Lectures summary New Developments in Risk Management

Lecture 1: Crisis management

Part 1: Theory on crisis management

A: Core concepts and principles

What is a crisis?
A crisis is an unprecedented or extraordinary event or situation with a high degree of
uncertainty that threatens an organization and requires a strategic adaptative and timely
response in order to preserve its viability and integrity.

Distinction between incidents and crises

Categorizing crises
Examples of crises
- Boeing crash
- Belastingdienst fraude
- Volkswagen DieselGate scandal
Company scandals -> usually internal incident

Principles of crisis management

- Seek understanding of the situation
- Achieve control ASAP
- Communicate effefctively, both internally and externally
- Build situational awarenss by good information management and coordinated
working
- Make strategic-level decisions to steer the organization out of the crisis
- Mainatin an overview of all decisions and actions to be accountable

Research shows that effective crisis magement pays off

B: Building a crisis management capability

Typical crisis management team. Composed of senior leaders supported by subject matter experts
Building blocks of crisis management
An effective crisis management capability has the following six building blocks
1. Structure – a sharp distinction between the operational, tactic and strategic crisis
organizations within the organization
2. Governance – clear mandate, tasks and responsibilities
3. Process – notification and escalation process
4. Plan – official and activated plan, including all crisis management process features
5. Decision-making– clear structure of decision making at different levels in the
organization
6. Experience – a well and frequently trained crisis management organization

C: Crisis leadership
Forces of a crisis. These forces make leadership difficult

Definition of leadership during crises: In the end, leading in and dealing with crisis = bringing
the new and unwelcome reality to your audience + helping them adapt to novelty

In a crisis, leadership should lead, management should deliver, and expertise is all about
“knowing”

To determine the performance of crisis leaders we use 10 tasks:

1. Early recognition – Recognizing the early warning signs of a potential crisis and
taking action
2. Sense‐making ‐ Understanding what is happening, who is involved and what might
happen in the future
3. Decision‐making ‐ Making strategic decisions based on limited and contradicting
information to steer the organization out of the crisis
4. Coordination ‐ Coordinating teams and people to make sure decisions are carried
out
5. Coupling and decoupling ‐ Understanding the bigger picture of the crisis and
understanding the intertwined connections
 6. Meaning‐making ‐ Understanding the impact of the crisis on the organization and
translating it to the public
7. Communication ‐ Communicating transparently and consistently about the facts and
impact of the crisis
8. Rendering accountability ‐ Explaining what worked and what went wrong during a
crisis
9. Learning ‐ Learning from the crisis to improve in the future
10. Preparing ‐ Preparing the organization for potential crises

D: Strategic decision-making

OODA-Loop : Observe Orient Decide Act

Advantages:
1. Make the CMT’s response proactive instead of reactive
2. Provide structure and clarity
3. Aligns actions to a commonly agreed objective
4. Enables the CMT to process and asses all incoming information
5. Enables the CMT to make decisions based on facts