. Present information clearly by avoiding jargon or technical terms. Lack of clarity makes
people think the organisation is purposefully being confusing in order to hide something.

3. Appear pleasant on camera by avoiding nervous habits that people interpret as decep-
tion. A spokesperson needs to have strong eye contact, limited dis fluencies such as uh
or uh-huh, and avoid distracting nervous gestures such as fidgeting or pacing. Coombs
(2007a) reports on research that documents how people will be perceived as deceptive
if they lack eye contact, have a lot of disfluencies, or display obvious nervous gestures.

4. Brief all potential spokespersons on the latest crisis information and the key message points
the organisation is trying to convey to stakeholders. Public relations can play a critical role
in preparing spokespersons for handling questions from the news media. The media rela-
tions element of public relations is a highly valued skill in crisis management. The public
relations personnel can provide training and support because in most cases they are not the
spokesperson during the crisis.

Figure 9.33: Crisis management training

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

9.9.4 Pre-draft Messages

Finally, crisis managers can pre-draft messages that will be used during a crisis. More accurate-
ly, crisis managers create templates for crisis messages. Templates include statements by top
management, news releases, and dark web sites. Both the Corporate Leadership Council (2003)
and the Business Roundtable (2002) strongly recommend the use of templates. The templates
leave blank spots where key information is inserted once it is known. Public relations person-
nel can help to draft these messages. The legal department can then pre-approve the use of the
messages. Time is saved during a crisis as specific information is simply inserted and messages
sent and/or made available on a web site.

WEBSITE
1. http://www.nhpco.org/files/public/communications/crisis_guide.pdf
2. http://www.womanabuseprevention.com/html/crisis_intervention.html

9.10 Communication Channels

An organisation may create a separate web site for the crisis or designate a section of its current
web site for the crisis. Taylor and Kents (2007) research finds that having a crisis web site is the
best practice for using an Internet during a crisis. The site should be designed prior to the crisis.
This requires the crisis team to anticipate the types of crises an organisation will face and the types
of information needed
for the web site. For
instance, any organi-
sation that makes con-
sumer goods is likely
to have a product harm
crisis that will require
a recall. The Corporate
Leadership Council
(2003) highlights the
value of a crisis web
site designed to help
people identify if their
product is part of the
recall and how the re-
call will be handled.
Figure 9.34: Crisis management training Stakeholders, includ-
ing the news media,
will turn to the Internet during a crisis. Crisis managers should utilise some form of web-based

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

response or risk appearing to be ineffective. A good example is Taco Bells E. coli outbreak in
2006. The Company was Criticised in the media for being slow to place crisis-related infor-
mation on its web site. Of course not placing information on the web site can be strategic. An
organisation may not want to publicise the crisis by placing information about it on the web site.
This assumes the crisis is very small and that stakeholders are unlikely to hear about it from
another source. In todays traditional and online media environment, that is a misguided if not
dangerous assumption. Figure 9.34 shows difference communication channels.

Taylor and Kent (2007) and the Corporate Leadership Council emphasise that a web site is an-
other means for an organisation to present its side of the story and not using it, creates a risk of
losing how the crisis story is told. Intranet sites can also be used during a crisis. Intranet sites
limit access, typically to employees only; though some will include suppliers and customers.
Intranet sites provide direct access to specific stakeholders so long as those stakeholders have
access to the Intranet. Dowlings (2003) research documents the value of American Airlines
use of its Intranet system as an effective way to communicate with its employees following
the 9/11 tragedy. Coombs (2007a) notes that the communication value of an Intranet site is
increased when used in conjunction with mass notification systems designed to reach employ-
ees and other key stakeholders. With a mass notification system, contact information (phones
numbers, e-mail, etc.) are programmed prior to a crisis. Contacts can be any group that can be
affected by the crisis including employees, customers, and community members living near a
facility. Crisis managers can enter short messages into the system then tell the mass notifica-
tion system who should receive which messages and which channel or channels to use for the
delivery. The mass notification system provides a mechanism for people to respond to messages
as well. The response feature is critical when crisis managers want to verify that the target has
received the message.

