1. CRISIS MANAGEMENT
TYPES, STAGES, CONSEQUENCES & STRATEGIES
by Atindya K Ghosh

2. Table of Content
• Introduction
• What is Crisis?
• What is Crisis Management?
• Crisis Management Objectives
• Types of Crisis Management
• Stages of Crisis Management
• The Crisis Life Cycle
• Consequences of Crisis Management
• The Transaction’s risk Management Process
• Strategies for Crisis Management
• Conclusion
by Atindya K Ghosh

3. Introduction
Crisis happens more than we imagine. They are not always easy
to see unless they affect our own lives.
What is Crisis?
A crisis is anything that has the potential to significantly impact
an organization.
What is Crisis Management?
The overall coordination of an organization's response to a crisis,
in an effective, timely manner, with the goal of avoiding or
minimizing damage to the organization's profitability, reputation,
or ability to operate.
Crisis management involves identifying a crisis, planning a
response to the crisis and confronting and resolving the crisis.
by Atindya K Ghosh

4. Introduction
Crisis Management Objectives:
Crisis management has four objectives:
• Reducing tension during the incident.
• Demonstrating Corporate Commitment and Expertise.
• Controlling the flow and Accuracy of Information.
• Managing Resources Effectively.
by Atindya K Ghosh

5. Types of Crisis Management
During the crisis management process, it is important to identify types of crisis in that different crisis
necessitate the use of different crisis management strategies. Potential crisis are enormous, but crisis
can be clustered.
1. Natural disaster i.e. natural crisis, typically natural disasters.
2. Technological Crisis i.e. technological crisis are caused by human application of science
and technology.
3. Confrontation i.e. confrontation crisis occur when discontented individuals and/or groups
fight businesses, government, and various interest groups to win acceptance of their
demands and expectations.
4. Malevolence i.e. an organization faces a crisis of malevolence when opponents or
miscreant individuals use criminal means or other extreme tactics for the purpose of
expressing hostility or anger toward, or seeking gain from, a company, country, or
economic system, perhaps with the aim of destabilizing or destroying it.
5. Organizational Misdeeds i.e. crisis occurs when management takes actions it knows will
harm or place stakeholders at risk for harm without adequate precautions.
6. Workplace Violence i.e. crises occur when an employee or former employee commits
violence against other employees on organizational grounds.
7. Rumors i.e. false information about an organization or its products creates crisis hurting
the organization’s reputation.
by Atindya K Ghosh

6. Stages of Crisis Management
The Crisis Lifecycle
• Stage One – The Storm Breaks.
• Stage Two – The Storm Rages.
• Stage Three – The Storm Passes.
by Atindya K Ghosh

7. Consequences of Crisis
Management
1. The Breaking Crisis:
• Control seems to be slipping out of the company.
• Lack of solid detail about the crisis. Hard-to-provide information
demanded by the media analysts and others.
• Temptation to Resort to a short-term focus, to panic and to
speculate.
2. Spread and Intensification of Crisis:
• Speculation and rumors develop in the absence of hard facts.
• Third parties – regulators, scientists and other experts – add
weight to the climate of opinion.
• Corporate Management comes under intense scrutiny from
internal and external groups.
by Atindya K Ghosh

8. Consequences of Crisis
Management
3. Rebuilding Needs:
• To manage reputation. There are opportunities in a crisis to build
positive perceptions of the company or product that last beyond
the crisis period.
• Company Communication / culture. The company embarks on a
long-term programme to tackle management issues and
communication problems that exacerbated the crisis.
by Atindya K Ghosh

9. Consequences of Crisis
Management
Problem and Challenges in Crisis Decision – Making:
• Surprise and hesitation. The shock of a crisis can create a delay in
response that allows your critics and the media to fill the gap with
negative comment and speculation.
• Pressure and stress must be channeled by the discipline of a crisis
strategy.
• Mistaking Information Distribution for communication.
• Treating key audiences as “opponents”.
• Good crisis management is essential, but never a substitute for daily risk
management processes.
• Risk Management processes should apply to all customers, although
depth and detail may depend on the transaction and customer.
Transactions involving credit or other types of financial risk should
incorporate a risk management process.
by Atindya K Ghosh

