Crisis ManagementCrisis Management
Khaled A. AnterKhaled A. Anter
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to know each otherto know each other
Ground rulesGround rules
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First break at 10:30 am (15 min.)First break at 10:30 am (15 min.)
Second break at 12:00 pm (45 min. include. Second break at 12:00 pm (45 min. include.
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Finish at 2:00 pmFinish at 2:00 pm
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Henry FordHenry Ford
(1863-1947(1863-1947((
““you can not build a reputation you can not build a reputation
based on what you are going to dobased on what you are going to do””
What is a crisisWhat is a crisis??
A crisis (from the Greek κρίσις - krisis; plural:
"crises"; adjectival form: "critical") is any event
that is, or expected to lead to, an unstable and
dangerous situation affecting an individual, group,
community or whole society.
More loosely, it is a term meaning 'a testing time'
or an 'emergency event'.
Definition of a crisis
Crisis is the situation of a complex
system (family, economy, society) when the
system functions poorly, an immediate decision is
necessary, but the causes of the dysfunction are
not known.
What is a crisis managementWhat is a crisis management??
Crisis management is the process by which an
organization deals with a major event that
threatens to harm the organization, its
stakeholders, or the general public.
Three most common elements to
crises
(a) a threat to the organization,
(b) the element of surprise,
(c) a short decision time.
Venette definition
Argues that "crisis is a process of transformation
where the old system can no longer be
maintained.“
Therefore the fourth defining quality is the need
for change.
If change is not needed, the event could more
accurately be described as a failure or incident
Risk assessment Vs. Crisis managementRisk assessment Vs. Crisis management
Risk assessmentRisk assessment involves assessing potential
threats and finding the best ways to avoid those
threats, Crisis management involves dealing with
threats before, during, and after they have
occurred.
Crisis ManagementCrisis Management
It is a discipline within the broader context of
management consisting of skills and techniques
required to identify, assess, understand, and cope
with a serious situation, especially from the
moment it first occurs to the point that recovery
procedures start.
Phases of a CrisisPhases of a Crisis
Signal detection Signal detection
Preparation and prevention Preparation and prevention
Containment and damage control Containment and damage control
Business recovery Business recovery
Learning Learning
Models and theories associated with Models and theories associated with
crisis managementcrisis management
Management Crisis PlanningManagement Crisis Planning
Contingency planningContingency planning
Business continuity planningBusiness continuity planning
Structural-functional systems theoryStructural-functional systems theory
Diffusion of innovation theoryDiffusion of innovation theory
Role of apologies in crisis managementRole of apologies in crisis management
Crisis leadershipCrisis leadership
Unequal human capital theoryUnequal human capital theory
Case studiesCase studies
““1010 casescases””
Case - ICase - I
TylenolTylenol®® (J&J) - 1982 (J&J) - 1982
IncidentIncident
Seven individuals died Seven individuals died
inin metropolitan Chicago metropolitan Chicago
65 milligrams of cyanide 65 milligrams of cyanide
ApproachApproach
Recalled and destroyed 31 million capsules Recalled and destroyed 31 million capsules
Cost of $100 million Cost of $100 million
CEO, James Burke, appeared in television ads CEO, James Burke, appeared in television ads
News conferences informing consumers of the News conferences informing consumers of the
company's actions company's actions
Tamper-resistant packaging was rapidly Tamper-resistant packaging was rapidly
introduced introduced
$100,000 reward offered by Johnson & Johnson $100,000 reward offered by Johnson & Johnson
on murdereron murderer’’s heads head
ConclusionConclusion
Tylenol remains a top seller, controlling about Tylenol remains a top seller, controlling about
35% of the pain killer market in North America 35% of the pain killer market in North America
Case - IICase - II
Odwalla FoodsOdwalla Foods - 1996 - 1996
IncidentIncident
Apple juice causes an Apple juice causes an
outbreak of outbreak of E. coli E. coli infectioninfection
Unpasteurized Unpasteurized
Forty-nine cases were Forty-nine cases were
reported reported
