Assignments Of Fundamental Management For MBA-DD Branch

CRISES MANAGEMENT

Abstract

The concept of crisis is multidimensional, it indicates the presence of a

difficult problem, that it is going through a period of anomaly and abnormal
or they are in a critical phase. This article examines the definition of crisis,
in along with its types, its characteristic and its main causes. In addition, this
article goes through the several phases of crisis management, which is
defined as the process by which a crisis is prevented, reduced or resolved.

Keywords: crisis; causes; types; characteristics; crisis management

1. Introduction

The concept of crisis is multidimensional, it indicates the presence of a

difficult problem, that it is going through a period of anomaly and abnormal
or they are in a critical phase. The term "crisis" usually refers to an
unpredictable and uncertain situation, which is dominated by tension and
insecurity and which may concern the individual, family, business,
organization, society, institutions, or the international environment. The crisis
often works as a test of the stability of a system (Stuckler et al., 2009; Maes
et al., 2010; Liu et al., 2016; Chernobrov, 2016; Crouch, 2014).
According to Rosenthal and Kouzmin (1997), the concept of crisis is
related to situations, which are occupied by a serious threat, uncertainty and a
sense of urgency.
According to Okumus and Karamustafa (2005), crisis is a large, sudden
event that is likely to have negative effects. The event and its consequences
can seriously damage an organization and its employees, its products,
services, financial situation and reputation.
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Crisis situations have features such as surprise for the event,

interruption of the routine, escalation of events accompanied by a feeling of
loss of control, increased media interest (for the event) and their increased
momentum to control the situation, the increased demand for information,
the large number of speculations about the event, its view by the Media as a
crisis and the spread of negative publicity (Ahmed, 2006).
Hence Fearn-Banks (2007) described the crisis as a massive event with
a potentially negative impact on an organization, company or industry as well
as the target audience, products, services and the "good name".

2. Classification of crises

Crisis is of different types, based on its characteristics and nature and

involves different reactions and therefore different means of management.
The following are the main types of crisis:
Financial crisis:
The financial crisis occurs when the business is financially affected by
the crisis. An example of a financial crisis is a business that does not have the
funds to pay its fees, such as paying dividends, interest, repaying loans, etc.
Such a crisis arises when the company suffers losses for significant periods of
time or when due to lack of accountability it loses consumer confidence
among other situations. This crisis is addressed by mobilizing the required
funds as a short-term solution and by making important financial decisions
such as restructuring, changing business activities, etc. as long-term solutions
(Kindleberger & Aliber, 2005; Laeven & Valencia, 2008).
Technological crisis:
The technological crisis arises as a result of failures in the common
scientific and technological tools and devices that we use in a business. If
Facebook servers are overloaded and all user accounts and details are deleted,

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then such a crisis will be a technological crisis. Common technological crisis

includes software failure, industrial accidents, etc. Conventional management
tools mainly include limiting losses and stopping the effects of failure to
affect more people or items. The next step will involve trying to recover what
has been damaged or lost with the help of experts in the field and will also
include finding the source and cause of the crisis (Ahmed, 2006).
Abuse crisis:
All companies compete with each other. However, some competitors
take such extreme measures that they actually try to go under the belt and
destroy the other company for their own success. The crisis that occurs as a
result of the extreme tactics used by a competitor or criminal to destroy the
business is known as a crisis of abuse. These crises include those that arise
through the breach of a company's server, breach of their products, etc.
Measures include finding the source and minimizing damage as soon as
possible by identifying who perpetrated the crisis (Ahmed, 2006).
Physical crisis:

Physical crisis refers to those that are created as a direct result of a natural
event, such as a volcano or an earthquake, etc. These crises are completely
out of the hands of the administration and cannot be prevented, unlike the
other crisis. Crisis management steps include evacuating the area and taking
mitigation measures as precautions such as constructing earthquake-resistant
buildings, preparing evacuation plans, etc. ex ante (Bankoff et al., 2003).