10. Consequences of Crisis
Management
The transaction's risk management process:
A transaction's risk management process should focus on five areas:
• Knowledge of your Client Company and product.
• Knowledge of your customer/underwriting.
• Structure and documentation.
• External risk mitigation/portfolio management.
• Crisis management.
by Atindya K Ghosh

11. Strategies for Crisis Management
1. Know your product
• It’s important to know your company’s risk philosophy.
• What is the risk appetite for this product, geography and
customer?
• Does the company’s success depend on this single
transaction?
• Companies and financial institutions usually know their
products very well because they’ve developed them.
However, selling a product in a new or changing market
may create new product dynamics or risks, and these must
always be addressed.
by Atindya K Ghosh

12. Strategies for Crisis Management
2. Know your customer/ underwriting
• Every company should have a KYC [Know Your
Customer] and / or underwriting process for assuming
financial risk.
• Financial risk is not just providing financing to a customer;
the potential for fines, duties or legal action or dependency
on one customer for a substantial portion of sales are
additional examples.
• Operational and reputational risks can also have financial
impacts. Clearly, greater financial risk requires better risk
management and higher compensation. The underwriting
process should focus on a customer's capacity and
willingness to meet financial obligations.
by Atindya K Ghosh

13. Strategies for Crisis Management
3. Structure and documentation
• There is no single formula for determining an appropriate
deal structure. The goal is to achieve a reasonable balance
between positive and negative factors.
• Elements of a good company structure include:
i. Key Risk Identification and Mitigates.
ii. Proper Identification of the Legal Entities Involves.
iii. Appropriate ties between Cash Flows and Purpose.
iv. Early Warning Signals.
v. Level of Monitoring appropriate to the level of Risk.
vi. Remedies to act when Mutual Expectations are not met.
vii. Proper Risk / Reward balance and clear Communication of
Expectations between all Parties.
by Atindya K Ghosh

14. Strategies for Crisis Management
4. External risk mitigation/portfolio management
• External risk mitigation is an important risk management
tool which can also support additional business generation
through freeing capacity by distribution of risk.
• Risk mitigation techniques
i. It includes funded and unfunded risk participations
[where one party sells a portion of a transaction’s risk to
one or more third parties].
ii. Insurance [a third party insures the transaction for certain
events].
iii. Credit Default Swaps [one party purchases credit
protection from another party, similar to insurance in
many ways].
iv. Collateral.
by Atindya K Ghosh

15. Strategies for Crisis Management
5. Crisis Management
Despite a solid risk management process, there will be
problems because we cannot predict all crisis events and protect against
them. Be prepared to deal with a crisis event and take action
immediately – identifying and assessing issues and options and
obtaining expert advice as needed.
6. Crisis Communications
Good communication is the heart of any crisis management
plan. Communication should reduce tension, demonstrate a corporate
commitment to correct the problem and take control of the information
flow. Crisis communications involves communicating with a variety of
constitutes: the media, employees, neighbors, investors, regulators and
lawmakers.
by Atindya K Ghosh

16. Conclusion
The broad lesson emerges from this review of international
practice with regard to crisis management. One is that there
are a number of tools, techniques and procedures that can
be of invaluable assistance to managers in preparing for and
dealing with a crisis. Developing crisis management plans,
envisaging and preparing for alternative scenarios, and
using exercises to simulate crisis can all be helpful in
preparing for a crisis. Two all of these supports have
limitations, and if used incorrectly can make the crisis
worse rather than better. There can be no replacement for
good judgment and leadership in these circumstances.
by Atindya K Ghosh

17. Thank You
by Atindya K Ghosh