Crisis Management

In business there are three main types of crisis:
• Financial crisis - short term liquidity or cash flow problems; and long term bankruptcy problems
• Public relations crisis - More commonly called "crisis communications," negative publicity that could adversely affect the success of the company
• Strategic crisis - changes in the business environment that call the viability of the company into question - for example the introduction of the automobile was a strategic crisis for buggy-whip manufacturers.

Certain preliminary measures need to be taken to prevent a crisis. Companies should always plan ahead and project likely outcomes. They should avoid decisions that have the potential to turn into a crisis. They should know their "worst case scenarios" and have a contingency plan for it.
If prevention has not been successful, then the following six steps should be undertaken immediately:
• Do an objective assessment of the cause(s) of the crisis.
• Determine whether the cause(s) will have a long term effect or whether it will be a short term phenomena.
• Project the most likely course of events.
• Focus all the most capable people (including yourself) on activities that will mitigate or eliminate the problem.
• Look for opportunities - there could be a "silver lining".
• Immediately act to guard cash flow.

If it is a cash flow crisis do not wait for further evidence before acting. Immediately take actions to maintain or increase cash flow. These could include:
• accelerating accounts receivable payments even if this requires the granting of discounts
• decelerating accounts payable payments even if this means losing discounts
• increasing short term sales
• maintaining or increasing profit margins on sales if possible
• reducing expenses:
• eliminating non-essential expenses
• selling non-mission critical assets
• reducing payroll
• outsourcing non-mission critical operations
• renegotiating loans and other debts wherever possible - obtaining interest-only loans or extended payment terms.

If it is a public relations crisis, act immediately to prevent or counter the spread of the negative information. Containment may require intense media activities. Use every media available to you to provide a counter argument or question the credibility of the original negative publicity.