Business & Society Ethics, Sustainability & Stakeholder Management 10th Edition © 2018 Cengage ‹#› Chapter 6 Issue, Risk and Crisis Management © 2018 Cengage ‹#› 2 Learning Outcomes Distinguish between risk management, issue management, and crisis management. Describe the major categories of risk and some of the factors that have characterized risk management in actual practice. Define issue management and the stages in the issue management process. Define crisis management and identify four crisis stages. List and discuss the major stages or steps involved in managing business crises. © 2018 Cengage ‹#› Chapter Outline The Relationship Between Risk, Issue, and Crisis Management Risk Management Issue Management Crisis Management Summary © 2018 Cengage ‹#› Risk, Issue & Crisis Management With little government oversight, the consumer is forced to rely on businesses to act responsibly. But such tragedies, and the financial scandals of many corporations, continue to erode consumer trust in businesses. Major external social events not caused by business also affect businesses, and firms must prepare to deal with them. No company is immune to the threat of a crisis, but few prepare. Managerial decision-making processes should include Risk Management, Issue Management, and Crisis Management. © 2018 Cengage ‹#› Relationships Between Risk, Issue, and Crisis Management (1 of 2) Differentiating between these 3 is difficult. Many product managers cannot differentiate between “risks” and “issues,” which has led them to be labeled the Siamese twins of public relations. The Issue Management Council definitions: Issue – a gap between a firm’s actions and stakeholder expectations Risk – a potential issue that may or may not occur Crisis – an issue that has escalated to a critical state © 2018 Cengage ‹#› Relationships Between Risk, Issue, and Crisis Management (2 of 2) Goal: To be effective, risk, issue and crisis management must close the gap between the firm’s situation and its stakeholders’ expectations. Many of the crises firms face today arise out of issue categories they are monitoring and prioritizing through issue management systems. Risk Management may keep issues from arising Effective issue management may enable the firm to avoid a crisis, or minimize its impact, and is vital to post-crisis management. © 2018 Cengage ‹#› Risk Management (1 of 2) Risk management concerns potential issues; it addresses an issue that has not yet occurred, and tries to keep the issue from arising. A “rules” approach to risk management can help prevent internal risks, but not those that stem from firm strategy or risks in the external environment. Example: In 2007, Tony Hayward, new CEO of British Petroleum (BP) promised to make safety his priority. His new rules required that employees not text while driving, and that they use lids on their coffee cups while walking. Of course, those rules did not prevent the Deepwater Horizon from e.

1. Business & Society
Ethics, Sustainability & Stakeholder Management
10th Edition
© 2018 Cengage
‹#›
Chapter 6
Issue, Risk
and Crisis Management
© 2018 Cengage
‹#›
2
Learning Outcomes
Distinguish between risk management, issue management, and
crisis management.
Describe the major categories of risk and some of the factors
that have characterized risk management in actual practice.
Define issue management and the stages in the issue
management process.
Define crisis management and identify four crisis stages.
List and discuss the major stages or steps involved in managing
business crises.
© 2018 Cengage
‹#›
Chapter Outline
The Relationship Between Risk, Issue, and Crisis Management

2. Risk Management
Issue Management
Crisis Management
Summary
© 2018 Cengage
‹#›
Risk, Issue & Crisis Management
With little government oversight, the consumer is forced to rely
on businesses to act responsibly.
But such tragedies, and the financial scandals of many
corporations, continue to erode consumer trust in businesses.
Major external social events not caused by business also affect
businesses, and firms must prepare to deal with them.
No company is immune to the threat of a crisis, but few prepare.
Managerial decision-making processes should include Risk
Management, Issue Management, and Crisis Management.
© 2018 Cengage
‹#›
Relationships Between Risk, Issue, and Crisis Management (1
of 2)
Differentiating between these 3 is difficult. Many product
managers cannot differentiate between “risks” and “issues,”
which has led them to be labeled the Siamese twins of public
relations.
The Issue Management Council definitions:
Issue – a gap between a firm’s actions and stakeholder
expectations
Risk – a potential issue that may or may not occur
Crisis – an issue that has escalated to a critical state

