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The Review of Crisis Management Facing Natural Disaster

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The Review of Crisis Management Facing Natural Disaster

Koh Mei Siang1

Center of Southern New Hampshire University (SNHU)
Of Help College of Arts and Technology,
Kuala Lumpur, Malaysia
Email: michelle_5536@hotmail.com

Rashad Yazdanifard2
Center of Southern New Hampshire University (SNHU)
Of Help College of Arts and Technology,
Kuala Lumpur, Malaysia
Email: rashadyazdanifard@yahoo.com
 2

Abstract

The devastating of unprecedented natural disasters has brought negative impact globally. Several
researches have shown that the development of the crisis management plan, natural disaster management
and business continuity plan for effectively managing natural disaster. Thus, this paper aims to study the
review of crisis management facing natural disaster.

Keywords: crisis management, natural disaster, business continuity plan, natural disaster management

1. Introduction

The September 11, 2001 terrorist attacks shredded through the heart of New York City and the
July 7, 2005 suicide bombings created chaos and mayhem in central London (Underwood, 2010). Tsunami
from 9.1 earthquakes in the sea off Sumatra, Indonesia on December 26, 2004, overran the shores of many
countries along the huge rim of the Indian Ocean and (Denning, 2006; Tolentino & Arnado, 2007) and the
number of death as the result of natural disaster was the highest in the year- 241,366 people died
(Rodriguez, Vos, Below, & Guha-Sapir, 2008). On August 29, 2005, Katrina, a category-5 hurricane,
knocked out electric and communication infrastructure over 90,000 square miles of Louisiana and
Mississippi and shifted 1.5 million people (Denning, 2006). Crandall, Parnell, and Spillian (2010) reported
that in 2008, two major events occurred closely together, both in terms of time and geography: the May 2
cyclone that struck Myanmar (Burma), and the May 12 earthquake that caused mass damage and fatalities
in the Peoples Republic of China. A chain of wrecking natural disaster events seems never keen to have an
ending. Japan underwent from a historic earthquake and tsunami that left nearly 16,000 people dead in last
year, 2011 (Crandall et al., 2010). Multinational companies’ global supply chain activities have been
disrupted severely, especially for the automobile manufacturers and electronic manufacturers (Skora & Yue
Xia, 2011).

These unexpected natural disasters have brought a massive loss of life, destruction of human life
and health, infrastructure and environmental protection. Alam (2011) stated that economic losses resulting
from disaster is increasing at an alarming rate: US$62 billion a year. Effective leaders are stipulated to
emerge due to these unprecedented national disasters during this crisis to save human lives and renovate
fundamental systems (Porche, 2009). Nevertheless, at a time when effective crisis leadership and
management were required, management plans and leadership systems were stressed to the point of
collapse and failure (Porche, 2009). Whenever a crisis occur, the fundamental functions of management are
often elapsed and the system creates more chaos than was already exist (Middaugh, 2003). Thus, this paper
presents a review of definition of crisis, types of crisis, crisis management, concepts of crisis management,
developing a crisis plan, disaster definition, natural disaster management and business continuity plan.

2. Definition of Crisis

A crisis is an unexpected occurrence that includes some element of surprise that poses a risk to the
organization and must be addressed instantly (Kozlowski, 2010). Kozlowski (2010) also stated that a crisis
is an emotionally stressful event that causes momentous business disturbance. Fearn-Banks (2002) defined
a crisis as “a major occurrence with a potentially negative outcome affecting an organization, company or
industry, as well as its publics, products, services or, good name. Crisis brings damage to an organization.
While Mitroff and Anagnos (2001) suggested, “A crisis is an event that affects or has the potential to affect
the whole of an organization”. Various definitions of crisis have been presented, and mostly combined
previous definitions to some extent. Pearson and Clair (1998) offered one of the first of the inclusive
definitions: 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 (p. 60, as cited in Crandall et al., 2010). Coombs (2007) has
offered another definition of crises: “the perception of an unpredictable event that terrorizes important
expectancies of stakeholders and can seriously collision an organization’s performance and generates
 3

negative outcomes”. Thus, it is the perception of an organization’s stakeholders to define whether an event
as a crisis. It is essential to recognize the crisis because there are occasions when management has gone
into denial, proclaiming that no crisis has occurred or could ever occur, for that matter, when in fact one
has transpired (Sheaffer & Mano-Negrin, 2003).

