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Case Studies

Incident, emergency, crisis or disaster?

James Downs assesses the difference between incidents, emergencies, crises and disasters; and how they fit together. James is Acting Head of Security at the Natural History Museum in London SW7, and has been working in the sector for ten years.

Most businesses and individuals have to deal with incidents and emergencies at some point during their lives. Some of these may become crises and may go on to have disastrous outcomes. In business terms all will have an impact that could affect reputation which in turn will affect profits and could lead to the demise of the business. There is very little in the way of academic writing that brings these four terms together in one document. All of them are linked in some way and it could be argued that their differences are relatively difficult to distinguish. Using case studies from recent events that have befallen large multinational businesses, this essay aims to identify the differences between incidents, emergencies, crises and disasters and how they fit together.
Incidents happen all of the time, an individual could encounter several in a single journey to and from work, or for a business, in a single days trading. Sometimes incidents may seem trivial and at other times can be highly problematic. The dictionary definition of an incident is “an event that is either unpleasant or unusual”. It can be argued that an incident is the starting point that can evolve into the emergency, become the crises and ultimately, without control, end in disaster for the business.

Examples of incidents could amount to a car accident, a theft or an assault; in fact there are many types of event that could be described as ‘an incident’. Incidents “are not solely concerned with major accidents involving fire, death and explosion” (Elliott, Swartz & Herbane, 2010) an incident could equally be a case of industrial espionage, the discovery of underhand business tactics or the breakdown of a major part of a company’s infrastructure. In their book, Business Continuity Management a Crisis Management Approach, Elliott et al cite P&O’s maiden voyage of their ship ‘the Aurora’ as an example of an incident that was dealt with, in the most part, successfully. The ship sailed out of port with nearly 2,000 passengers on board only to return 24 hours later due to breaking down (Elliott et al, 2010). The ship developing a fault was the trigger incident that could very well have developed into a public relations disaster for the company if not for a very quick response by senior management and a high compensation bill. If P&O had not had plans in place their response may not have been quite so quick. They had an emergency response plan in place to respond to the incident with their public relations team ready and waiting to offer “a full refund and the offer of a free cruise, the package cost P&O £6m but succeeded in controlling any negative publicity for the company” (Elliott et al, 2010). Reputation is extremely important to a business; had they delayed their response their losses could have been a lot greater.

Planning for an emergency is key to the survival of a business. The Civil Contingencies Secretariat defines emergency as “an event or situation which threatens serious damage to human welfare, the environment or an act of war or terrorism which threatens serious damage to the security of a country (the UK).” (Civil Contingencies Secretariat, 2013) An emergency can be the immediate aftermath of an incident or a disaster. From the critical lifesaving minutes following a severe car accident to the rush getting essential food, supplies and shelter to a country affected by an earthquake, war or other humanitarian crisis. In business terms the emergency could be the response to a fall in share price or profit warning. It could also be the reaction to a major incident resulting in catastrophic reputational damage along with more familiar emergency situations such as fire or flood. It is therefore essential that within any emergency plan roles and responsibilities are laid out for all of these eventualities. Under the Civil Contingencies Act 2004 local authorities must assess the risks of emergencies, put emergency plans in place, put in place business continuity management arrangements and share information with other local responders to enhance coordination (Elliott et al, (2010). This is the same for the emergency planners within a company. Knowing what the plans are for immediate neighbours is also essential for evacuation points, and joined-up approaches should an incident affect more than one business in the area. Communication with emergency responders such as the Police and Fire Brigade is essential for coordination purposes when they are on site and it is also important that they know who the main contacts are in order to get information about the building. An organisation may not necessarily have to be involved in an emergency to be called upon to help with casualties or in some other way. It is important that the business also has this in mind when forming an emergency plan.

“All organisations face crises from time to time. The key is to ensure that this is acknowledged by top and senior management, and that processes are in place” (Pettinger, 2007).

Elliott et al use Turner’s model of crisis to describe the stages that form a crisis. Turner’s model of crisis sets out the six stages that a business goes through from the beginning to the end of a crisis. It starts with the Initial beliefs and norms, the company trading normal, business as usual, before entering into an incubation stage where for example senior management and their subordinates know that something is happening but do not immediately act upon it until a trigger incident brings the crisis to the fore. The onset is the crisis in motion where issues begin to arise such as reputation damage leading to reduction in share prices. This then needs to be acted upon and therefore the company begins to salvage and rescue what is left of the business. Following on the company must adjust and act upon the lessons learned in each part of the model.

A case in point is the current scandal that the Volkswagen motor company is embroiled in that has plunged the company into crisis, wiping value off their shares and causing, arguably, irreparable damage to the company’s reputation by damaging the trust that their customers and shareholders hold in them. Corporate greed and the quest for higher profits no matter what led the board to use “deceptive and illegal practices that misrepresented its cars to millions of consumers and regulators” (Ndedi et al, 2015). So was it worth it? In their recent paper on the scandal Alain Ndedi, Akepe Linus Enobi and Kingsley Kelly Mua observe that “the consequences of the rigged Volkswagen emissions scandal unearthed stunning implications, namely the probability of potentially affecting people’s health, the environment, the reputation of the industry and even Germany” (Ndedi et al, 2015).

