1.1 BACKGROUND OF THE STUDY
Management of a major crisis requires prevention, planning, testing, evaluation and maintenance to mitigate and minimize the consequences. The process used by a company can determine the outcome for those affected, including employees, community and the company.
According to F. John Reh (2009:131), a crisis is any natural, accidental or intentional event that severely impacts people, property, and/or the environment. Effects might include fatalities, disabling injuries significant destruction or contamination, or jeopardize the organization’s reputation or products, threatening a company’s reputation or its continued existence. The consequences are independent of company size, quality of management, industry or location, (Lawrence S. K. 2001:12).
Crisis Management defined as the preparation and application of strategies and tactics that can prevent or modify the impact of major events on the company or organization. It is the way of thinking and acting when everything “hits the fan.” At worst, crisis management can be the life-or-death difference for a product, career, or company (Caywood, 1997:189). Crisis has potential to do direct impact on corporate reputation. For this reason, crisis periods are indeed time of the reputation risk management for the managers in the competitive business environment. Crisis situations are risky process and it should manage timely manner.
Kolawole, O. D. (2002), see crisis management as the process by which an organization deals with a major event that threatens to harm the organization, its stakeholders, or the general public. The study of crisis management originated with the large scale industrial and environmental disasters in the 1980s. Three elements are common to most definitions of crisis: (a) a threat to the organization, (b) the element of surprise, and (c) a short decision time. Venette (2000:12) argues that “crisis is a process of transformation where the old system can no longer be maintained.” Therefore the fourth defining quality is the need for change. If change is not needed, the event could more accurately be described as a failure or incident. Peter Drucker (1909-2005),
In contrast to risk management, which involves assessing potential threats and finding the best ways to avoid those threats, crisis management involves dealing with threats before, during, and after they have occurred. That is, crisis management is proactive, not merely reactive. It is a discipline within the broader context of management consisting of skills and techniques required to identify, assess, understand, and cope with a serious situation, especially from the moment it first occurs to the point that recovery procedures start.
Virtually nothing can damage organizational reputation and financial performance more rapidly and more deeply than the impact of a major crisis. Yet many organizations continue to delegate responsibility for crisis management to operational middle managers, while reputation management increasingly secures a place at the executive table.
However a significant trend in crisis management is now emerging which has the potential to reshape the discipline with substantial implications for the development of organizational structure and design. This trend is the advance of proactive crisis prevention as opposed to reactive crisis response, which brings with it more comprehensive parameters of what should be recognized as integral elements of crisis management within a broader continuum of management activities.