How to Categorize Crisis Situations for Better Crisis Management
When you decide on building a crisis management plan, you need to have a clear picture of possible crisis scenarios. There are general types of crises but there are also crisis situations that may be specific to your business. To start off consider these different categories of crises which businesses are most susceptible to experiencing.
Financial crisis: This type of crisis happens when the business is noticing a drop in sales, and potentially a lower demand for their product or service. As revenues shrink and asset value goes down, the company may struggle to meet financial obligations, igniting a negative financial cycle.
Personnel crisis: During such a crisis, an employee or a figure associated with the business is involved in a conflict or activity that is deemed unethical or illegal. This can take different forms and can be of different proportions, depending on whether it’s spreading inside or outside the organization.
Organizational crisis: This type of crisis takes place when the brand has acted in a way that negatively impacted their customers. Examples of this include keeping important information from customers who deserve to know the details or exploiting customer data by selling or sharing it.
Technological crisis: Whenever the product or service is interrupted via software crashes, bugs, or any other tech-related issue can be categorized as a technological crisis. It usually leads to customers questioning the business reliability, which leads to loss of revenues and significant damage to reputation.
Natural crisis: This is pretty self-explanatory. Hurricanes, tornados, floods, and winter storms are all examples of natural crises that have the power to damage or completely ruin a business. Depending on a company’s location, they might be more prone to natural disasters.
Quantifying the Impact
After you’ve assessed the different types of crises that may occur, you will want to identify how it may impact your company.
- Loss in sales and revenues
- Customer dissatisfaction
- Damaged reputation
- Increase in expenses
- Drop in customer loyalty
By quantifying the impact a crisis could have on your business, you will be better prepared for dealing with it and avoid future re-occurrences. With this approach you can determine the proper action plan you and your employees need to deploy to resolve the situation.