Guest Author – Natalia Andrew

Any unforeseen event that causes fear and anxiety, and threatens to destabilize a company is called a business crisis.

Through proper training, contingency planning, and sharp decision-making, many established businesses have been able to weather these crises over the years. Below we’ve outlined the most common examples that business managers may encounter, so you know what to avoid.

Personnel crisis

When company personnel and key players affiliated with a business are caught engaging in illegal or unethical misconduct, this is what’s called a personnel crisis. And with the current pervasiveness of social media and “cancel culture,” companies are more vulnerable to personnel crises than ever before.

Social media users will not hesitate to call out what they believe is unacceptable behavior, and this can have profound impacts on the conduct of business. For instance, video talents of the immensely popular Bon Appetit YouTube channel resigned one after another — following the surfacing of a brown face photo of their editor-in-chief. The subsequent backlash on various social media channels has forced Condé Nast to review their labor policies and include more people of color in their team.

To deal with a personnel crisis, it’s important to reaffirm your company’s commitment to its values, and assure the public that disciplinary action will be taken against the individual in question. Internally, holding ethics programs may also help establish a culture of sensitivity and transparency to prevent any similar incidents from occurring in the future.

Technological crisis

With the pandemic forcing everyone indoors, most businesses have had to rely on technology to continue operating. This work-from-home setup can be convenient, but it also exposes businesses to technological crises — or problems that arise from malfunctioning or compromised software or hardware.

As many businesses near their first year of working remotely since the pandemic hit, cybersecurity experts warn that there will be more frequent cyber attacks in the coming year. Vulnerable home routers, in particular, have become prime targets for hackers looking to exploit unprotected networks. As such, business data and privileged company information that are accessible from an employee’s home are also at risk of falling into criminals’ hands.

There are a few simple ways to avoid a technological crisis. For one, providing your employees with up-to-date hardware will help safeguard against any potential crashes that may result in data loss. Outfitting their devices with antivirus programs can also ward off malware or spyware they might get from visiting websites, especially those with various pop-up prompts. Lastly, strong passwords — those that use capital letters and special symbols like ‘@’ or ‘$’ — will make it harder for hackers to break into your machines.

Financial crisis

A financial crisis occurs when a business racks up losses over an extended period of time, leaving it unable to pay its dues such as operating costs and loan repayments. The reasons behind it can be internal, like poor cash flow management, lackluster marketing, or weak sales. However, financial crises are sometimes unavoidable when external factors are involved.

Take, for instance, recessions. No one can say for sure how long recessions last, as the circumstances always vary. Some can be as short as six months, while others, as long as a year and a half. But because of the slowdown in national economic activity, consumers tend to tighten their purse strings, resulting in less income for many businesses.

There is no single correct way to avoid or rectify a financial crisis. However, a good rule of thumb is to trim down the fat in your budget to optimize your net profit. Sometimes this entails making tough decisions, like overhauling your entire business plan or even laying off employees. Prioritize protecting your capital so that you have the funds to expand again once the crisis is over.

Natural crisis

Natural crises, as the name suggests, happen because of natural calamities or so-called “acts of God.” These include earthquakes, floods, volcano eruptions, and the like. The most recent example of this is the COVID-19 pandemic, which has completely upended operations in different business settings. In fact, the International Labor Organization has recorded that around 27% of employees from high-income countries are now working remotely to minimize health risks and enforce social distancing. Aside from this, economic activity has increased on digital platforms, marking a shift in consumer behavior to which businesses need to adapt.

If your business is hit with a natural crisis, it’s important to orient your employees about how your operations will look like moving forward. Communicate with customers, investors, and other stakeholders to inform them of your situation. You should also contact your insurance company to file for claims (if applicable). Lastly, you can also check out government agencies like the US Small Business Administration, who provide resources to assist calamity-hit businesses.

Organizational misdeeds crisis

A crisis of organizational misdeeds occurs when a company’s higher-ups make decisions despite the possible harm these may cause to stakeholders and other parties. This can take many forms, including withholding important information from consumers, tampering with data and information, making false promises about products or services, or even graver acts such as taking bribes and conducting under-the-table deals. Most of the time, organizational misdeeds crises stem from management’s desire to make a quick buck — even at the cost of compromising company values and employee welfare.

Since the source of a misdeeds crisis is the management itself, care and vigilance must be taken by other similarly high-ranking members of the company to ensure all operations are above-board and in line with your business goals. Furthermore, transparency in decision-making would also help prevent such crises.

From natural disasters to threats in cyberspace, there’s no end to the risks businesses have to face regularly. This is exactly why business leaders must arm themselves with the right knowledge and tools to respond quickly and decisively, and ensure their business survives.

A blog article for by writer Natalia Andrew