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Crisis of organizational crimes:

The Crisis of Organizational Misdeeds includes (Ahmed, 2006):
1. Crisis of deception

2. Crisis of Remarkable Management Values

3. Judgment of Corrective Unjust Law

The crisis of deception is the result of concealing important information

from management or consumers from management. This is done in order to
make illegal profits from the business and to gain unjustified wealth. This
concealment often causes huge losses in places where such events are hidden.

3. The Main Causes of Crises

Every crisis is characterized by the factors that cause it. Based on the
factors, the management plan of the respective crisis is formed. The main
categories in which critical situations are classified are four depending on the
causes of the crisis, which may come from internal or external factors of the
organization and may be characterized as technical-economic or human-
organizational social factors (Shrivastava & Mitroff, 1987).
Regarding the theory of international relations, Michael Brecher states
that the reasons that can cause a change in relations or an increase in tension
between two or more states, in order for an international crisis to occur, are
(Brecher, 1993):
• An action or event,
• An oral or written threatening statement,
• A political action such as the severance of diplomatic relations,
• An economic action such as a trade embargo,
• Non-violent military action such as troop movements,
• An indirect act of violence against an ally or client state,
• An immediate military attack,
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• An internal challenge to a regime (verbal or physical, or an

action to strengthen the position of the rulers),
• A technological or geopolitical change in the environment that
weakens a state's ability to protect its vital interests, including its
independence.
According to Manolis Sfakianakis, these causes may be financial,
organizational, administrative, commercial, competitive, legal, force majeure,
etc. In particular, Manolis Sfakianakis classifies the causes of a business
crisis as follows (Sfakianakis, 1998):
• Financial causes (adverse financial results, excessive borrowing,
debt accumulation, large-scale theft and abuse, incorrect wage
and pay policy, incorrect pricing policy, waste and excessive
spending, etc.),

• Organizational causes (dysfunctional organizational structure,

overcrowded staff, insufficient staffing, insufficient production
organization, inappropriate investments, extensions, incorrect
reorganizations, insufficient health and safety measures, accidents
at work, losses, etc.),
• Administrative causes (insufficient administration, death or
departure of an important executive, disputes, staff strikes,
disputes with trade unions institutions, disputes with agents,
shareholders, investors, notoriety, scandals, etc.).
• Commercial causes (decrease in customers, sales, orders,
excessive and sudden increase in raw material prices, poor quality
or defective or dangerous products, delays in meeting demand,
insufficient distribution network, insufficient advertising and
market research, etc.),
• Competitive causes (intense competition, defamation and false
publications, misleading competitors' advertisements, industrial
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espionage, attempts to alienate share capital by competitors /

acquisition or merger attempts, etc.),
• Legal causes (legal, labor, tax, insurance violations, disputes and
disputes with the local population, organizations and organized
interests, etc.),
• Causes due to force majeure (natural disasters, technological
disasters, terrorist acts, fires, environmental pollution through the
fault of the company, etc.).

4. Crisis characteristics

Every crisis, regardless of its form and the organism in which it is

created, is characterized by the following (Ahmed, 2006):
1) It is escalating in intensity. The situation of a crisis is dynamic. The
emerging crises do not manifest from the first moment with their greatest
intensity, but escalate.
2) There is a high sense of insecurity and danger. During the crisis,
those involved are overwhelmed with anxiety, as they feel they are losing
control of the situation.
3) The usual functions and rhythms are affected. The intensity and
concern for the worst "scenario" of the development of the events, disturb
and change the normal orderly operation of the business.
4) The public / international image of the unit / country is endangered.
The consequences of any emerging crisis usually affect the "image".
5) It will be thoroughly checked by the competent state-transnational
bodies and by the Mass Media. The manifestation of a crisis inevitably
arouses the interest of the competent bodies, but also of the media, as there is
an increased demand for information, in order to restore the speculations
about the events.

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6) Causes damage and property damage. It usually causes moral

damage, which damages the power of the country, or the profile of the
company, while at the same time causing a malfunction in its commercial
activity.

