Crisis and the Ethics of Business
A crisis is a low probability, high impact situation that is perceived by critical stakeholders to threaten the viability of an organization.
Crises can come in many forms, such as natural disasters, terrorist attacks as mentioned in The CEO Can’t Afford to Panic article, technological disasters such as the Y2K computer bug, labor strikes and economic crises such as the one the world is currently suffering from now.
A crisis indicates not only an event that happens, but the situation in which an organization finds itself in, decisions that an organization makes after a crisis can be as threatening to the business and its stakeholders as the crisis’s itself.
A management crisis is an unexpected event or action that threatens the ability of an organization to survive. While a crisis can be statistically projected and frequently is, for planning and statistical purposes, its immediate and actual occurrence cannot be anticipated to happen at any given time, and when it does, a crisis situation ensures. Loss of life, threat to life or an imminent threat to ongoing business operations can all be considered to be immediate results of crisis situations when the lives and interests of employees, customers, suppliers, members of the community and others who have a relationship with the organization and a state in its actions are threatened or adversely impacted.
Crisis management refers to the management of operations during the actual crisis, in the midst of the event, to the degree that events can be managed. Many aspects of a crisis are beyond human effort to respond, stop or fix in such cases as the type of terrorist attack on the World Trade Center on September 11, 2001.
Crisis management also refers to the management of an organization before, during and after a crisis, and is the reason for proactive planning of what all segments and persons in an organization are expected to do in the event of a crisis. While many risks cannot be managed, the organization’s response can and should be managed to reduce the resultant adverse effects. And, among other actions, the organization’s actions toward those affected by the crisis can and must be managed.
Highly visible disasters such as terrorist attacks and natural disasters focus the attention of the public and the business community on the vulnerability of companies, their profitability and maintenance of ongoing operations; to that end, companies develop contingency strategies in the form of disaster recovery plans. A function of risk management, disaster recovery plans are designed to enable a company to return to business as usual as soon as possible.
One of the main purpose’s of an organization is to develop a means by which businesses may consider and completely address operational, ethical, profitability and constituent aspects in planning how to recover from a disaster or crisis that interrupts or impedes normal commerce. Too often businesses focus on the bottom line and lose sight of the people and symbiotic associate aspects that must come together to return the entire business environment to its original health.
Sound ethics is a necessary precondition of any long-term business enterprise. Businesses should not be torn between doing what’s right and what’s necessary to make money; in fact, it’s bad for business, leading to inefficiency and distrust. Trust in leadership is mentioned in Clawson’s text Level Three Leadership on page 205, the role of trust and respect, Clawson states “When mutually rewarding relationships are built upon a moral foundation, trust and respect develop and influence the