Death of a small childDeath of a small child
16 criminal counts of 16 criminal counts of
distributing adulterated juice distributing adulterated juice
OdwallaOdwalla pled guilty pled guilty
ApproachApproach
Within 24 hours, Within 24 hours, OdwallaOdwalla conferred with the FDA and conferred with the FDA and
Washington state health officials Washington state health officials
Schedule of daily press briefingsSchedule of daily press briefings
Press releases which announced the recall Press releases which announced the recall
Expressed remorse, concern and apology Expressed remorse, concern and apology
Detailed symptoms of Detailed symptoms of E. coli E. coli poisoningpoisoning
Developed effective thermal processesDeveloped effective thermal processes
All of these steps were communicated through close All of these steps were communicated through close
relations with the media and through full-page relations with the media and through full-page
newspaper ads newspaper ads
ConclusionConclusion
Despite a net loss for most of 1997, Odwalla worked to Despite a net loss for most of 1997, Odwalla worked to
rehabilitate its brand name. In addition to advertising its rehabilitate its brand name. In addition to advertising its
new safety proceduresnew safety procedures, Odwalla released its line of food , Odwalla released its line of food
bars (its first solid food product line) and entered the bars (its first solid food product line) and entered the
$900$900 million fruit bar market.million fruit bar market.
Another new product was the Another new product was the Future ShakeFuture Shake, a "liquid , a "liquid
lunch" aimed at younger consumers. Because of these lunch" aimed at younger consumers. Because of these
efforts, Odwalla was again profitable by the end of efforts, Odwalla was again profitable by the end of
1997, reporting a profit of $140,000 for the third 1997, reporting a profit of $140,000 for the third
quarter quarter
Case - IIICase - III
Pepsi -Pepsi - 1993 1993
IncidentIncident
Claims of syringes being Claims of syringes being
found in cans of diet found in cans of diet
PepsiPepsi
Pepsi urged stores not to Pepsi urged stores not to
remove the product from remove the product from
shelves shelves
Situation investigated Situation investigated
led to an arrest led to an arrest
ApproachApproach
Pepsi made public and then followed with their first Pepsi made public and then followed with their first
video news release video news release
First video showing the production process to First video showing the production process to
demonstrate that such tampering was impossible within demonstrate that such tampering was impossible within
their factories their factories
A second video news release displayed the man arrestedA second video news release displayed the man arrested
A third video news release showed surveillanceA third video news release showed surveillance where a where a
woman was caught replicating the tampering incident woman was caught replicating the tampering incident
ApproachApproach
The company simultaneously publicly worked with the The company simultaneously publicly worked with the
FDA during the crisisFDA during the crisis
The corporation was completely open with the public The corporation was completely open with the public
throughout throughout
Every employee of Pepsi was kept aware of the detailsEvery employee of Pepsi was kept aware of the details
After the crisis had been resolved, the corporation ran a After the crisis had been resolved, the corporation ran a
series of special campaigns designed to thank the public series of special campaigns designed to thank the public
for standing by the corporation, Coupons for further for standing by the corporation, Coupons for further
compensation compensation
ConclusionConclusion
This case served as a model for how to handle This case served as a model for how to handle
other crisis situations other crisis situations
Case - IVCase - IV
BhopalBhopal disaster 1984 disaster 1984
IncidentIncident
One of the world's One of the world's
worstworst industrial catastrophesindustrial catastrophes
A leak ofA leak of methyl methyl
isocyanateisocyanate gas and other gas and other
chemicals from the plantchemicals from the plant
Exposure of hundreds of Exposure of hundreds of
thousands of people thousands of people
Confirmed a total of 3,787 Confirmed a total of 3,787
deathsdeaths
leak caused 558,125 injuries leak caused 558,125 injuries
ApproachApproach
Illustrates the importance of incorporatingIllustrates the importance of incorporating cross-cross-