Table 9.2 summarises the Crisis Communication Channel Preparation Best Practices.
Table 9.2: Crisis Communication Channel Preparation Best Practices

Be prepared to use a unique web site or part of your current web site to address crisis
concerns.
Be prepared to use the Intranet as one of the channels for reaching employees and any
other stakeholders than may have access to your Intranet.
Be prepared to utilise a mass notification system for reaching employees and other key
stakeholders during a crisis.

9.11 Crisis Response

The crisis response is what management does and says after the crisis hits. Public relations play
a critical role in the crisis response by helping to develop the messages that are sent to various
publics. A great deal of research has examined the crisis response. That research has been di-
vided into two sections. Figure 9.35 shows the classification of crisis response.

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

CRISIS
RESPONSE

Initial Crisis Post Crisis

Response Phase

Figure 9.35: Classification of crisis response

9.11.1 Initial Response

Practitioner experience and academic research have combined to create a clear set of guidelines
for how to respond once a crisis hits. The initial crisis response guidelines focus on three points:
be quick, be accurate, and be consistent. Table 9.3 describes the best practices of initial crisis
response.
Table 9.3: Initial Crisis Response Best Practices

Be quick and try to have initial response within the first hour.
Be accurate by carefully checking all facts.
Be consistent by keeping spokespeople informed of crisis events and key message
points.
Make public safety the number one priority.
Use all of the available communication channels including the Internet, Intranet, and
mass notification systems.
Provide some expression of concern/sympathy for victims.
Remember to include employees in the initial response.
Be ready to provide stress and trauma counseling to victims of the crisis and their fami-
lies, including employees.

9.11.2 Post-Crisis Phase

In the post-crisis phase, the organisation is returning to business as usual. The crisis is no lon-
ger the focal point of managements attention but still requires some attention. As noted earlier,
reputation repair may be continued or initiated during this phase. There is important follow-
up communication that is required. First, crisis managers often promise to provide additional
information during the crisis phase. The crisis managers must deliver on those informational
promises or risk losing the trust of publics wanting the information. Second, the organisation
needs to release updates on the recovery process, corrective actions, and/or investigations of the
crisis. The amount of follow-up communication required depends on the amount of information
promised during the crisis and the length of time it takes to complete the recovery process. If
you promised a reporter damage estimate, for example, be sure to deliver that estimate when it

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 CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

is ready. West Pharmaceuticals provided recovery updates for over a year because that is how
long it took to build a new facility to replace the one destroyed in an explosion. As Dowling
(2003), the Corporate Leadership Counsel (2003), and the Business Roundtable (2002) ob-
serve, Intranets are an excellent way to keep employees updated, if the employees have ways
to access the site. Coombs (2007) reports how mass notification systems can be used as well to
deliver update messages to employees and other publics via phones, text messages, voice mes-
sages, and e-mail. Personal e-mails and phone calls can be used too.

9.11.3 Phase Best Practices

Table 9.4 describes the best practices of post-crisis phase.

Table 9.4: Post-Crisis Phase Best Practices

Deliver all information promised to stakeholders as soon as that information is known.

Keep stakeholders updated on the progression of recovery efforts including any correc-
tive measures being taken and the progress of investigations.
Analyse the crisis management effort for lessons and integrate those lessons in to the
organisations crisis management system.

The Rudimentary Crisis Communication Plan may not have all the bells and
whistles some plans have, and it is definitely not a ready-to-use, one-size-fits-all
ACTIVITY plan that lets you fill in the blanks and instantly issue a crisis update statement.
It is, however, a good starting point for a communicator or an organisation that
does not yet have a crisis communication plan and wants to develop one.

Visit: http://www.nku.edu/~turney/prclass/tips/crisis_planning.pdf to learn more

about The Rudimentary Crisis Communication Plan.

WEBSITE

http://mediarelations.ifas.ufl.edu/crisis.htm

9.12 Handling the Media During a Crisis

Corporate communication managers should eliminates cases of mismanagement such as the

spending of millions on campaigns placed in the wrong medium, IPOs planned for periods
during which the media is likely to be critical or uninterested, failure to account for the impact
of analysts coverage, or embattled CEOs in moments crisis finding themselves alone on the
media stage due to other board members obscurity. A crisis can result in a flood of media in-

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

quiries that may be local, regional, or national. Be prepared to log all calls that come in. A log
should include: name of caller, name of publication or media source, office phone, cell phone,
fax, email, general nature of inquiry and any deadlines. Figure 9.36 shows how to handle the
media during a crisis.