3. © 2018 Cengage
‹#›
Relationships Between Risk, Issue, and Crisis Management (2
of 2)
Goal: To be effective, risk, issue and crisis management must
close the gap between the firm’s situation and its stakeholders’
expectations.
Many of the crises firms face today arise out of issue categories
they are monitoring and prioritizing through issue management
systems.
Risk Management may keep issues from arising
Effective issue management may enable the firm to avoid a
crisis, or minimize its impact, and is vital to post-crisis
management.
© 2018 Cengage
‹#›
Risk Management (1 of 2)
Risk management concerns potential issues; it addresses an
issue that has not yet occurred, and tries to keep the issue from
arising.
A “rules” approach to risk management can help prevent
internal risks, but not those that stem from firm strategy or risks
in the external environment.
Example: In 2007, Tony Hayward, new CEO of British
Petroleum (BP) promised to make safety his priority. His new
rules required that employees not text while driving, and that
they use lids on their coffee cups while walking. Of course,
those rules did not prevent the Deepwater Horizon from
exploding three years later.

4. © 2018 Cengage
‹#›
Risk Management (2 of 2)
A new framework for Risk management divides it into three
categories:
Preventable risks – internal risks that offer no strategic benefit
(BP’s coffee lids)
Strategic risks – risks taken to achieve greater returns (BP’s
deep drilling)
External risks – external risks that cannot be controlled (natural
disasters and economic shocks)
© 2018 Cengage
‹#›
Risk Management & Sustainability
Sustainability involves living in the present in a way that does
not compromise the future.
Risk Management involves taking action today that will
mitigate or prevent a problem that could arise in the future.
Both are concerned with the future consequences of present-day
actions.
Risk-shifting may damage the sustainability of others.
© 2018 Cengage
‹#›
Issue Management -

5. is a process by which organizations:
identify issues in the stakeholder environment,
analyze and prioritize them in terms of their relevance to the
organization,
plan responses to the issues, and then
evaluate and monitor the results.
It is helpful to think of issue management in connection with
sustainable strategic management process, enterprise-level
strategy, corporate public policy, and integrated reporting.
© 2018 Cengage
‹#›
Fig 6-1
© 2018 Cengage
‹#›
Portfolio Approach -
Experience with prior issues likely influences future issues
Provides focus and coherence to the firm’s dealing with the mix
of issues it faces
Failure to adopt certain issues into the portfolio does not signal
neglect, but is part of a rational process of issue management in
which strategic priorities are vital
© 2018 Cengage
‹#›
Issue Definition -
A gap between what stakeholders expect and what the firm is

6. doing.
The gap typically involves debate, controversy, or differences
of opinion that must be resolved.
At some point, the organization must make a decision on the
matter, but that does not mean the issue is resolved.
Once an issue becomes public, its resolution becomes
increasingly more difficult.
Issues are ongoing, and require ongoing responses.
© 2018 Cengage
‹#›
Emerging Issues -
Characteristics of an emerging issue -
The terms of the debate are not clearly defined.
The issue deals with matters of conflicting values and interest.
The issue does not lend itself to automatic resolution by expert
knowledge.
Issue is often stated in value-laden terms.
Trade-offs are inherent.
© 2018 Cengage
‹#›
Issues Management Process-
Issues can be identified earlier, more completely, and more
reliably.
Early anticipation:
Widens the range of options.
Permits study and understanding of the full range of issues.
Permits organization to develop a positive orientation towards
the issues.

7. The organization will have earlier identification of the
stakeholders.
The organization will be able to supply information to
influential publics earlier and more positively, creating better
understanding.
© 2018 Cengage
‹#›
Model of Issues Management Process
© 2018 Cengage
‹#›
Identification of Issues (1 of 2)
© 2018 Cengage
‹#›
Identification of Issues (2 of 2)
Five Leading forces as predictors of social change:
Events
Authorities or advocates
Literature
Organizations
Political jurisdictions
If these five forces are monitored closely, impending social
change can be identified, and sometimes predicted.

