Foresight Must Be 20/20 When Creating a Crisis Management Program

By Soper, Richard H. | Risk Management, September 1989 | Go to article overview

Foresight Must Be 20/20 When Creating a Crisis Management Program


Soper, Richard H., Risk Management


Foresight Must Be 20/20 When Creating A Crisis Management Program

While many organizations devote from 1 percent to 6 percent of their gross pre-tax revenue to risk funding and loss control, as well as internal and external risk management administrative activities, they do not have an effective crisis management program. Even when proven risk and insurance management techniques and effective loss control strategies are employed, disasters must still be anticipated.

As a segment of an operating risk management program, crisis management may be defined as a strategic technique to reduce the effects of a loss situation (emergency and/or catastrophic) through risk identification, measurement, loss mitigation and management accountability, with a primary focus on pre-loss planning and post-loss recovery. A crisis management strategy is made up of strategy formulation and strategy implementation. The definition of effective crisis management must be broad and not become inhibited by the traditionally narrow considerations of most standard commercial insurance policies. Crisis management objectives should interface with the needs of a company and incorporate the concepts of safety, pre-loss planning, post-loss recovery, asset conservation and revenue production maintenance with the goal of financial survival.

Key Strategic Elements

An effective crisis management program should include the key strategic elements of planning for specific periods and program development involving sequential tasks to be implemented in the event of a crisis. When planning for a time period, it is best to create a time schedule. This schedule should focus on the periods prior to, during and immediately following the crisis and allot time for post-crisis recovery.

The following elements are appropriate for the creation of an effective strategic program for most types of major organizations:

* Establish an operational executive crisis management committee of key management personnel who have the authority and responsibility for creating, implementing and maintaining the program.

* Organize an emergency response team for each defined physical area, which shall provide immediate response capabilities at the time of the crisis.

* Formulate executive crisis management committee analytical capabilities and resources for the purpose of identification, measurement, magnitude assessment, forecasting and intervention for each potential crisis.

* Develop vulnerability reduction programs to mitigate or eliminate the identified crisis and loss exposures.

* Implement a crisis management program strategy including contingency relocation planning, alternate administration capability, management information computer systems backup, including offsite storage retrieval, production contingency planning and alternative inventory sources, internal and external communication system alternatives, backup systems for transportation and distribution and sales and marketing plan modifications.

* Institute chronological action guides that identify tasks to be performed before, during and following an emergency.

* Maintain a continuing crisis management education program with dual emphasis on specific response capabilities and general emergency preparedness.

* Operate a crisis management audit committee to assure the attainment of objectives and identification of program areas requiring improvement, modification or enhancement.

Operating Authority

Operational authority should be provided through the use of an executive crisis management committee comprised of senior staff members. The committee system approach should be mounted within the existing line of authority and the immediate objectives and long-term goals of the company. This approach has been extremely successful and, to function effectively, allows a minimal time commitment by all members. …

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Foresight Must Be 20/20 When Creating a Crisis Management Program
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