cultural communicationcultural communication in crisis management plansin crisis management plans
Operating manuals printed only in English is an Operating manuals printed only in English is an
extreme example of mismanagement extreme example of mismanagement
Indicative of systemic barriers to information diffusionIndicative of systemic barriers to information diffusion
Symbolic intervention can be counter productive (Symbolic intervention can be counter productive (Union Union
CarbideCarbide’’s upper management arrived in India but was unable to assist in the s upper management arrived in India but was unable to assist in the
relief efforts because they were placed under house arrest by the Indian relief efforts because they were placed under house arrest by the Indian
governmentgovernment) )
ConclusionConclusion
Seven ex-employees, including the former UCIL Seven ex-employees, including the former UCIL
chairman, were convicted in Bhopal of causing chairman, were convicted in Bhopal of causing
death by negligencedeath by negligence and sentenced to and sentenced to two years two years
imprisonmentimprisonment and a and a fine of about $2,000fine of about $2,000 each, each,
the maximum punishment allowed by law. An the maximum punishment allowed by law. An
eighth former employee was also convicted, but eighth former employee was also convicted, but
died before judgment was passed died before judgment was passed
Case - VCase - V
FordFord and and FirestoneFirestone Tire and Tire and
Rubber CompanyRubber Company 2000 2000
IncidentIncident
15-inch Wilderness AT, 15-inch Wilderness AT,
radial ATX and ATX II tire radial ATX and ATX II tire
treads were separating treads were separating
from the tire core from the tire core
leading to grisly, leading to grisly,
spectacular crashes spectacular crashes
These tires were mostly These tires were mostly
used on the Ford Explorer, used on the Ford Explorer,
the world's top-selling the world's top-selling
(SUV) (SUV)
ApproachApproach
First, they blamed consumers for not inflating First, they blamed consumers for not inflating
their tires properly their tires properly
Then they blamed each other for faulty tires and Then they blamed each other for faulty tires and
faulty vehicle design faulty vehicle design
Then they said very little about what they were Then they said very little about what they were
doing to solve a problem that had caused more doing to solve a problem that had caused more
than 100 deaths than 100 deaths
They got called to Washington to testify before They got called to Washington to testify before
Congress Congress
ConclusionConclusion
Bridgestone/Firestone recalled 6.5 million tires Bridgestone/Firestone recalled 6.5 million tires
Total cost = 1 Billion $ Total cost = 1 Billion $
Case - VICase - VI
Exxon Valdez oil spill Exxon Valdez oil spill
19891989
IncidentIncident
Spilled millions of Spilled millions of
gallons of crude oil into gallons of crude oil into
the waters off Valdez the waters off Valdez ––
AlaskaAlaska
The size of the spill is The size of the spill is
estimated at 40,900 to estimated at 40,900 to
120,000 m3 120,000 m3
Hundreds of miles of Hundreds of miles of
coastline were polluted coastline were polluted
and salmon spawning and salmon spawning
runs disrupted runs disrupted
ApproachApproach
Exxon, did not react quickly in terms of dealing with Exxon, did not react quickly in terms of dealing with
the media and the public the media and the public
The company had neither a communication plan nor a The company had neither a communication plan nor a
communication team in place to handle the event communication team in place to handle the event
Exxon established its media center in Valdez, a location Exxon established its media center in Valdez, a location
too small and too remote to handle the onslaught of too small and too remote to handle the onslaught of
media attentionmedia attention
The company acted The company acted defensivelydefensively in its response to its in its response to its
publicpublic
Even laying blame, at times, on other groups such as Even laying blame, at times, on other groups such as
the the Coast Guard Coast Guard
ConclusionConclusion
Litigation was filed on behalf of 38,000 litigants Litigation was filed on behalf of 38,000 litigants
A jury awarded plaintiffs US$287 million in A jury awarded plaintiffs US$287 million in
compensatory damages and US$5 billion in compensatory damages and US$5 billion in
punitive damagespunitive damages
As of 2010 there are approximately 98As of 2010 there are approximately 98 cubic cubic