3. Types of Crisis

It is important to identify the different types of crisis or catastrophic event that could happen in
preparing the proper response for each. Mitroff and Anagnos (2001) have depicted the following crises
including: Economic crises, such as labor strikes, labor shortage, market crash, a major decline in stock
price and fluctuations or a decline in major earnings; Informational crises, such as a loss of proprietary and
confidential information, altering with computer records or a loss of key computer information with regard
to customers and suppliers; Physical crises, such as a loss of key equipment plants and material suppliers,
breakdowns of key equipment and plants, loss of key facilities and major plant disruptions; Human
resource crises, such as a loss of key executives, loss of key personnel, rise in absenteeism, a rise in
vandalism and accidents and workplace violence; Reputation crises, such as slander, gossip, rumors,
damage to corporate reputation and tampering with corporate logos; Crises resulting from psychopathic
acts, such as product tampering, kidnapping, hostage taking, terrorism and workplace violence; and natural
disasters, such as earthquakes, fires, floods, explosions, typhoons and hurricanes.

4. Crisis Management

Crisis management has become more and more important as the economic expansion and the dynamic
environment of enterprises today. A crisis management plan in place is vital for each organization to
prepare for the unfortunate and unpredictable event of a crisis. The implementation of effective strategies
of problem-solving, appropriate prevention strategies and a comprehensive crisis management is crucial.
Fearn-Banks’ (2001) defined that crisis management is strategic planning to prevent and respond during a
crisis or negative occurrence, a process that removes some of the risk and uncertainty and allows the
organization to be in greater control of its destiny.

According to Pearson (2000), the main purpose of a crisis management plan is to make apt
decisions based on best facts and clear thinking when operating under unexpected conditions and also
Kozlowski (2010) added that it is to protect employees, consumers and customers, as well as, company
assets, brands and corporate image. In short, develop a crisis management plan can minimize any potential
liabilities and commotion to organization. Mitroff and Anagnos (2001) also agreed that by having the right
plans and capabilities in place before a crisis occurs, crisis damage to an organization can be minimized
and the time to recover from it can be shortened immensely.

5. Approaches to crisis management

The concept of crisis management has seen a stable development over the last twenty years. Three
well-known approaches emerge from a study of the various crisis management models. These approaches
has initiated a number of people used it as a reference in the development of their crisis models.
There are four approaches which are Fink’s (1986) four-stage model, Mitroff’s (1994) five-stage model, a
basic three-stage model, and Myers (1993) four stage approach.

Fink (1986) was one of the first who develop a crisis model and divided the anatomy of a crisis
into four stages: the prodormal crisis stage, when warning signals of a potential crisis emerge; the acute
crisis stage, when trigger event and ensuing damage of the crisis occur; the cornice crisis stage, when
lasting effects of the crisis continue and clean up begins; and the crisis resolution stage, when the crisis is
no longer a concern to stakeholders (as cited in Shaluf, Ahmadun, & Said, 2003; Crandall, Parnell, &
Spillian, 2010; Veil, 2011). According to Coombs (2007), Fink separates the crisis event into three stages.
Fink (1986, as cited in Coombs, 2007) stated it begins with a trigger event (acute phase), moves to
extended efforts to deal with the crisis (chronic phase), and concludes with a clear ending (resolution). The
different stages of the life cycle require different actions from the crisis manager. As a result, crisis
management is performed in stages and is not one simple action.
 4

Coombs (2007) reported that the second influential approach is from prolific crisis writer and
expert Ian Mitroff (1994). Mitroff (1994, as cited in Coombs, 2007) divides crisis management into five
phases which are signal detection, new crisis warning signs should be recognized and acted upon to avoid a
crisis; probing and prevention, organization members search known crisis risk factors and work to reduce
their potential for harm; damage containment, a crisis hits and organization members try to prevent the
damage from spreading into uncontaminated parts of the organization or its environment; recovery,
organization members work to return to normal business operations as soon as possible; and learning,
organization members review and critique their crisis management efforts, thereby adding to the
organization’s.

