Every business in the world carries a certain amount of risk. As they say, there would be no gain without any risk. Thus, it implies that businesses should have the capacity to overcome risks in order to succeed. There are many types of risks in business. Certain risks can cause great harm to the business. They can bring about a crisis in the business. Hence, every business should employ special crisis management techniques to overcome these risks.
Types of crisis:
Natural disasters: These disasters such as earthquakes, flooding, etc can strike without any warning. You may not be able to do much to prevent such disasters from occurring. However, you can take precautionary measures in anticipation of such disasters. This is one aspect of crisis management. You can mitigate such risks by taking adequate insurance cover whereby you would use the use the insurance policy as a hedging tool to take care of the loss.
Unnatural disasters: It need not always take a natural disaster to bring your business to a crisis. Even a fire caused by a short circuit can result in a major disaster whereby you might encounter a crisis. The best risk mitigating measure you can take is the insurance again. The insurance policy can come to your rescue. Hence, you have seen that taking adequate insurance can be an effective technique as far as crisis risk management is concerned.
Technological disasters: Today every business uses technology for its effective functioning. In fact, the businesses are entirely dependent on technology. It can fail at times. A major technological crash can entail your business losing all its data. Every business envisages such situations. Hence, you find the concept of taking the backup of data at regular intervals. In case you do so, you would have a safe point for restoration of data. Large businesses having a presence in multiple cities can have a dual backup system whereby at least one would be available for restoration. This is also an important part of crisis risk management.
There are other types of crisis such as the crisis of malevolence, frauds, etc. Every kind of crisis should have special methods of dealing with it.
Crisis Management Vs Risk Management
There is a difference between crisis management and risk management. Risk management involves identifying potential risks and taking proper steps to mitigate the same. Crisis management does not give you much time to react. You have to deal with the threats before, during, as well as after the crisis occurs. It is a continuous process.
Companies and organizations usually encounter one more type of risk. This risk involves danger to the capital as well as earning powers of the organization. There are effective ways to deal with such situations. The best way is to plan, organize, lead, and control the activities of the organization in such a manner that it results in minimizing the risk to an enterprise’s capital and earnings. This is the cornerstone of enterprise risk management.
You have seen certain aspects crisis management. We have also discussed effective means of mitigating such crisis as well.