Figure 9.36: Handling the media during a crisis

SUMMARY

1. The crucial role of PR Communication in crisis situations by communicating to the pub-

lic, reassuring them and taking the organisation through the crisis with little damage to
its image.

2. Different types of risks such as risk analysis finance, and how they are analysed;

3. In a risk situation, how risk communication corrects the publics view of risk;

4. Risk control measures and the steps involved in managing a crisis for example, risk iden-
tification, analysing the source, the type of the problem etc;

5. The characteristics of a crisis and how is it handled by drafting a plan, forming a team
and exercising to test the plan and creating a website to reach the stakeholders in a short
notice;
6. Crisis response, post-crisis phase and how to handle the media.

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CHAPTER 9 l RISK, ISSUES AND CRISIS MANAGEMENT

glossary

Apprise - Give information or notice to breached Act in disre-

gard of laws and rules.
Hospice - Lodging for travellers (especially one kept by a mo-
nastic order)/a program of medical and emotional
care for the terminally ill.
Palliative - Moderating pain or sorrow by making it easier to
bear.
Reparation - Compensation (given or received) for an insult or in-
jury.

Untangle - Become or cause to become undone by separating the

fibers or threads of.

reference

Books

Michael, Regester, & Judy, Larkin, (1997). A Casebook of Best Practice. Risk Issues
and Crisis Management. London: Kogan page Ltd

(2004). Mastering the Skills to Prevent Disasters. Crisis Management Harvard. Busi-
ness School Press.

Norman R. Augustine, Anurag Sharma, Idalene F. Kesner, N. Craig Smith, Robert J.

Thomas, John A. Quelch, Greg Brenneman & Linda Hill ( 2000). A Harvard Business
Review Paperback. Harvard Business Review on Crisis Management. USA: Library
of Congress in Publication Data.

Steven, Fink. (2002). Planning for the Inevitable: Crisis Management. An Authors
Guild BackInPrint Edition. Lincolin NE: iUniverse Publishers.

Laurence, Barton, (2001). Crisis in Organisations II (Paperback). South-Western Col-

lege of Publishing. Thomson Learning.

Web Links

http://www2.halton.gov.uk/pdfs/socialcareandhealth/newriskassessmentandmanage-
ment

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 RISK, ISSUES AND CRISIS MANAGEMENT l CHAPTER 9

http://www.actuaries.org.uk/data/assets/pdf_file/0006/138903/IAA_PracticeNote.pdf

http://www.stsc.hill.af.mil/resources/tech_docs/gsam3/chap6.pdf

http://www.infed.org/biblio/globalization.htm

multiple choice questions

1. Risk management is a structured approach consisting of a sequence of __________.

A. risk assessment, development of strategies to manage and mitigation with managerial
resourses
B. development of strategy, mitigation and risk assessment
C. mitigation, assessment and strategy development

2. The risk communicators disseminate the truth to __________.

A. those lacking reason and are hampered by bias, ideology etc
B. those who are ignorant of the facts
C. social and political opponents

3. A step involved in initial crisis response is __________.

A. deliver all information promised to stakeholders as soon as that information is known
B. be ready to provide stress and trauma counseling to victims of the crisis and their
families, including employees
C. be prepared to utilise a mass notification system for reaching employees and other
key stakeholders during a crisis

4. The process of determining whether an investment or business decision is worth the fi-
nancial risk involved is called _______.
A. risk analysis hacker
B. financial in-depth risk analysis
C. risk analysis finance

5. If the transit insurance will be handled by the foreign party __________.

A. the sale should be on terms whereby risk of non-insurance or poor insurance doesnt
falls to the party arranging the coverage, but to the innocent party
B. the sale should be on terms whereby risk of non-insurance or poor insurance doesnt
falls on to the innocent party
C. the sale should be on terms whereby risk of non-insurance or poor insurance falls to
the party arranging the coverage, not to the innocent party.

32