Another approach by Smith (1990, as cited in, Coombs, 2007; Crandall et al., 2010; Veil, 2011)
has offered a macro-stages format consisting of a precrisis period, the crisis of management; a crisis period,
the operational crisis; and a postcrisis stage, the crisis of legitimation. The term macro indicates that the
stages are general and that each contains a number of more specific sub-stages: the micro level (Coombs,
2007). This is alike to economics, where macroeconomics deals with all the forces at work on the economy
while microeconomics deals with specific factors (Coombs, 2007).

Coombs (2007) divide of the crisis management process includes the precrisis stage, crisis event
and post crisis stage. The precrisis stage involves actions before a crisis is encountered and consists of the
three sub-stages which are signal detection, prevention, and crisis preparation (Coombs, 2007). Thus, crisis
managers have to develop a system for detecting potential crisis and responding to them. Actions must be
taken to prevent them from happening, once potential crises are detected. Crisis managers must be prepared
if a crisis still occurs. Next, the crisis event stage begins with a trigger event that marks the beginning of the
crisis and ends when the crisis is considered resolved (Combs, 2007). This crisis phase has two sub-stages
which are crisis recognition and crisis containment (Combs, 2007). Crisis recognition implies an
understanding of how events are labeled and accepted as crises and the means for collecting crisis-related
information whereas crisis containment focuses on the organization’s crisis response (Combs, 2007). A
critical part of this phase is communication with stakeholders through words and actions. The last stage is
postcrisis stage whereby crisis management does not end when the crisis ends (Combs, 2007). There are
key activities that must emerge after the crisis. Coombs (2005) claimed that the best learning experience for
crisis management is a real crisis. This stage should involve three steps which including evaluating crisis
management, learning from the crisis, and other postcrisis actions such as follow up communication with
stakeholders and continued monitoring of issues related to the crisis (Coombs 2005).

Crandall et al., (2010) had reported in their book that Myers (1993) offered a four stage approach
that begins with the normal operations stage, a time when prevention practices are established. Preparations
are made to address an event should one occur in this stage. The second stage, emergency response, Myers
(1993) stated it involves the first hours immediately following the onset of the crisis (as cited in Crandal et
al., 2010). Interim processing, the third stage, signifies an intermediate phase where temporary procedures
are set up until normal operations can resume; restoration, the final stage, focuses on the transition back to
normal operations (Myers, 1993, as cited in Crandal et al., 2010).

6. Developing a strategic crisis plan

According to Coombs (2007), crisis management has developed from emergency preparedness,
and drawing from that base, encompasses a set of four interconnected factors: prevention, preparation,
response, and revision. Prevention, also known as mitigation, represents the steps taken to avoid crises
(Coombs, 2007). Stakeholders have to identify warning signs and take proper actions to prevent the crisis.
As saying goes, “Prevention is better than cure”. For instance, a faulty food is recalled before it brings any
problems to customers. Prevention is largely unaware by the public. News stories about crises that did not
happen are rare. It shows that it is vital to have a crisis management plan.

Coombs (2007) claimed preparation is the best-known factor in crisis management because it
includes the crisis management plan (CMP). CMP is a must for every organization. Preparation also
involves detecting crisis vulnerabilities, opting for and training a crisis management team and
 5

spokespersons, creating a crisis portfolio, and refining a crisis communication system (Coombs, 2007). For
example the incident of September 11, although organizations were not prepared for terrorist attacks, they
were prepared to evacuate employees swiftly in the event of fire (Pearson, 2002). In some organizations,
codes and networks that had been set up for other potential crises were helpful in quickly verifying the
safety and location of employees (Pearson, 2002). Again, it strongly emphasized that preparation of any
kind put an organization on better grip for managing any type of occurrence that may happen.

Response is the application of the preparation components to a crisis (Coombs, 2007). A crisis can
be fake or real. The preparation components must be tested repeatedly; and the testing involves running
simulated crises and drills that determine the strength of the CMP, crisis team members, spokespersons,
and the communication system. A real crisis involves the implementation of the same crisis management
resources, only the outcomes are real rather than hypothetical. Response is very public during an actual
crisis (Coombs, 2007).