metres (3,500metres (3,500 cucu ft) or 26,000 gallons) of Valdez ft) or 26,000 gallons) of Valdez
crude oil still in Alaska's sand and soil crude oil still in Alaska's sand and soil
Case - VIICase - VII
TheThe ChernobylChernobyl disaster disaster
26 April 1986 26 April 1986
IncidentIncident
Reactor four suffered a Reactor four suffered a
catastrophic power increase catastrophic power increase
leading to explosions in its leading to explosions in its
core core
This dispersed large This dispersed large
quantities of radioactive fuel quantities of radioactive fuel
and core materials into the and core materials into the
atmosphere atmosphere
The accident occurred during The accident occurred during
an experiment scheduled to an experiment scheduled to
test a potential safetytest a potential safety
ApproachApproach
The reactor had not been encased by any kind of The reactor had not been encased by any kind of
hardhard containment vesselcontainment vessel
Because of the inaccurate low readings, the Because of the inaccurate low readings, the
reactor crew chiefreactor crew chief assumed that the reactor was assumed that the reactor was
intactintact
The readings of another dosimeter brought in by The readings of another dosimeter brought in by
04:30 were dismissed under the assumption that 04:30 were dismissed under the assumption that
the new dosimeter must have been defective the new dosimeter must have been defective
ApproachApproach
"We didn't know it was the reactor. No one had "We didn't know it was the reactor. No one had
told us.told us.““
LieutenantLieutenant Volodymyr Pravik, who died on 9 May 1986 ofVolodymyr Pravik, who died on 9 May 1986 of acute acute
radiation sicknessradiation sickness
ConclusionConclusion
The The distrustdistrust that many people (both within and that many people (both within and
outside theoutside the USSR) had in theUSSR) had in the SovietSoviet authoritiesauthorities
Over 30 years is estimated at US$235Over 30 years is estimated at US$235 billion (in billion (in
2005 dollars)2005 dollars)
5% - 7% of government spending in Ukraine 5% - 7% of government spending in Ukraine
still related to Chernobyl still related to Chernobyl
Case - VIIICase - VIII
FukushimaFukushima I nuclear accidents I nuclear accidents
20112011
IncidentIncident
Following the9.0 Following the9.0
magnitudemagnitude Tōhoku Tōhoku
earthquake and earthquake and
tsunamitsunami on 11 March on 11 March
20112011
Experts consider it to be Experts consider it to be
the second largest the second largest
nuclear accident after nuclear accident after
thethe Chernobyl disasterChernobyl disaster
More complex as all More complex as all
reactors are involved reactors are involved
ApproachApproach
Tokyo drinking water exceeded the safe level for Tokyo drinking water exceeded the safe level for
infants infants
Prompting the government to distribute bottled Prompting the government to distribute bottled
water to families with infants water to families with infants
A nuclear emergency was declared by the A nuclear emergency was declared by the
Government at 19:03 on 11 March Government at 19:03 on 11 March
Initially a 2Initially a 2 km, then 10km, then 10 kmkm evacuation zone was evacuation zone was
ordered ordered
ApproachApproach
Later Prime MinisterLater Prime Minister issued instructions that issued instructions that
people within a 20people within a 20 km (12 mile) zone around the km (12 mile) zone around the
plant must leaveplant must leave
Urged that those living between 20Urged that those living between 20 km and km and
3030 km from the site to stay indoors km from the site to stay indoors
Six weeks after the crisis began, plans were Six weeks after the crisis began, plans were
announced for a large-scale study of the announced for a large-scale study of the
environmental and health effects of radioactive environmental and health effects of radioactive
contamination from the nuclear plant contamination from the nuclear plant
ConclusionConclusion
A private report by journalists and academics as well as an
investigation by TEPCO.
The panel said the government and TEPCO failed to prevent the
disaster not because a large tsunami was unanticipated, but
because they were reluctant to invest time, effort and money in
protecting against a natural disaster considered unlikely.
"The utility and regulatory bodies were overly confident that
events beyond the scope of their assumptions would not occur . .
. and were not aware that measures to avoid the worst situation
were actually full of holes," the government panel said in its final
report.
