Leadership

How businesses can turn crises to their advantage

Children walk past a crack caused by the earthquake in a street in Port-au-Prince January 16, 2010. Haitian authorities are rounding up troublemakers to prevent sporadic looting from turning into wider violence in the aftermath of the Caribbean nation's devastating earthquake, a senior security official said. REUTERS/Carlos Barria (HAITI - Tags: DISASTER) - GM1E61H07IF01

What do companies who have taken advantage of a crisis have in common? Image: REUTERS/Carlos Barria

Deepankar Sanwalka
Advisory leader, PwC India
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Leadership

This article is part of: India Economic Summit

Most organizations today are battling some kind of crisis – a situation triggered by significant internal or external factors, or several small incidents that build and have an enterprise-wide, multifunctional impact. These crises disrupt normal business operations and have the potential to harm or damage the reputation of the organization. Crises don’t discriminate and can threaten the existence of the organization if not contained in time.

In my more than 25-year professional career, I have seen many such crises and have come to categorize companies into four groups:

  • Those who go down with a crisis;
  • Those who are able to weather the storm but suffer significant damage that leaves them lagging behind their peers, almost forever;
  • Those who emerge stronger by turning a crisis into an advantage;
  • Those who do not change at all and continue to face crisis after crisis until fighting crises becomes a part of their routine.

The most intriguing category is that of companies which have not only fought a crisis but emerged stronger and went on to become even more successful organizations. Almost all of the companies who seem to take advantage of a crisis have something in common – they make dedicated efforts to prepare themselves for a crisis in advance.

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When a crisis hits, it is natural for the C-suite, most likely the CEO, to own the crisis response. However, many different teams – finance, IT, legal – are involved in the remediation of a crisis. If no leader has been clearly appointed, it can be a situation of too many cooks spoiling the broth. Similarly, it can be very confusing if there is a lack of clarity about who is supposed to do what and how to swing into action if no designated crisis management team has been established.

Crisis-ready organizations have an identified leader for crisis response, along with a designated team whose roles and responsibilities are clearly defined. Such organizations invest in the development of crisis management plans and test and continuously update them.

Naturally, such organizations run crisis preparedness as a programme with an owner who is responsible for testing crisis management plans through simulations. A good crisis management plan is based on the premise that a crisis is never a single isolated event. It always has a domino effect on various aspects of the organization, with internal as well as external stakeholders the most affected. Through simulations, gaps in the organization are revealed. Organizations that learn from and fix these gaps before it’s too late are much more confident during a crisis.

Rapid adoption of technology has created interconnected organizations and the consequences of a crisis are now felt by all corners in real time. This impact has a human dimension and again affects relationships with internal and external stakeholders the most. Today, news about an important event goes viral in next to no time. It is therefore vital that crisis response is timely and authentic – something that can only be achieved if the response to a crisis is based on facts. Gathering accurate facts quickly during a crisis is imperative to be able to respond to one.

Crises come in all shapes and sizes and they do not discriminate. Typically, bigger organizations have been found to be more vulnerable to crises. PwC’s first-ever Global Crisis Survey involved more than 2,000 companies, including views from more than 150 C-suite executives from large, publicly listed companies in India and companies that have received private equity funding. Almost all the respondents in India (97%) anticipated that they would be hit by a crisis in the near future; 80% said they had faced at least one crisis in the past five years.

Image: PwC Global Crisis Survey


The survey findings indicate that close to 4 in 10 (37%) of the companies in India that are in a better place post-crisis had allocated a budget for crisis management before the crisis hit – and nearly half (50%) saw their revenue grow as a result. In addition, 87% of the respondents in India not only recognize the importance of gathering facts but also realise the benefits of gathering accurate facts quickly.

Respondents who were in a better place post-crisis performed a root-cause analysis of their crisis response: nearly all (98%) acted on the results, one-third (32%) made a few changes, a quarter (25%) defined several projects to be completed and others (16%) are taking substantial action.

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A huge majority of companies in India who self-identify as “in a better place” (94%, including 59% who agreed strongly) confirmed that they acted as a team in response to the crisis, with a similar majority (92%) agreeing they acted with integrity.

Crises will increasingly become harder to contain and more complex to solve and address. With continuous scrutiny from stakeholders, regulators and the media, there will be even less room for error, thus making organizations and leaders responsible for doing the right thing from the outset.

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