8. © 2018 Cengage
‹#›
Examples of Forces Leading Social Change
© 2018 Cengage
‹#›
Issue Selling and Buying
Issue selling -
Relates to middle managers exerting
upward influence in organizations as they try to attract the
attention of top managers.
Issue buying -
Top managers adopt a more open
mind-set for the issues that matter to their subordinates.
© 2018 Cengage
‹#›
Analysis of Issues -
Who (which stakeholder) is affected by the issue?
Who has an interest in the issue?
Who is in a position to exert influence?
Who has expressed opinions on the issue?
Who ought to care about the issue?
To help with issue analysis:
Who started the ball rolling? (Historical view)
Who is now involved? (Contemporary view)
Who will get involved? (Future view)

9. © 2018 Cengage
‹#›
Ranking or Prioritization of Issues
Two essential questions -
How likely is the issue to affect the organization?
How much impact will the issue have?
Once these questions are answered, it is necessary to prioritize
them as to their importance or relevance to the organization.
Those listed at the top will receive the most attention and
resources; those at the bottom may be removed from
consideration.
© 2018 Cengage
‹#›
Other Issues: Ranking Techniques
© 2018 Cengage
‹#›
Formulation and
Implementation of Response
Formulation -
The response design process.
Implementation -
The action design process.
Clarity of the plan
Resources needed to implement the plan
Top management support

10. Organizational structure
Technical competence
Timing
© 2018 Cengage
‹#›
Evaluation,
Monitoring, and Control
Companies should continually evaluate the results of their
responses to issues.
Ensure that actions are kept on track.
Includes careful monitoring of stakeholder opinions.
A form of stakeholder audit (similar to a social audit) can be
used.
Information from this stage helps firms to make adjustments to
the process as needed.
© 2018 Cengage
‹#›
Issue Development Process
Issues Development Process -
The growth process or life cycle of an issue helps management
recognize when an event or trend is becoming an issue.
The process has four stages:
Felt need
Media coverage
Leading political jurisdictions
Regulation or litigation

11. © 2018 Cengage
‹#›
Issues Development Life Cycle Process
© 2018 Cengage
‹#›
Illustrations of Issue Development
Environmental Protection
Social expectation manifested in Silent Spring by Rachel
Carson.
Eugene McCarthy’s political platform
Legislation in 1971-1972 with creation of the EPA
Emissions standards, pollution fines, product recalls,
environmental permits
Product or Consumer Safety
Social expectation manifested in Unsafe at Any Speed by Ralph
Nader
Political issue through the National Traffic Auto Safety Act and
Motor Vehicle Safety Hearings
Social control reflected in ordering seatbelts in all cars, defects
litigation, product recalls, and driver fines
© 2018 Cengage
‹#›
Issue Management in Practice
Issue management covers a range of public relations and
management activities.
Companies that adopt issues management processes:
Develop better overall reputations

12. Develop better issue-specific reputations
Perform better financially
The most successful firms sought close-knit ties with external
and internal stakeholders, and successfully incorporated their
values and interests into management decisions.
© 2018 Cengage
‹#›
Crisis Management -
A crisis can rip the foundation of an organization to shreds if
top management does not respond:
quickly
decisively, and
effectively
A strong and effective response can strengthen an organization
in the long run.
Best examples:
Prudential’s response, including donations and volunteers, to
Japan’s earthquake and tsunami
Johnson & Johnson’s recall of their product Tylenol, tainted
through no fault of their own
© 2018 Cengage
‹#›
Crisis Management
How NOT to manage a crisis:
When Tiger Woods crashed his Cadillac into a tree in his
community, the media converged. Allegations of serial
infidelity arose, and the crisis escalated into an organizational
crisis for his billion dollar empire. Woods said nothing for days,