In terms of Turner’s model, one can see the different stages quite clearly. Using the model, the incubation period was senior management’s awareness that the software installed in the vehicles was present, the trigger incident that sparked the crisis was the whistle blower’s initial accusations. The scandal was extremely public with blanket media coverage. This was the onset and was massively damaging to the company’s reputation. The rescue and salvage element was the immediate recall of 8.5bn diesel cars “the company has put aside €6.5bn (£4.8bn) to meet the costs of recalling the cars but also faces the threat of fines and legal action from shareholders and customers” (Ruddick & Topham, 2015). The lessons learned will be numerous and highly scrutinised with customers and shareholders alike wary of the company’s future direction. Volkswagen’s new chief executive said “Volkswagen would need to devolve more power to its brands and regional operations, declaring: “We have a good chance of shining again in two to three years” (Ruddick & Topham, 2015). It is difficult to imagine a giant like Volkswagen losing its grip on the industry so this assumption is probably a good one although the collapse of Enron in 2001 shows that a scandal can lead to total of the business.

When asked to describe a disaster many would recall an earthquake or a terrorist attack but, like incidents, disasters can have many forms “The dictionary definition of a disaster is ‘an occurrence that causes great distress or destruction: a thing, project, etc. that fails or has been ruined” (Chapman, 2002). A disaster would be any event that would stop a business trading and hence making profit. Chapman lists bad publicity, a supplier becoming bankrupt, losing a key member of staff, a former employee having a grudge or a neighbour’s premises declared hazardous due to a chemical spill (Chapman, 2002). Some of these can be mitigated against, such as training employees to succeed one another, but disasters can come from external sources over which the company has very little or no control.
In recent times “The earthquake and tsunami that struck Japan in March 2011 directly impacted over 27,000 businesses” (Cameron et al, 2014). What was a horrific natural disaster for the people of Japan had a knock on effect for businesses across the globe many of which had supply chains with companies supplying components, or warehousing for their product. A year later 22pc of these businesses had not resumed operations (Cameron et al, 2014). None of these businesses, including the tech giant Sony, had any control over this disaster. In 2011 the BBC reported that “the company had made a net loss of 15.5bn yen ($199m; £122m) for the quarter following the disaster, down from a 25.7bn yen profit during the same period in 2010.” (BBC News, 2011) Other tech companies such as Sharp and Panasonic also suffered heavy losses such are the vulnerabilities of dealing with companies in areas susceptible to extreme weather conditions, earthquakes or economic troubles.

In conclusion

Incidents, emergencies, crises and disasters seem to be closely linked and tend to follow on from each other unless there are processes in place to control them. Incidents are the trigger, the emergency is the immediate aftermath, the crises is the result of an emergency beginning to overwhelm the business triggering reactions that would normally be outside of day to day working processes and a disaster is the culmination of all these elements when all of the controls put in place begin to fail. It has become fundamental to all businesses, no matter the size, to have a plan in place to ensure that they at least have a basic knowledge of procedures to aid them during an emergency, laying out the plans for generic incidents such as flood, fire, adverse weather, computer failures, breakdowns and other incidents that may befall a business. Whilst the emergency plan may point out the procedures for dealing with the incident as it happens or in the immediate aftermath there also needs to be a crisis plan so that there is communication and joined up working across the organisation to attempt to control what is happening, make critical decisions and above all lead into the next stage of business continuity management to ensure that the business knows how to continue trading in the weeks, month or years following the incident.

References

Chapman, J. (2007). Business Recovery Planning in a Week. London: Hodder & Stoughton
Elliott, D., Swartz, E. & Herbane, B. (2010). Business Continuity Management (Second Edition). New York: Routledge
Gill, M. (2006). The Handbook of Security. Basingstoke: Palgrave Macmillan
Great Britain. HM Government, Civil Contingencies Secretariat. (2013). Emergency Response and Recovery, Non statutory guidance accompanying the Civil Contingencies Act 2004. London: Cabinet Office
Hiles, A. (2011). The Definitive Handbook of Business Continuity Management. Chichester: Wiley
MacKenzie, C., Barker, K & Santos, J. (2014). Modelling a severe supply chain disruption and post-disaster decision making with application to the Japanese earthquake and tsunami, IIE Transactions, 46:12, 1243-1260, DOI: 10.1080/0740817X.2013.876241
Ndedi, A & E., Akepe, L & Mua, K. (2015). Mind the Gap: The Bottom Line and Ethical Behaviour: How Volkswagen Failed to Reconcile the Two? Available at SSRN: http://ssrn.com/abstract=2684749
O’Callaghan, S. (2010). Turnaround Leadership – Making Decisions, Rebuilding Trust and Delivering Results after a Crisis. London: Kogan Page
Pettinger, R. (2007). Introduction to Management (Fourth Edition). Basingstoke: Palgrave Macmillan
Ruddick, G & Topham, G. (2015, October 15). VW to recall 8.5m diesel cars across Europe. The Guardian. Retrieved from the Guardian website: http://www.theguardian.com/business/2015/oct/15/vw-scandal-german-authorities-reject-voluntary-recall
Sony makes a loss as quake and tsunami hit production. (2011, July 28). The BBC. Retrieved from the BBC website: http://www.bbc.co.uk/news/business-14321660
Wakefield, A. (2015). Risk, Crisis and Disaster Management. ICJS: University of Portsmouth.

Picture by Mark Rowe: a pre-digital, 1960s vintage ‘room allocation’ board from the Cold War bunker near St Andrews in Fife now open to the public as ‘Scotland’s Secret Bunker’. Visit http://www.secretbunker.co.uk/.


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