Case - XCase - X
The Deepwater Horizon oil spill The Deepwater Horizon oil spill ––
20102010
““The Macondo incidentThe Macondo incident””
Gulf of MexicoGulf of Mexico
IncidentIncident
It is the largest accidental marine oil It is the largest accidental marine oil
spill in the history of the petroleum spill in the history of the petroleum
industry industry
The spill stemmed from a sea-floorThe spill stemmed from a sea-floor oil oil
gushergusher that resulted from the April 20, that resulted from the April 20,
2010,2010, explosion ofexplosion of Deepwater Deepwater
HorizonHorizon
BPBP released a 193-page report on its released a 193-page report on its
web site. The report says web site. The report says BPBP
employees and those of employees and those of TransoceanTransocean
did not correctly interpret a pressure did not correctly interpret a pressure
test, and both companies neglected test, and both companies neglected
signs such as a pipe called signs such as a pipe called a risera riser losing losing
fluid. It also says that while BP did not fluid. It also says that while BP did not
listen to recommendations listen to recommendations
byby HalliburtonHalliburton for more centralizersfor more centralizers
ApproachApproach
Short-term efforts:Short-term efforts:
Remotely operated underwater Remotely operated underwater
vehicles to close the blowout vehicles to close the blowout
preventerpreventer valves on the well headvalves on the well head
Placing a 125-tonne Placing a 125-tonne
(280,000(280,000 lb)lb) containment containment
domedome (which had worked on leaks in (which had worked on leaks in
shallower water) over the largest leak shallower water) over the largest leak
and piping the oil to a storage vessel and piping the oil to a storage vessel
on the surface on the surface
Positioning a riser insertion tube into Positioning a riser insertion tube into
the wide burst pipe the wide burst pipe
ApproachApproach
TransoceanTransocean's's Development Driller IIIDevelopment Driller III started drilling a first started drilling a first
relief well, relief well, GSF Development Driller IIGSF Development Driller II started drilling a started drilling a
second relief second relief
Each relief well is expected to cost about $100Each relief well is expected to cost about $100 millionmillion
BPBP began pumping cement from the top, sealing that part began pumping cement from the top, sealing that part
of the flow channel permanently of the flow channel permanently
Two weeks later, it was uncertain when the well could be Two weeks later, it was uncertain when the well could be
declared completely sealeddeclared completely sealed
Even in properly sealed wells, the cementEven in properly sealed wells, the cement
plugs can fail over the decades and metal plugs can fail over the decades and metal
casings that line the wells can rust casings that line the wells can rust
ConclusionConclusion
At first, At first, BPBP files a 52 files a 52 page page exploration and exploration and
environmental impact plan environmental impact plan for thefor the MacondoMacondo well. The well. The
plan stated that it was "plan stated that it was "unlikely that an accidental surface or unlikely that an accidental surface or
subsurface oil spill would occur from the proposed activitiessubsurface oil spill would occur from the proposed activities””
Mark E. HafleMark E. Hafle, a senior drilling engineer at BP, warns , a senior drilling engineer at BP, warns
that the metal casing for thethat the metal casing for the blowout preventerblowout preventer might might
collapse under high pressure collapse under high pressure
TheThe White HouseWhite House oil spill commission released a final oil spill commission released a final
report detailing faults by the companies that led to the report detailing faults by the companies that led to the
spillspill
The panel found that The panel found that BPBP, , HalliburtonHalliburton, and , and
TransoceanTransocean had attempted to work had attempted to work more cheaply more cheaply and and
thus helped to trigger the explosion and ensuing leakage thus helped to trigger the explosion and ensuing leakage
ConclusionConclusion
BPBP released a statement in response to this, saying, released a statement in response to this, saying, ""Even prior Even prior
to the conclusion of the commissionto the conclusion of the commission’’s investigation, BP instituted s investigation, BP instituted
significant changes designed to further strengthen safety and risk significant changes designed to further strengthen safety and risk
management “ management “
TransoceanTransocean, however, blamed , however, blamed BPBP for making the decisions for making the decisions
before the actual explosion occurred and government officials before the actual explosion occurred and government officials
for permitting those decisionsfor permitting those decisions
HalliburtonHalliburton stated that it was acting only upon the orders of stated that it was acting only upon the orders of BPBP
when it injected the cement into the wall of the well when it injected the cement into the wall of the well