Crisis Management
Crisis management is the process by which a crisis is prevented,
reduced or resolved (Ritchie, 2004; Baldwin, 1979; Jaques, 2009).
Also, with the crisis management technique is meant the minimization
of risk and uncertainty with the ultimate goal of controlling every situation.
These are measures aimed at reducing unpleasant situations and preventing
them from spreading further (Jaques, 2007; Christensen et al., 2016).
The process of managing a crisis is detailed as it involves making
serious decisions. The factor that complicates this process is that these
decisions need to be made under pressure and time constraints due to the
variability of the environment and a set of busy people working in a context
of uncertainty (Moynihan, 2008; Ansell & Boin, 2017; Uitdewilligen &
Waller, 2018).
Crisis management is a continuous investigation and analysis of the
threats that can harm the company in order to minimize the uncertainty and
take all appropriate measures before the crisis and as soon as the crisis breaks
out and to provide security to employees and as much as possible to keep
intact the image and financial situation of the company (Shivakumar et al.,
2011; Johansen et al., 2012; Henderson et al., 2019).
Every business, large or small, public or private, whether it produces
products or offers services, is not meant to enter the 21st century without a
basic parameter. The board of directors of the company must organize the
structure of this parameter, which is the Crisis Management Committee
(CRC) (Unlu et al., 2010; Gruber et al., 2015; Christensen et al., 2015).
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5. The Main Phases of Crisis Management

The steps taken to deal with the crisis include five phases. These phases
are presented as following:
- The first phase is the forecast. During the current phase, the actions
related to crisis forecasting are included.
- The second phase is the phase of prevention. During this phase the
actions taken to prevent the root cause of the crisis are included.

- The third phase is the phase of operation. At this stage, the measures
are created to deal with the crisis before it occurs, while they are preparing
for implementation as soon as it breaks out.

- The fourth phase is the phase of reconstruction. The reversal or

recovery strategy is built in order for the business to return to its normal
course.
- The fifth phase is the phase of research. During this current phase, the
reasons for the crisis are analyzed and the way they are managed is evaluated
(Seeger et al., 2005).
- Particularly important in the context of crisis management by
organizations is the prevention phase. This phase includes actions taken to
reduce the consequences of a crisis. Prevention activities aim to identify and
predict, at best, possible future crises. It consists in identifying the
vulnerabilities and functions of the organization and in taking dynamic
measures to fill the «gaps» that are identified.
- These actions consist in the study and review of the current situation. At
this stage, the potential hazards and critical parameters are identified
(Alkhawlani et al., 2016; Rolka, 2018). Then, at the context of the same
stage, the significance of the risks is assessed.

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More specifically, the potential risks are assessed in order of gravity. Also
included, is the study of worst-case scenarios, as for example the analysis of
scenarios and models for predicting risks and crises. Similarly, the study of
past situations is included, as for example the retrospective study of similar
crises and emergencies. Then there is the search for additional know-how, as
for example the identification of specialized people - executives, consultants
and associates - required for each possible crisis, as well as the definition of a
reliable method of continuous evaluation (Coccia, 2020).
In general, it is impossible to prevent crises altogether. However,
prevention efforts increase the likelihood of avoiding or reducing the severity
of their consequences. Prevention measures are essential and necessary in
order to suggest and direct the activities in the preparation stage of crisis
management (Ghio et al., 2020).
The preparation phase of crisis management includes all the measures
taken to ensure the capacity to respond effectively in a time of crisis. The
preparation activities consist of the planning, in terms of functions and
communication, of the main reaction parameters, of the way of management,
of the resources required, as well as of the training and the pilot
implementation of the action plans (Coombs & Laufer, 2018; Rolka, 2018).
The designation of collaborators to be used during the crisis, also
implies the organization of communication channels between the head of the
department, or team, and the collaborators, as for example individuals,
groups or other organizations. Also, the leadership team should communicate
the relevant plan to its partners and all together to harmonize with the
approved management program. These relationships and the reciprocal
agreements, that will take place before a crisis occurs, are sure to help
optimize methods and ultimately coordinate events (Ley et al., 2014; Ginige
et al., 2014).

