A Comprehensive Guide to Crisis Management for Businesses

Crisis management is something business owners and social media marketers need to understand if they want their brands to thrive.

Due to how quickly things move and, more importantly, how closely connected we all are via computers and smartphones, a seemingly small situation can quickly escalate and turn into a crisis.

Understanding how to manage a crisis is an excellent first step if you want to protect your company’s reputation, build trust, and deliver the best customer experience.

With the right knowledge and fast action, you can anticipate and resolve a crisis scenario before it impacts your business.

Today, our goal is to help you learn about the different types of crises and the best ways to resolve them. We will also review the history of crisis management and provide examples. Finally, we will share actionable tips that you can use if you ever find yourself facing a potential crisis.

Let’s dive in!

What is Crisis Management?  

Put plainly, crisis management is the process of handling disruptive and often unexpected events that have the potential to harm a business both financially and in terms of brand reputation.

All good crisis management strategies involve careful planning, clear and timely communication, and fast decision-making to minimize the impact on the business and customer perception. A well-designed crisis response can even help professionals turn bad situations into opportunities for growth.

Brand owners, PR teams, and social media marketers all play important roles in the crisis management process. They need to work together to identify, strategize, and act on a crisis before it worsens.

A poor crisis management strategy can severely impact a business’s reputation and revenue, so you’ll want to do everything possible to manage crises as quickly and effectively as possible.

Establishing a crisis management team is also essential. A dedicated crisis management team ensures that roles are clearly defined and response efforts are coordinated efficiently.

The History of Crisis Management

The idea of crisis management has been around for centuries. Leaders from the Greek and Roman eras, for instance, would send people out to deliver important messages to the public when a situation was bound to upset the people they led, such as food shortages.

It wasn’t until the 1980s that we saw prime examples of businesses using crisis management to preserve their brand reputation. One of the earliest examples that come to mind occurred in 1982, when seven people died after taking cyanide-laced Tylenol in and around Chicago.

Johnson & Johnson took quick action when the reports came in and recalled a staggering 31 million bottles of Tylenol to prevent anyone else from getting sick. It was later determined that the poisoning occurred when an individual entered the stores and replaced the regular Tylenol with the contaminated capsules.

J&J didn’t want to take any more risks in the future, so they decided to develop a tamper-evident seal and fundamentally change their capsule into a caplet, which can’t be tampered with as easily. Their quick action most likely saved lives, but it also helped reinforce trust with consumers who were rightfully nervous about their products after the incident.

While this is an extreme example, it is undoubtedly a noteworthy case demonstrating that potential crises have many faces.

Modern Crisis Management

Nowadays, the vast majority of crisis management takes place on social media. Given that well over 4.62 billion people use social media, this makes sense.

People are more than happy to voice their concerns about a brand on social sites like Instagram, X, Facebook, and TikTok, so businesses want to use this as a primary avenue to communicate with their target audience.

The way businesses communicate this information can vary. They may post a video where a founder or PR manager explains the situation and how they intend to correct it. Alternatively, some businesses release their crisis management response as a clickable image that people can read through at their own pace.

Here’s an example of a crisis response from United Airlines after they were caught on camera forcibly removing a passenger from a plane after overbooking it in 2017:

Types of Crises and How to Address Them

Now, we will examine some of the different crises and what you can do to resolve them. The goal is to help you understand what signs to look out for, identify common threats, and how to prepare a crisis management strategy.

1. Financial Crisis

A financial crisis occurs when a company’s assets rapidly drop in value or it struggles to pay its debts. This can be due to bankruptcy, fraud, a poor economy, or many other factors.

The general theme is that, ultimately, they are losing more money than they are making.

This is an extremely damaging crisis for businesses and workers. If left unchecked, financial crises typically result in layoffs, loss of investor confidence, hiring freezes, and even the company closing its doors forever.

You’ll need to act fast to solve this problem and regain your financial footing.

How to Address:

The first step in crisis recovery is to protect existing profits. This may mean cutting costs, restructuring debt, or seeking additional funding.

Next, you’ll need to re-evaluate the company’s financial strategy. You may have to renegotiate with creditors or explore new revenue streams to start mending this type of crisis. Plenty of options exist, but long-term financial health should be the focus as a general rule.

As scary as it sounds, this may mean rethinking your business model to adapt to the new economic reality.

You should also take the time to engage with stakeholders so they understand the situation and what you’re all trying to do to fix it. Transparent communication can help build trust and avoid panic.

Example:

In the early 1990s, IBM faced a severe financial crisis. The company, long dominant in the mainframe computer market, saw its revenues plummet as personal computers gained popularity.

By 1993, IBM reported a staggering $8 billion annual loss for $16 billion ‘in the red’ between 1991 and 1993. The company’s stock price fell dramatically, and there were fears of bankruptcy.