HalliburtonHalliburton also blamed the governmental officials and also blamed the governmental officials and BPBP. It . It
criticized criticized BPBP for its failure to run a for its failure to run a cement bond logcement bond log testtest
In the report, In the report, BPBP was accused of nine faults was accused of nine faults
““Better management of decision-making processes Better management of decision-making processes
within within BPBP and other companies, better and other companies, better
communication within and between communication within and between BPBP and its and its
contractors and effective training of key contractors and effective training of key
engineering and rig personnel would have engineering and rig personnel would have
prevented the prevented the MacondoMacondo incident incident””
TheThe White HouseWhite House oil spill oil spill
commission panel final reportcommission panel final report
Lessons learned in Lessons learned in
Crisis ManagementCrisis Management
Lessons learned in Crisis Lessons learned in Crisis
ManagementManagement
A study identified organizations that recovered and A study identified organizations that recovered and
even even exceededexceeded pre-catastrophe stock price pre-catastrophe stock price
The average cumulative impact onThe average cumulative impact on shareholder shareholder
valuevalue for the for the recoverersrecoverers was was 5% plus 5% plus on their original on their original
stock valuestock value
The The non-recoverersnon-recoverers remained more or less unchanged remained more or less unchanged
between days 5 and 50 after the catastrophe, but between days 5 and 50 after the catastrophe, but
suffered a net negative cumulative impact of almost suffered a net negative cumulative impact of almost
15%15% on their stock price up to on their stock price up to one year one year afterwards. afterwards.
ImportantImportant
““It is highly recommended to those who It is highly recommended to those who
wish to engage their senior management in wish to engage their senior management in
the value of crisis managementthe value of crisis management””
Crisis as an OpportunityCrisis as an Opportunity
Crisis as an OpportunityCrisis as an Opportunity
Management must move from a mindset that Management must move from a mindset that manages
crisis to one that to one that generates crisis leadership
Most executives focus on communications andMost executives focus on communications and public public
relationsrelations as a as a reactive strategyreactive strategy
Potential damage to reputation can result from the Potential damage to reputation can result from the
actual management of the crisis issue actual management of the crisis issue
Companies may stagnate as theirCompanies may stagnate as their risk risk
managementmanagement group identifies whether a crisis is group identifies whether a crisis is
sufficiently sufficiently ““statistically significantstatistically significant””
Crisis leadershipCrisis leadership
””Immediately addresses both the damage Immediately addresses both the damage
and implications for the companyand implications for the company’’s present s present
and future conditions, as well as and future conditions, as well as
opportunities for improvementopportunities for improvement””
Government and crisis managementGovernment and crisis management
United States United States National GuardNational Guard at the federal level at the federal level
U.S.U.S. Federal Emergency Management Federal Emergency Management
AgencyAgency ((FEMAFEMA) within the) within the Department of Department of
Homeland SecurityHomeland Security administers theadministers the National National
Response PlanResponse Plan ((NRPNRP) )
This plan is intended to This plan is intended to integrate public and integrate public and
private responseprivate response by providing a common by providing a common
language and outlining language and outlining
Government and crisis managementGovernment and crisis management
The The NRPNRP is a companion to the is a companion to the National National
Incidence Management SystemIncidence Management System
FEMAFEMA offers free web-based training on the offers free web-based training on the
National Response Plan National Response Plan through the Emergency through the Emergency
Management InstituteManagement Institute
Common Alerting ProtocolCommon Alerting Protocol ((CAPCAP) is a relatively ) is a relatively
recent mechanism that facilitates crisis recent mechanism that facilitates crisis
communication across different mediums and communication across different mediums and
systems “A consistent emergency alert format “
RememberRemember!!
The Crisis Management ToolboxThe Crisis Management Toolbox
I.Individual Preparedness Plan Checklist
II.Coordination Authority Public Checklist
III.Command Centers
IV.Incident Command System (Common Terminology)
V.Designating a Spokesperson, backup spokesperson
VI.Media Policies and Procedures (Practicing Tough
Questions/Prepared Statements)
VII.Drill, drill then drill !