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The importance of the installation of the system is also special. The

system that will emerge from the above analysis must necessarily include all
the necessary resources and other infrastructure, which will ensure that
during the crisis, the system and consequently the organization itself, will be
operational. The components of the system are the infrastructures of the
organization, such as the facilities, the logistical infrastructure and other
similar elements, the available resources, as for example the financial
resources, the credit capacity, the available stocks and other similar elements,
the human resources of the organization, as for example trained staff and
available response teams, emergency response teams and rehabilitation teams
(Engelbach et al., 2014).
Of course, it is considered necessary for the administration to assure
that all of the above are available in advance and that the equipment, that has
been provided, is operational at all times. At this point, it is emphasized that
the «immediate response» equipment, which should be available, concerns
the predetermined location of the crisis management team, the available
communication equipment, such as telephone lines, mobile phones, and also
backup systems and support staff (Al-Dahash et al., 2014; Bowers et al.,
2017).
In any case, regardless of the crisis caused, the plan drawn up, like any
other corresponding plan, can very easily prove to be useless and ineffective
if it is not tested, simulating the real conditions. By itself, it is possible to
give the agency management a false sense of security and, of course, a false
impression of the levels of preparation and readiness. In order to avoid
keeping a plan «on paper», it is necessary to periodically implement the
prescribed measures and actions with the participation of the crisis
management team and all the rest of the staff involved. However, before any
exercise, all participants should receive the appropriate training in the issues
related to the implementation of the plan (Doumouras et al., 2012; Bellomo et al., 2016).
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The training and the pilot application of the crisis management actions
will mainly contribute to maintaining a high level of readiness, to
familiarizing the staff with the coping plans, such as functions and
communications, to confirming that all stakeholders know their role in the
plan and their responsibilities and obligations, to practical implement the
provisions of the plan, and to create opportunities for discussion and
exchange of views (Hart & Sundelius, 2013).
During the exercise and regardless of the magnitude of the simulated
crisis, the top management of the organization must necessarily be actively
involved in it, as it is the one who at a given time will be called to decide, or
not, the activation of the plans and taking, in a real situation now,
countermeasures (Schraagen et al., 2010; Christensen et al., 2016; Coombs &
Laufer, 2018).
Each simulation exercise should be followed by a thorough discussion
and drawing conclusions about what went well and what did not. This
discussion will provide an opportunity to review the plans, both at the level
of infrastructure and at

the level of human resources, with possible redeployments or redistributions,

in terms of the assigned responsibilities and obligations (Doumouras et al.,
2012; Bellomo et al., 2016).
As part of the response phase, actions are taken by the organization in
an effort to control the consequences of a crisis. These actions have, as their
main goal, the mitigation of the negative effects and results of the crisis and it
must be understood that they must be continuous, repetitive and
simultaneous, due to the uncertainty surrounding the crises and emergencies.
This phase and the actions taken are characterized by a set of coordinating
actions and methods of communication, which depend directly on the nature
and severity of the crisis (Van Wart & Kapucu, 2011).
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The response phase can be characterized by three distinct steps.