Many publications critiqued Bausch & Lomb’s failure to recall ReNu with MoistureLoc when it
was linked to a 2006 outbreak of Fusarium keratitis, a form of fungal eye infection that can produce
blindness (Dobbin, 2006; Mintz & Di Meglio, 2006, as cited in Coombs, 2007). Bausch and Lomb did stop
shipping the product and eventually asked retailers to remove the product from shelves. However, it was
not until May 15, a month after the crisis began, that an official recall was issued (Mintz & Meglio, 2006,
as cited in Coombs, 2007). Crises make for good news stories, and news of ReNu with MoistureLoc was
everywhere. Part of the response is recovery, which denotes the organization’s attempts to return to normal
operations as soon as possible following a crisis. Business continuity is the name used to cover the efforts
to restore operations to normal. As noted earlier, downtime from a crisis is a financial drain. The quicker an
organization can return to normal operations, the fewer financial losses it will incur (Coombs, 2007).

Revision is the fourth crisis factor. It involves evaluation of the organization’s response in
simulated and real crises, determining what it did right and what it did wrong during its crisis management
performance (Coombs, 2007). This provides an insight to an amendment of the prevention, preparation, and
response efforts. It can make sure that the organization is on the right track and mistakes are avoided by
replacing a more appropriate action. Revision is the development of an institutional or organizational
memory, which can improve the effectiveness of crisis management by expanding the organization’s
perception of crises and its response capacity (Li, YeZhuang, & Ying, 2004; Weick, 1988, as cited in
Coombs, 2007). The more and assorted the crises an organization experiences through practice sessions, the
better it can grip similar situations in reality. The factors are linked in a twist. If prevention fails,
preparation is required for best performance. Revision is derived from performance and informs both the
prevention of and preparation for future crises. In turn, improving preparation should improve response
(Coombs, 2007). Crisis is always unpredictable and there is no guarantee that an organization can escape it.
By having a systematic crisis management plan can reduce the cost loss in a lesser way within the shortest
time.

7. Disaster definition

A “disaster” indicates a low-probability but high-impact event that causes a large number of
individuals to become ill or injured (Waltzman & Fleegler, 2009). According to the Emergency Disasters
Database (2006), disasters are classified as natural disasters or technological disasters. To be recorded as a
disaster, an event must satisfy at least one of the following criteria: ten or more people reported killed; 100
people or more reported affected; a declaration of a state of emergency; or a call for international assistance.
Natural or unnatural disasters cause excess morbidity and mortality in both unpredictable and predictable
ways.

8. Natural disaster management

Catastrophes today have economic and social impacts that across national boundaries and can
have undulate effects very far away (Michel-Kerjan, 2009). There are similarities for financial risks,
climate change and terrorism, while different in nature, including high uncertainty, large economic and
 6

social costs and interdependencies (Michel-Kerjan, 2009). These devastating losses lead to a greater need
for efficient disaster management. .
According to Moe and Pathranarakul (2006), disaster management includes five generic phases: (1)
prediction; (2) warning; (3) emergency relief; (4) rehabilitation; and (5) reconstruction. Tun, Gehbauer,
Senitz, Mueller and Marc (2007) had written in their study about the five phases which including prediction
phase, warning phase, emergency relief phase, rehabilitation and reconstruction. The prediction phase
includes mitigation and preparedness activities in which structural measures are undertaken to limit the
adverse impact of natural hazards, environmental dilapidation and technological hazards and non-structural
measures are taken in advance to make sure effective response to the impact of hazards by establishing
timely and effective early warnings and the temporary evacuation of people and property from threatened
locations (Tun et al., 2007). The warning phase refers to the condition of timely and effective information,
through identified institutions, that allows individuals exposed to a danger to take action to avoid or reduce
their risk and prepare an effective response (Tun et al., 2007). The next, emergency relief phase includes
the stipulation of assistance or intervention during or immediately after a disaster to meet the life
preservation and basic life needs of those people affected which it can be of immediate, short-term, or
protracted duration (Tun et al., 2007). Rehabilitation requires of both decisions and actions taken after a
disaster with a view to restoring or improving the pre-disaster living conditions of the suffering community,
while encouraging and facilitating necessary adjustments to reduce disaster risk (Tun et al., 2007).
Reconstruction refers to the rebuilding of damaged living conditions of the stricken community with the
aim of long-term sustainability (Tun et al., 2007).

