IB revision

What is crisis management?

Crisis management is a way of dealing with problems (crises) as they arise, without being able to undertake any long term strategic planning.

Examples:

Industrial accidents

Strike Action

Pollution eg oil spills

Product recall for safety reasons

What is contigency planning?

Preparing for unwanted or unlikely possibilities.

Example - disaster planning

Other examples might include: severe recession;  bankruptcyof a major customer; a sudden surge in demand.

Benefits

Contingency plans can be drawn up to cover all functional areas of a business eg HR, Accounting and Finance; Marketing; and operations. This might be helpful to focus in the plan, should the external environment change quickly.

Contingency plans can be used to protect the reputation of the firm / its brand if things change.

Costs

Are contingency plans just a waste of time and money? By definition the things they consider are unlikely and may never happen...

Hence there is an opportunity cost associated with contingency planning; working capital and time is used in their creation which could be used elsewhere in the business.