Any external or internal factor or a chain of incidents that disrupt enterprise-wide operations with the potential to adversely affect the reputation or business of an organization is by definition a crisis. Although the current pandemic has put the spotlight on crisis management, the concept of crisis is a regular business problem for most Indian and global organizations. Let’s explore the key findings of PwC’s Global Crisis survey, and what it tells about India Inc.’s crisis preparedness.
Crises don’t discriminate
While larger organizations are more vulnerable to crisis, smaller organizations are not immune. Crisis is most likely to strike organizations of all shapes and sizes. More than 80% of the respondents said they faced a corporate crisis at least once in last 5 years and about 50% had experienced around 2 – 5 crises in the same time span. Interestingly, 97% of the surveyed executives expect to face a crisis situation in the future. Immediate action is key to crisis management. Timely containment of crisis is all that stands between organizational success and failure.
Multiplicity of crises
Crises are diverse – ones that have occurred in the past might not be a threat in the future and those that might hit in the future remain dormant in the present. The survey revealed 65% of the present-day crises arise from regular operational disruptions, while 56% stem from technological failure and cybercrime. “Competitive/Marketplace disruption, Liquidity and Geopolitical disruption” are projected to be some of the top causes of future crises. However, trying to guess the future crises is a futile endeavor. To become crisis resilient, organizations must instead work on creating and testing crisis response plans.
The domino effect of crises
A crisis is multilayered and penetrates several aspects of an organization in unique ways. Business relationships and reputation are worst hit, feel 78% and 77% of the respondents respectively. It further trickles down to harm financial strength, lower workforce morale and disrupt day-to-day operations, gradually pushing the organization downhill. The main crisis eventually gives rise to a secondary crisis that complicates the situation further. About 20% of the respondents pointed out leadership misconduct as the cause of secondary crisis. Crisis preparedness thus requires organization leaders to be well-versed with organizational gaps and persistent problems so that they can prevent occurrence of secondary crisis situations.
Responsibility of crisis management
When everyone feels responsible, very few claim the ownership. Almost all top leaders of an organization – board members, legal, risk, IT, C-suite executives feel responsible for crisis response, recovery and communications, but only 24% of them consider themselves to be the owners of crisis recovery. Organizations clearly lack a dedicated crisis management team with relevant experience, evident in the finding where 82% companies stated that they took external help for crisis mitigation.
Crisis as an opportunity
A large number of organizations claimed crisis made their company stronger. 42% of the leaders who survived a crisis in the last 5 years claimed that they were in a better position post-crisis recovery. The survey found companies that were able to leverage a crisis for business growth had taken the following steps:
- Have an allocated budget for crisis management in anticipation
- Have a tried and tested crisis response plan
- Select a fact-based approach with participation from key stakeholders
- Conduct root cause analysis and take follow-up action
- Perform as a team with common values
Globally 37% companies had an allocated budget for crisis management and nearly 50% of them experienced revenue growth as a result. 9% of the surveyed companies lacked a crisis response plan.
Today, standing amid the crisis of the century, we are in a better position to redefine the significance of crisis preparedness. In a digital world where all stakeholders expect hyper-transparency, there would be no room for error and hence a new and advanced crisis management approach is the need of the hour.
This article portrays key insights from the report “Crisis Preparedness: An imperative to stay competitive” by PwC.