Defining and Distinguishing Risk Management and Crisis Management
Defining or even distinguishing between the two words, risk management and crisis management, can be very difficult. The two words are frequently used interchangeably, even by those in the highest managerial positions, despite the fact that their usage and definition are completely different. The word "crisis management" is used to define or describe all the procedures used or put in place to manage unanticipated and unfortunate events that could endanger or damage an organization, people, businesses, or companies. (Aebi, Sabato, & Schmid, 2012). Crises normally occur without giving any early warning. It is there irrefutable that plans must be put in place to address or be executed promptly in the event of a crisis for the following reasons; bring on board actions which will rectify the situation, or lower the implications of the crisis so as to retain normality as swiftly as possible.
Dissimilar but Related: Risk Management
Dissimilar but related to crisis management is risk management (Aebi, Sabato, & Schmid, 2012). Contrary to crisis management, risk management appears to be a continual process where any potential threat is highlighted and remedies are put in place to prevent their occurrences. Whereas risk management tends to be more proactive which is aimed at putting hurdles to the occurrence of unfortunate events, crisis management is a more reactive process which deals with the situation as it occurs (Aebi, Sabato, & Schmid, 2012). However, regardless of prepared and well designed a company's, organization's or military's risk management are, it is unavoidable to have crisis management plan in place in readiness for any eventuality.
The National Response Framework
The National Response Framework (NRF) is a set of guidelines and principles which outline how the response teams/partners should prepare in readiness to provide a collaborated and harmonized disaster response during emergencies (Anneli, 2006). The Framework is important because it defines important roles, structures, as well as principles which dictate how stakeholders respond to disasters as a nation. The Framework outlines how the state and federal government, nongovernmental organizations, communities, and private sectors apply the guidelines for coordinated response to emergency situations (Anneli, 2006). Away from NRF, National Incident Management System (NIMS) is a methodological and proactive approach to guide all the governmental departments and agencies, NGOs, and private sectors to coordinate and work impeccably to manage all the incidents which involve threats of whatever magnitude, to reduce the loss of life and property (Anneli, 2006). NIMS is an important base for the National Preparedness System (NPS).
Crisis Management as Part of Risk Management
As already discussed in the previous section, risk management and crisis management are dissimilar and therefore should not be used interchangeably (Pearson & Clair, 2009). Whereas risks are preventable by proper risk management plans, crises are only containable or manageable. Similarly, risks require proactive measures whereas crises require reactive measures which sometimes can prove to be so abrasive to the company's management (Pearson & Clair, 2009). Crisis management is not part of risk management. However, risk management can be considered part of crisis management because it is aimed at preventing the crisis situation from occurring (Pearson & Clair, 2009). It is therefore right to conclude that risk management is part of crisis management because the threats which would eventually result in crises are thwarted before they occur.
Types of Crises faced by Organizations today
Organizations and companies in the 21st century face several crises which if not properly managed, would result in the downfall. The organizational crisis is defined as any situation which is likely to; cause a threat to a product line or business unit as a whole, deteriorate the financial performance of the organization, destroys the organization's reputations, and causes harm to the consumers, the environment, or the employees of the organization (Smith, 2010). There are several crises which organizations face but the main ones include; financial crisis, the crisis of malevolence, the crisis of deception, natural crisis, and workplace violence and abuse.
The Financial Crisis
The financial crisis is defined as the situation where the financial assets of a business lose value rapidly. This situation in most cases is associated with panic where investors expect that when their money remains in the banks, they will lose value or their assets will depreciate and therefore they either withdraw or sell them (Smith, 2010; Jaques, 2008). The consequence of this is that the financial institutions like banks face a crisis which is then transferred to other sectors of the economy like organizations and businesses.
The Crisis of Malevolence
Another crisis is that of malevolence which is for malicious intentions by an intruder or sometimes employee(s) of the organization (Jaques, 2008). In this situation, notorious individual resorts to criminal acts or even severe steps for the fulfillment personal demands. Examples of this kind of crisis include kidnapping of an organization's official or spreading false rumors about the organization (Krackhardt & Stern, 2008).
Workplace Misconduct
Workplace misconduct is another form of crisis which organizations today have to live with. This kind of crisis arises when for example workers engage in illicit acts like beating or bullying other and/or sexually abusing their minors at work.
Crisis Due to Natural Causes
Finally is crisis due to natural causes. They result from turbulences in the environment, for example, hurricanes, earthquakes, drought, and storms among others (Krackhardt & Stern, 2008). All these crises are serious in for the organizations and must, therefore, be dealt with properly before they get out of hand. However, the most serious crisis which must be handled with priority is a financial crisis. Any organization or company cannot run without finances. The other types of crisis can be managed while the business is still operational whereas a financial crisis would mean the organization is closed down due to bankruptcy.
References
Aebi, V., Sabato, G., & Schmid, M. (2012). Risk management, corporate governance, and bank performance in the financial crisis. Journal of Banking & Finance, 36(12), 3213-3226.
Jaques, T. (2008). Issue management and crisis management: An integrated, non-linear, relational construct. Public Relations Review, 33(2), 147-157.
Krackhardt, D., & Stern, R. N. (2008). Informal networks and organizational crises: An experimental simulation. Social psychology quarterly, 123-140.
Pearson, C. M., & Clair, J. A. (2009). Reframing crisis management. Academy of management review, 23(1), 59-76.
Pearson, C. M., & Mitroff, I. I. (2013). From crisis prone to crisis prepared: A framework for crisis management. The academy of management executive, 7(1), 48-59.
Smith, D. (2010). Beyond contingency planning: Towards a model of crisis management. Industrial Crisis Quarterly, 4(4), 263-275.
Annelli, J. F. (2006). The national incident management system: A multi-agency approach to emergency response in the United States of America. Revue scientifique et technique-Office international des épizooties, 25(1), 223.