In a natural disaster management life-cycle, there are four essential activities conducted in the
project life-cycle: mitigation, preparedness, response, and recovery (Tun et al., 2007; Benjamin, Bassily-
Marcus, Babu, Silver, & Marin, 2011; van Wyk & Yadavalli, 2011). Mitigation activities include structural
and non-structural measures undertaken to limit the adverse impact of natural hazards, environmental
degradation and technological hazards (Tun et al., 2007). Preparedness deals with the activities and
measures taken in advance to ensure effective response to the impact of hazards, including the issuance of
timely and effective early warnings and the temporary evacuation of people and property from threatened
locations (Tun et al., 2007) or the community’s ability to respond when a disaster occurs (van Wyk &
Yadavalli, 2011). Response refers to the provision of assistance or intervention during or immediately after
a disaster to meet the life preservation and basic subsistence needs of those people affected (Tun et al.,
2007). The timing of response is critical for a successful intervention in disaster relief (Benjamin et al.,
2011). The longer it takes for care to arrive, the higher the fatality rate ((Benjamin et al., 2011) It can be of
an immediate, short-term, or prolonged duration (Tun et al., 2007). Recovery involves decisions and
actions taken after a disaster with a view to restoring or improving the pre-disaster living conditions of the
stricken community, while encouraging and facilitating necessary adjustments to reduce disaster risk (Tun
et al., 2007).

So far, we have presented a general idea of different managerial approaches towards natural
disasters. Hence, the next we will discussed from business point of view on how to deal with these
unpredicted events.

9. Business Continuity Plan

Rinehardt (2010) noted business continuity (BCP) is defined as the strategic and tactical
competence of an organization to plan for and take action to incidents and business disruptions to continue
operations at an tolerable, predefined level. The business continuity plan approach was first initiated in the
work of Kaplan and Norton (1992, as cited in Tun et al., 2007). Business continuity planning is about
taking proactive steps to prevent and minimize the risk of foreseeable disruptions and the creation of
practiced logistical plans for how an organization will recover and restore partially or completely
interrupted critical functions (Rinehardt, 2010). “Business continuity planning is strategy in their
application; in other words, they are plans to keep your facility up and running after it has been “damaged”
in some way”, Morganti (2002) said. The statement of a BCP is to get ready for the worst-case scenario:
you have suffered damage to the site (Morganti, 2002). It could be from human error, natural hazards or
even a temporary “blip” in the system (Morganti, 2002). Tun et al. (2007) noted there are four areas
managers need to look into: financial perspective, how do we look to shareholders? ; customer perspectives,
 7

how do customers see us? ; internal perspective, what must we excel at? ; and innovation and learning
perspective, can we continue to improve and create value?

According to Strohl (2007), there are four crucial components in developing a business continuity
plan: business impact analysis, risk management, risk assessment and risk monitoring. The first step in
developing a business continuity plan is to conduct a business impact analysis. It helps to identify potential
impacts of uncontrolled, non-specific events in the institution’s business processes (Strohl, 2007). It also
estimates the maximum permissible downtime and associated costs for critical business processes (Strohl,
2007). Risk management must include in developing a comprehensive planning. This is to help prioritize
potential business disruptions based on severity and probability of occurrence (Strohl, 2007). Threats are
then analyzed based on the impact to the institution, its customers and financial markets (Strohl, 2007). It is
crucial to plan strategies and method to get through all critical business functions and process in the event
of a disaster or unplanned event. A planning tool that offers a universe of convenient features like import
wizards for employee, equipment, software and vendor information, predefined recovery processes,
predefined roles and recovery teams, a call list utility and the ability for individual action plan makes
everything simple (Strohl, 2007). The final step is to test the plan in ensuring that it will actually work
during a disaster. Plan maintenance is also important to ensure the plan is up-to-date and current with
changes as they occur within the institution (Strohl, 2007).