IBM hired Louis Gerstner Jr. as CEO in 1993 to address this crisis. Gerstner shifted IBM’s focus from hardware to software and services, cut costs, and streamlined the company’s operations. These strategic changes gradually turned IBM around, returning it to profitability and positioning it as a leader in IT services.

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2. Reputational Crisis

A reputational crisis occurs when a company’s public image is damaged due to scandals, social media backlash, or product failures. Because it can occur in many different ways, you need to be vigilant to identify potential risks before they escalate.

It’s worth adding that news travels fast on social media, so crisis scenarios like this can snowball quickly if you’re not careful.

Brands facing a reputational crisis can damage customer trust and brand loyalty for years, especially if they refuse action. Since reputation is everything if you want to win over your customers, it’s not hard to see why it can become such a problem.

How to Address:

The most important thing in managing a reputational crisis is quick, clear, and authentic communication.

If you take a while to respond, or it’s insincere, you will worsen matters. In the eyes of most consumers – and we bet you feel this way too – the only thing worse than a business doing something wrong is acknowledging it and refusing to take responsibility.

Businesses should address the issue head-on, apologize if necessary, and outline the steps to fix it.  Giving your audience a clear understanding of what happened and how you want to fix it is crucial.

Social media is key in managing reputational crises. By monitoring your brand on sites like Instagram, YouTube, and Facebook, companies can speak directly to the public, control the narrative, and rebuild trust.

The best way to do this is to practice social listening, which means tracking when people talk about your brand, products, or the industry. Despite the amazing benefits of this strategy, only 20% of marketers claim to practice social listening consistently.

The reality is that brand leaders will have an easier time enacting their crisis strategy when they know what people say about them. You can use this opportunity to identify potential threats and stay ahead of the curve, which will ultimately help you avoid the t

Research shows that 88% of people trust reviews over advertising, so it’s easy to see how an effective response to a potential crisis can help you emerge stronger than you were before.

Example:

In April 2017, Pepsi released a controversial advertisement featuring model Kendall Jenner. The commercial depicted Jenner joining a nondescript protest and resolving tensions by offering a Pepsi to a police officer.

The ad immediately sparked widespread criticism and backlash on social media, with many accusing Pepsi of trivializing serious social justice movements. Critics argued that the commercial oversimplified complex social issues and appropriated imagery from real protests for commercial gain.

Recognizing the severity of the situation, Pepsi swiftly addressed the crisis. Within 24 hours of the ad’s release, the company pulled the commercial from all media platforms and issued a public apology.

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3. Operational Crisis

Operational crises occur when a business sees a disruption to its normal operations. This situation reduces a brand’s ability to function, deliver consistent products, or meet customer demands.

There are quite a few ways a brand could face an operational crisis. Most notable are supplier issues, inefficient processes, human error, and equipment failures. Whatever is causing the problem, businesses cannot create a positive customer experience.

If not addressed quickly and efficiently, brands will begin to lose their brand reputation, and revenue will drop, which could lead to a financial crisis.

How to Address:

The best way to manage an operational crisis is to develop a crisis management plan and build a crisis response team to tackle these issues head-on. For example, if your software website is down due to a glitch with your host, you should have an IT team to pinpoint this issue, contact the company, and restore the site from backup if necessary.

If you sell physical products, having additional supply chains to obtain vital materials and maintain your inventory is a good idea.

Generally speaking, the key is preparedness and a solid crisis communication strategy. You can overcome most operational crises with a crisis management plan.

Example:

In February 2018, KFC in the United Kingdom faced a noteworthy operational crisis. The restaurant, themed around chicken and the “C” in KFC, ran out of chicken.

As you can imagine, people who decided to visit KFC only to find out that there was no chicken available were shocked, to say the least. Hundreds of KFCs were forced to close down due to the shortage.

This crisis stemmed from a supplier issue. The supplier partnered with a new logistics provider, but due to warehouse issues, they could not follow through on their promise.

KFC handled this situation well, offering a heartfelt apology, creating a website for customers to track store reopenings, and running a very cheeky marketing campaign that received lots of positive press.  

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4. Natural Disasters

Natural disasters like earthquakes, wildfires, floods, or pandemics can cause very serious crises for businesses and customers.

The COVID-19 pandemic had the biggest impact in recent memory. Many businesses were forced to shut down forever because they couldn’t sell to their customers due to shelter-in-place policies and the closure of “non-essential” businesses.

The ones who survived had to do some pretty serious restructuring to make it past this crisis.

Businesses can be shut down for several weeks or months after fires, floods, and tornados. This timeline could be longer if the natural disaster had been particularly vicious and devastated most of the region.