Initially, there is a process of assessing the situation. More specifically, the
assessment of the situation consists primarily in the collection, assembly of
information and the control of the reliability of data sources. This initial step
will contribute decisively to the assessment of the nature of the crisis, thus
determining the part of the organization that will take action. According to
the result of the evaluation and given the level of power that has been
granted, the response and communication plans will be activated, if this is
deemed necessary. This phase will characterize the crisis, its evolution and its
consequences. Oligarchy or devaluation of the situation brings disastrous
results (Haddawy et al., 2015; Schwarzer, 2015).
This step is followed by the activation of the operational response
plans, which presupposes the immediate establishment of the response team
envisaged by them. It is usually accompanied by direct communication with
other internal or external factors in order to determine the priority of actions.
The lead department immediately submits short-term solution proposals,
which will reduce the risk and minimize the damage caused. This point in
time is not suitable for permanent and long-term solutions (Israeli et al.,
2011; Jessop, 2012).
Activating the communication plan is the next step and initially consists
in the short time preparation and recording of the official position of the head
of the organization. The next immediate steps include identifying or
investigating the current state of interest in the media, selecting the
appropriate, if not predetermined, person to be appointed as a spokesperson,
assigning tasks with full and detailed information about the event, the parties
involved and the positions of the organization, the compilation and
coordination of the transmission of the agreed message of the organization
and finally, the preparation of the information requested or to be requested by
the media (Alexander, 2013).
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The response given to the media will identify and explain the subject
matter of the problem and assure the public that immediate action has been
taken to control the situation. The lead department should maintain constant
contact and communication with the internal and external public
throughout this period, in order to provide

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The recovery phase should include an organizational learning process

in order to assess the knowledge and experiences gained during the crisis, as
it is mentioned in the study of Hiltz et al. (2011). Crises can have positive or
negative effects on an organization's professional and public image. In any
case, the organization should not be tempted to ignore the necessary
corrective actions it must take after crisis management. On the one hand, an
organization that has just emerged from a crisis can consider that it is now
ready to overcome all other similar situations. On the other hand, if it has
been hurt by a crisis, it may find it extremely difficult to recover and try to
take advantage of the experience (Grundy & Moxon, 2013).
Finally, the informed management of the organization should in any
case take advantage of the opportunity, organize a formal review of
operations and procedures and carefully review the results, without rushing to
take responsibility, emphasizing the improvement of the organizational
structure and the preparation for the next difficult situations and crises
(Doumouras et al., 2012).

6. Conclusion and Recommendations

Not every crisis is a simple and unambiguous event. It is a complex and

multifaceted event that affects many areas at once and for a Plan to be
effective it must follow a basic principle. To anticipate everything that
constitutes the crisis, meaning all the adverse consequences, and for each of
them to oppose a measure. This principle also determines the content of a
Plan. As part of the process of defining the Plan, the crisis to be addressed
must first be identified and its characteristics must then be defined as well.
Every crisis, as mentioned above, is a result of the manifestation of a

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phenomenon if and when the phenomenon causes adverse effects that as a

whole, constitute the crisis (Maes et al., 2010; Liu et al., 2016; Chernobrov,
2016; Crouch, 2014).
At this point, it is argued that phenomena that have adverse effects are
known and examined by the competent sciences. Their characteristics and the
results of their event are also known. Consequently, every crisis, depending
on the phenomenon that causes it, is more or less known. Its characteristics
that depend on the characteristics of the phenomenon are also known
(Rosenthal & Kouzmin, 1997; Health, 2005; Okumus & Karamustafa, 2005).
At this point should be mentioned that a crisis management Planner can
make reasonable assumptions about both unobserved and unrecorded
contingencies. Thus, all possible adverse effects of the phenomenon or the
generative cause of the crisis are collected and recorded, as for example all
the elements of a possible crisis, as well as the possible adverse side effects
and all the versions in the evolution of the crisis. In this way, the planner,
who is usually also the crisis manager, knows exactly what he has to face.
For all that needs to be addressed, a measure is defined and assigned for each
one separately (Hausmann & Rodrik, 2003).
Based on the above, the content of a Crisis Management Plan includes
all the adverse effects of a crisis -theoretical, recorded, hypothetical- and all
measures to address them. By contingency measure it is meant the way
people act and the way they use the necessary means and materials to
properly manage the contingency, in order to have a desired result (Boin &
McConnell, 2007).
At this point, it should be emphasized that the more detailed and
accurate a plan is, in terms of the possibilities of the crisis and the measures
to deal with them, the more effective it is (Moriarty et al., 1993; Comfort et
al., 2001).

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