C for crisis? (Part 1: Crisis management and law)
Crisis and management
The synonyms of the word “crisis” include “tragedy”, “disaster”, “emergency” and “catastrophe”. According to the Cambridge Dictionary “crisis” means “an extremely difficult or dangerous point in a situation”.
“Crisis management” simply put is a system in managing a crisis before and after it arises. In other words, there must be a set of strategic and structured ways to handle crisis or mishap that took place.
Who is likely to require to manage a crisis?
For illustration, a public company listed on the stock exchange with fast moving consumer goods (FMCG) having their star product contaminated. The potential consequences – the impact on the sale of the product and plummeting share price. It probably may attract further issues like malicious comments on the social medias.
We can imagine that the larger an organisation, the more it is imperative to manage its crisis for obvious reasons.
Crisis management is important for those sustainability sensitive entities. VIPs, celebrities, nonprofit organisations, government agencies, public and private companies need to manage crisis to stay in the game and survive before moving forward.
Why there is a need to manage crisis?
Given the illustration on the FMCG public company, no or bad handling of crisis could lead to series of possible consequences.
Examples of legal consequences:
Legal actions for negligence brought by the consumers;
Enforcement against the company due to contravention of law that protects the public against health hazards in the sale of food; and
Criminal prosecution as a consequence of the contravention.
Examples of collateral consequences:
The damage to the confidence in the star product;
The tarnished image and reputation of the company; and
The sentiments that drive down the company’s share price on the stock exchange.
Examples of secondary crisis and multiplier effects:
Secondary crisis that could occur including negative messages by some netizens to persuade the public to boycott the company; and
One original crisis that spawns new and multiple crises due to the spoke person of the company got into a brawl with a journalist.
For huge crisis, even if one is fortunate enough to avoid its business to be shut down, it will take a toll on the entity which affects its sustainability in long run. Nipping the crisis in the bud before it manifested is the only wise move.