Crises are an inevitable part of management and the larger the business grows the bigger the crises seem to become. However robust a business seems, it is still fallible - as has been shown by the recent histories of Arthur Andersen and Marconi.
An understanding of risk is essential in crisis management. Sophisticated modelling tech¬niques and expert consultants can help managers appreciate risks better, especially those stemming from global issues such as terror¬ism and climate change. Closer to home, risks such as changing cus¬tomer preferences or takeover threats may be best analysed within the company itself. The constant monitoring of what is going on in the larger world is an essential activity. Once a range of possible future crises has been established, contingency plans can be put in place.
However, not every crisis can be foreseen. The chances of an airlin¬er crashing, for example, are extremely small, but every airline must still live with the possibility. When an Air France Concorde crashed on take-off from Paris - the first accident involving a Concorde - Air France was pre¬pared to deal with the issue. Managers moved quickly to with¬draw Concorde from, service, announce an investigation into the accident and reassure the trav¬elling public that it was still safe to fly Air France. The following day the airline s share price did decline, but not by much and not for very long.
Intel, the world’s leading maker of semiconductors, suffered a huge and unforeseen crisis when It emerged that a small proportion of its Pentium microprocessors were faulty. Quickly assessing the options, the company took the brave step of recalling and replac¬ing the entire production run of the series. The move cost more than $lbn (Ј550m) and probably saved the company. Intel showed that it was committed to its product, whatever the short-term cost, and customers responded positively
Looking back on the incident, Andy Grove. Intel’s chairman and then chief executive, compared managing in a severe crisis to an illness. Strong, healthy companies will survive, although at a cost to themselves. Weak companies will be carried off by the disease and will die. In Mr Grove’s view, the key to successful crisis manage¬ment is preparedness. Forward thinking and planning are essen¬tial; understanding the nature of the crisis that might occur can help managers be better prepared, as the Air France example shows.
Yet even while managers are planning how to deal with seismic events such as terrorist attacks or natural disasters, they may be missing more subtle threats such as the development of new tech¬nologies that could undermine their business. Good crisis man¬agement requires the ability to react to events swiftly and posi¬tively, whether or not they have been foreseen.