5.7 Crisis management & contingency planning (HL)
5.7 Crisis management and contingency planning (HL Only)
A crisis is any unpredicted event that has widespread negative consequences. In a business management context, this means a crisis causes major disruptions to the normal operations of an organization. Crisis management is about the response a business takes in the event of an actual crisis. Contingency planning is about devising and developing pre-arranged plans to deal with a crisis, in case it actually occurs.
This topic examines how crises can affect the operations of a business organization and how it can prepare to deal with crises, should they ever occur.
Accidents can cause a crisis in the workplace
Crises can occur due to numerous reasons, including:
Human activity and human error, such as financial crises, illnesses, and wars.
Accidents, such as gas explosions, burst water pipes and fires.
Natural disasters, such as rainstorms, hurricanes, earthquakes and droughts.
The learning outcomes (or assessment objectives) for this section of the syllabus are:
The difference between crisis management and contingency planning (AO2)
The following factors that affect effective crisis management (AO2):
• Transparency
• Communication
• Speed
• ControlThe following advantages and disadvantages of contingency planning for a given organization or situation (AO2):
• Cost
• Time
• Risks
• Safety
Top tip!
Note that crises do not have to occur on a national or international scale. They can occur on a small scale, affecting just a single organization, e.g. an expected power cut, machinery breakdowns, hacking of ICT systems or the sudden illness of a key member of staff. Also, try to use contemporary examples. Too often, students write about major crises, such as the financial crisis of the late 1920s(!) Have a look here on the InThinking website for more contemporary case studies about crisis management.
Did you know?
The Chinese characters for crisis are “危機”, with the first character meaning danger or threat, and the second character being part of the characters that make up the word opportunity or chance “機會”. Hence, out of every crisis, an opportunity arises. During World War II, the Germans banned the import of Coca-Cola. The head of Coca-Cola Deutschland (Germany) decided to produce an alternative drink called Fanta, using domestically sourced ingredients. Ten years later, Coca-Cola launched Fanta across the world.
Case Study - Toyota's product recall crisis
To get an idea of the need for crisis management and contingency planning, watch this short video featuring Toyota’s head of global operations who made a public appearance in the USA to apologise for safety problems with its cars. At the time, over 8.5 million Toyota cars had been recalled in the USA alone.
InThinking Business Management resources
Click the hyperlinks below to access the InThinking resources for this particular section of the IB Business Management syllabus.
- The difference between crisis management and contingency planning (AO2)
- Factors that affect effective crisis management (AO2)
- Advantages & disadvantages of contingency planning (AO2)
- Case studies in crisis management (including coverage of the coronavirus pandemic of 2019/2020)
- Unit 5.7 Smart quiz questions
- Crisis management & contingency planning (HL) - Question bank (over 25 questions on this topic for students to try out from the question bank)
- Glossary of key terms
Return to the Unit 5 Operations Management homepage