13. then spoke vaguely regarding the accusations.
Rules of crisis management:
Don’t wait.
Don’t run from the truth.
Don’t hide.
© 2018 Cengage
‹#›
The Nature of Crises
There are many definitions of crisis; here are two:
A crisis is an extreme event that may threaten your very
existence. At the very least, it causes substantial injuries,
deaths, and financial costs, as well as serious damage to your
reputation.
An organizational crisis is a low-probability, high-impact event
that threatens the viability of the organization and is
characterized by ambiguity of cause, effect, and means of
resolution, as well as by a belief that decisions must be made
swiftly.
© 2018 Cengage
‹#›
Types of Crises
© 2018 Cengage
‹#›

14. Outcomes of Major Crises
After major crises, companies reported:
The crises escalated in intensity
The firm was subjected to media and government scrutiny
The crises interfered with normal business operations
The crises damaged the companies bottom line
Resulted in major power shifts; those who handled the crisis
well, rose; those who fumbled, lost
© 2018 Cengage
‹#›
Crisis Management: Four Stages
© 2018 Cengage
‹#›
Managing Business Crises
Five practical steps in managing crises
Identifying areas of vulnerability
Develop a plan for dealing with threats
Forming crisis teams
Simulating crisis drills
Learning from experience
Effective crisis management requires tailoring a program to a
firm’s industry, business environment and crisis management
experience.
© 2018 Cengage
‹#›

15. Ten Steps of Crisis Communications
Identify your crisis communication team
Identify key spokespersons, authorized to speak for the
organization.
Train your spokespersons.
Establish communications protocols.
Identify and know your audience.
Anticipate crises.
Assess the crisis situation.
Identify key messages to communicate to key groups (speak
first to internal stakeholders).
Decide on communication methods.
Be prepared to ride out the storm.
© 2018 Cengage
‹#›
Successful Crisis Management (1 of 2)
Being prepared for a crisis:
Example: After Hurricane Katrina, both Walmart and Home
Depot stood out for their preparedness and assistance.
Learning from Crises:
CEOs coping with Katrina learned:
Take care of your employees
Keep communication lines open
Get ready for the next disaster
© 2018 Cengage
‹#›
Successful Crisis Management (2 of 2)
Schwan’s was notified of a possible salmonella outbreak

16. involving its products.
It immediately shut down, halted all sales and production, and
invited the state health department, the department of
agriculture, and the FDA in to the plant to investigate.
Within 24 hours, it set up a hotline to answer consumer
questions, contacted employees and managers to staff the
hotline, prepared for a product recall, and began working with
its insurer.
Medical treatment was given, bills paid and losses reimbursed
to those affected, and after one year, most claims were resolved.
The source of contamination was discovered (a supplier) and
Schwan’s began preparing to prevent a reoccurrence.
© 2018 Cengage
‹#›
Key Terms
acute crisis stage
chronic crisis stage
crisis
crisis communications
crisis management
crisis resolution stage
crisis teams
emerging issue
external risks
issue
issue buying
issue definition
issue development process
issue management
issue selling
portfolio approach
preventable risks

17. prodromal crisis stage
risk management
strategic risks
© 2018 Cengage
‹#›
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Business & Society
Ethics, Sustainability & Stakeholder Management
10th Edition
© 2018 Cengage
‹#›
Chapter 9
Business
Ethics and
Technology
© 2018 Cengage
‹#›

18. 2
Learning Outcomes (1 of 2)
Identify and describe what the new world of Big Data is all
about and the implications it holds for business.
Explain how social media have changed the world of business
and technology.
Discuss how surveillance is a new dimension to being a
consumer and an employee and what its implications are for
stakeholders.
Articulate an understanding of technology and the technological
environment.
© 2018 Cengage
‹#›
Learning Outcomes (2 of 2)
Identify the characteristics of technology to include their
benefits, side effects, and challenges in business.
Comment on the relationship between technology and ethics.
Define information technology and discuss the issues relating to
e-commerce in business.
Define biotechnology. Identify the ethical issues involved in
genetic engineering and genetically modified organisms
(GMOs).
© 2018 Cengage
‹#›
Chapter Outline
The New World of Big Data
Technology and The Technological Environment
Characteristics of Technology
Technology and Ethics
Information Technology