10. Difficulty faced by stakeholders

When it comes to assessing the risk of the crisis events, there is always a problem for all managers
which are perception risk. Risks are most likely to be perceived different by most decision makers (Skora
& Yue Xia, 2011). There was a research done by Skora and Yue Xia (2011) to interview the managers at
SKF Logistics how they perceive risks caused by natural disasters and catastrophic weather conditions. The
results showed that mostly managers perceive the consequences of those events as considerable but not
dramatic for the company’s supply chain operation (Skora & Yue Xia, 2011). Furthermore, those managers
reported that their perception towards risks due to natural disasters and weather related crisis such as snow
storms, volcano eruption or floods as daily operational problems, and not defined as critical or crisis (Skora
& Yue Xia, 2011).

11. Keys to successful crisis management

There are two significant keys can lead to successful crisis management which are
communication and coordination (Kline & Smith, 2006). Porche (2009) also agrees that the importance of
communication as he commented an effective crisis management team fosters open communications
among managers, leaders, and employees. A well-written communication plan is needed when developing
the crisis plan (Kline & Smith, 2006). The communication plan gives a clearer explanation on each
individual’s responsibilities towards the organizational crisis (Kline & Smith, 2006). Another factor,
coordination, was found to be correlated and overlaps with communication (Kline & Smith, 2006). There
are two main purposes to coordinate; one is to ensure an effective response, second, work with external
partners in designing successful crisis plans as well as coordinating with facilities and key responders in the
event of an actual crisis (Kline & Smith, 2006). Clas (2008) also agreed with Kline and Smiths’ opinion to
coordinate with stakeholders and the media to ensure clarity during crisis communication.

11. Discussion

As we can observed that the increasing trend of natural disasters and particular great and
devastating catastrophes during last three decades with much stronger impact and severe effects than in the
past. Skora and Yue Xia (2011) described that such events can lead to a partial or complete halt of a
company’s global supply chain with all the following negative effects, for example financial instability,
operational time losses, market share reduction, customer disloyalty and long recovering. It is clear to see
that the impact of unexpected natural disasters brought to every each of us. It has become a global issue as
the whole worlds are economically, environmentally, socially and mentally affected by the unwelcome
natural disasters. The occurrence of disasters has alerted the whole world to become aware of the
importance of the emergence of effective crisis leadership and also to develop an extensive, comprehensive
 8

management plans. Most researches have agreed and emphasized it is imperative to have a backup plan to
manage the unpredicted disaster or crisis nowadays. There are many researchers have pointed out the
definition of crisis as an negative event that bring negative consequence to the organization. They all
believed that it requires stakeholders to recognize the crisis and addressed immediately.

The approaches to crisis management also gave readers an idea on how is the concept of crisis
management has gone through a steady revolution over the last twenty years. Most approaches lay
emphasis on detect the signal if a crisis occur, then prevent it from happening. When crisis is unavoidable,
recovery acts need to be in place to minimize the damage to an organization.

Several management plans have identified on how to prepare or deal with the disaster or
catastrophic events before and after. These three plans which are crisis management, disaster management
and business continuity plan are actually quite similar in terms of the steps taken to prevent and overcome
the crisis. In term of organization, crisis management is strategic planning to prevent and respond during a
crisis or negative occurrence, a process that eliminate some risk and uncertainty and allows the
organization to be in greater control of its destiny. Thus, a right plans in place before a crisis occur can help
diminish the harm to an organization, as well as to protect employees, consumers and customers, company
assets, brands and corporate image. On the other hand, natural disaster management is more concise on the
mitigation of the people from threatened locations, rehabilitation for people affected and reconstruction of
the building after the damage brought by the disaster. Business continuity plan, another viewpoint from
business regarding to the plan taking practical steps to prevent and lessen the risk of foreseeable
interferences and the creation of practiced logistical plans for how an organization will recover and restore
partially or completely interrupted critical functions.

In a nutshell, these studies provide a comprehensive literature review of the development of

management program in dealing with uncontrollable disasters or catastrophic events. It also provided some
threats that all stakeholders have to eliminate when creating their plan.

12. Conclusion

The overall goal of this paper is to present a review of the trends of crisis management facing
natural disaster. As discussed in the above, there is crisis management, natural disaster management, and
business continuity plan used to manage the risk of the impact of disaster. All of these programs can
integrate into a new managerial approach for the unpredictable disaster or crisis. There is a need to have an
inclusive research on this issue as to prevent from the crisis happening.

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