How to Address:

Business leaders should show empathy by supporting affected customers and employees during a natural disaster. This could include financial assistance, flexible working hours, or hosting a fundraiser to help people affected. What you need to do will vary based on the severity and type of disaster.

Generally, if you want to maximize your impact, you’ll want to keep the community in the loop through social media and other channels. This step shows that you care about your customers and employees, not just the bottom line.

It’s also important to have a disaster recovery plan in place.

For example, during the COVID-19 pandemic, many businesses needed to adapt to operating remotely. Businesses with zero online presence or strategy had a harder time adjusting to this situation.

These actions helped them survive the crisis and strengthened their relationships with customers and staff. Preparing for natural disasters also means having insurance policies to cover losses and flexible infrastructure that can pivot in times of crisis.

Example:

Gold’s Gym, a popular fitness spot that originated in Venice Beach, California, filed for Chapter 11 bankruptcy in 2020 after its profits dropped to record lows when movement was restricted during the COVID-19 pandemic.

This could have ended their business, but they auctioned their brand to see if an investor could save them. Their plan worked.

They were purchased by RSG Group the same year, and their businesses started recovering as the company helped them operate safely and effectively when it was time to re-open. 

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5. Cybersecurity Crisis

With technology at the heart of everything we do, cybersecurity crises such as data breaches and hacking are more common than ever. A cybersecurity crisis occurs when a bad actor infiltrates a business system and causes harm.

This is one of the worst types of crisis because it usually involves people stealing confidential information from your business, including sensitive customer information. Not only will this lead to a serious loss of trust, but it will also result in legal issues.

Establishing a secure password strategy that includes two-factor authentication is also necessary. All it takes is someone cracking one password to start a chain reaction that can negatively impact your brand.

How to Address:

The good news is that there are many steps you can take to manage and prevent a cybersecurity crisis.

The first thing you must do is establish a cybersecurity system that includes a robust antivirus/malware plugin on your site. It sounds simple, but it’s your first line of defense in an attack.

You’ll also want to hire a chief information officer who can help organize, encrypt, and store sensitive information so that even if someone breaks in, they won’t be able to cause much damage.

If you find yourself in the middle of an active attack, you’ll need to contain the threat. This could mean disconnected systems, shutting down servers, or isolating suspicious IPs. The next step is to determine what happened and if anything was stolen.

Once you find out what happened, you’ll want to let your customers know. If they find out from an outside source, they are not likely to be forgiving. That thought aside, it’s simply the right thing to do.

Example:

One of the most well-known cybersecurity crises occurred in 2013 when the retailer Target suffered from a massive data breach.

A couple of hackers obtained log-in details from a third-party HVAC vendor and were able to cause a shocking amount of havoc. For content, the details of a jaw-dropping 40 million customers were stolen.

People in this massive group, rightfully so, felt like they were wronged. A bunch of class-action lawsuits followed, and Target ended up paying out $292 million – not including legal fees or the cost to upgrade their security system.

Despite this, Target was able to recover. They built a strong, new security system, hired a chief information security officer, and beefed up their security across the board. It took a while to regain people’s trust, but they pulled it off..

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Best Practices for Crisis Prevention and Management

Now that you know about some of the different types of crises and crisis management strategies, we will review a list of actionable strategies to help you develop your preparedness and response strategy.

• Build a crisis management plan. A good crisis management plan will help you anticipate potential issues and outline clear steps for addressing them. I highly recommend you include contact information for key personnel, crisis management protocols, and business assessment strategies for mitigating damage so things can get moving fast in the event of a crisis. Establishing a crisis recovery plan is one of the first steps you can take to give yourself a little peace of mind.
• Update and test your plan. A crisis plan is not a static document. It must be reviewed and updated regularly to reflect changes within your business and the industry. Your best bet is to periodically test your plan through simulations so you can identify gaps and make sure your team is ready to act.
• Use social listening tools. Social listening tools like Mention can help you identify brewing PR disasters or customer service issues before they escalate into full-blown crises. Early detection allows you to respond and resolve potential crises before they explode.
• Maintain open communication during a crisis. Social media is essential for communicating with customers during a crisis. Be sure to keep them updated so they know what to expect. You’ll also want to stay in touch with stakeholders. Transparency will help you win people over, even if you’re mid-crisis.
• Don’t forget about post-crisis analysis. After a crisis, It’s very important to take the time to analyze your response. Identify what worked well, what could have been handled better, and use those learnings to refine your crisis management plan and improve future responses.

Final Thoughts

There’s no question that having an effective crisis management plan for your business is no longer optional. Every day, you risk encountering a problem that can quickly escalate if you don’t have a plan in place.

Today, we showed you some of the most common crises businesses face and what to do about them. The next step is up to you. Start thinking about your business and how you would handle the situations we discussed today.

If you start putting together a plan now, you’ll be more adaptable and prepared for a crisis when it matters most.