19. Biotechnology
Summary
Key Terms
© 2018 Cengage
‹#›
Business Ethics & Technology
We live in an age dominated by advancing technology. Each
new generation experiences technological advances that were
not seen by previous generations.
The new generation of young people is called the iGeneration.
Technology is part of their DNA, and they have no “off-switch.”
Technology is at the core of most businesses, but it is a two-
edged sword.
Despite many positive advances, there are new problems and
challenges.
© 2018 Cengage
‹#›
The New World of Big Data (1 of 2)
Big Data –
the tons of information that are out there and how businesses
are striving to put it to work.
More information from more sources than ever before.
Businesses can access it as quickly as it’s generated.
Advantages of Big Data accompanied by new issues: data
security, privacy, cybercrime.

20. © 2018 Cengage
‹#›
The New World of Big Data (2 of 2)
Social Media –
Cutting edge of business communication based on technology
Has a dark side where social and ethical issues arise.
Unfair reviews and how they respond to them are a constant
challenge
Places more emphasis on instantaneous rather than accurate
information
Surveillance –
Monitor customers’ and employees’ actions
For good, but possible abuses
© 2018 Cengage
‹#›
Technology and
the Technological Environment
Technology -
The totality of the means employed to provide objects necessary
for human sustenance and comfort.
A scientific method used to achieve a practical purpose.
Technological environment -
The total set of technology-based advancements or progress
taking place in society.
© 2018 Cengage
‹#›

21. Characteristics of Technology
Benefits of Technology -
Increased production of goods and services
Reduced amount of labor needed to produce goods and services
Made labor easier and safer
Results in a higher standard of living
© 2018 Cengage
‹#›
Costs of Technology -
Technology has some unanticipated side effects:
Environmental pollution
Depletion of natural resources
Technological unemployment
Creation of unsatisfying jobs
© 2018 Cengage
‹#›
Challenges of Technology -
Data amnesia – forgetfulness from outsourcing from brains to
digital devices.
Google Effect – knowing that information is easily accessible
on the Internet, we are less likely to remember it.
Communications technology affects our brains, nervous
systems, social abilities, relationships, mental health, physical
health, and family structures.

22. © 2018 Cengage
‹#›
Technology and Ethics
Our perspective is to raise ethical questions that may be related
to business development, and the use of technology.
Two Key Issues -
Technological determinism -
The idea that what can be developed will be developed.
Ethical lag -
Occurs when the speed of technological change far exceeds that
of ethical development.
© 2018 Cengage
‹#›
Information Technology
© 2018 Cengage
‹#›
E-Commerce as a Pervasive Technology
Electronic Commerce -
Also called e-commerce, e-business, or Web-based marketing.
The Internet has reshaped the way business is conducted.
Online Scams – con artists are using the Internet to scam the
unwary; including fake check scams, free gifts, phishing,
Nigerian money offers, credit card fraud, travel scams, pyramid
schemes, and investment opportunities.
Ongoing Issues in E-Commerce Ethics -
Access
Intellectual property
Privacy and informed consent

23. Protection of children
Security of information
Trust
© 2018 Cengage
‹#›
Invasion of Consumer Privacy
via E-Commerce
Cookies -
Identification tags that websites drop on our personal-computer
hard drives so they can recognize repeat visitors the next time
we visit their Web sites.
Spam -
Unsolicited commercial e-mail. It is sent through "open-relays"
to millions of persons.
Identity Theft -
Tampering with one’s financial accounts.
© 2018 Cengage
‹#›
Figure 9-1
© 2018 Cengage
‹#›
Government’s Involvement in Consumer Privacy Protection
Government is involved in consumer privacy, many think it is
not doing enough.
In 2012 the White House issued a proposed a

24. Consumer Privacy Bill of Rights though it has not been adopted
into law.
Individual Control
Transparency
Respect for Context
Security
Access and Accuracy
Focused Collection
Accountability
A proposed Consumer Privacy Protection Act of 2015 was still
in committee.
© 2018 Cengage
‹#›
Business Initiatives
with Consumer Privacy Protection
Ethical leadership
Privacy policies
Chief privacy officers
Data security
© 2018 Cengage
‹#›
Questionable Businesses and Practices
Made possible by electronic commerce and the use of the
Internet.
Three business categories viewed as questionable:
Web-based pornography
Internet gambling
Web-based downloading of music, movies, books, and other
copyrighted digital material

25. Illegal Downloading – represents theft of intellectual property
Monitoring Technology – raises questions when companies use
technology to monitor consumers as they use a company’s
products.
© 2018 Cengage
‹#›
The Workplace and Computer Technology (1 of 2)
Biometrics – the use of body measurements, like eye scans,
fingerprints, or palm prints for determining and confirming
identity
Robotics – use of industrial robots could double by 2018.
People worry they will lose their jobs to robotics technology.
Artificial Intelligence – embraces software technologies that
make a computer or robot perform equal to or better than
normal human ability in accuracy, capacity, and speed.
Cell Phones and Texting – use of company phones, or using
phones for business while driving is a business ethics topic.
© 2018 Cengage
‹#›
The Workplace and Computer Technology (2 of 2)
Unethical Actions by Employees
Created a potentially dangerous situation by using new
technology while driving
Wrongly blamed an error the employee made on a technological
glitch
Copied the company’s software for home use
Used office equipment to shop on the Internet for personal

26. reasons
Used office equipment to network/search for another job
Accessed private computer files without permission
Used new technologies to intrude on coworkers’ privacy
Visited porn websites using office equipment
Company Actions – management should clearly define
guidelines for ethical computer use by employees.
© 2018 Cengage
‹#›
Ten Commandments
of Computer Ethics
© 2018 Cengage
‹#›
Biotechnology
Biotechnology -
Involves using biology to discover, develop, manufacture,
market, and sell products and services. Biotechnology is
striving to heal, fuel, and feed the world.
Bioethics -
A field that deals with the ethical issues embedded in the
commercial use of biotechnology.
Proceduralism is the primary tool for bioethicists. It is using
protocols to ensure that classical safeguards are not violated.
© 2018 Cengage
‹#›

27. Realms of Biotechnology
Genetic Engineering
Genetically
Modified Foods
© 2018 Cengage
‹#›
Genetic Engineering
Stem cell research
Cloning
Cloning Animals for Food
Genetic testing and profiling
© 2018 Cengage
‹#›
Genetically Modified Organisms (GMOs)
Also referred to as genetically engineered organisms (GEOs)
Fear over health and environmental effects; critics call them
“Frankenfoods.”
Many U.S. crops are genetically modified:
Sugar beets (95%)
Soybeans (91%)
Cotton (88%)
Corn (85%)
Most Americans consume genetically modified organisms every
day.
© 2018 Cengage
‹#›
Labeling of GMOs -
Safety of GMOs is not in question, according to scientific

28. research.
But one of the most frequently discussed issues with GMOs is
labeling.
FDA does not mandate GMO labeling in the U.S.
The Non-GMO Project believes that people have the right to
make informed choices about whether they consume GMO
products.
© 2018 Cengage
‹#›
Key Terms
Artificial intelligence
Big Data
bioethics
biometrics
Biotechnology
botnets
botnet scam
chief privacy officer
cloning
Cookies
Digital amnesia
electronic commerce
embryonic stems cells
ethical lag
genetic engineering
genetic profiling
genetic testing
genetically modified foods (GMFs)
Genetically modified organisms (GMOs)
Google effect
Information technology
identity theft

29. online scams
phishing
Spam
technoethics
technological determinism
technological environment
technology
therapeutic cloning
© 2018 Cengage
‹#›
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