Strategic Risk Decision Making - Literature review Example

STRATEGIC RISK DECISION MAKING Name Institution Professor Course Date Introduction Organisational crises are incidences characterized through high consequence, ambiguity, low probability and decision making time demands. Crisis management comprises of three unique phases: crisis prevention, crisis response and crisis recovery. Crisis prevention that entails averting and avoiding potential crises is subdivided into three phases which include mitigation, warning and planning. The response stages occur when avoidance efforts fail and events set off a crisis. At this stage organisations transition their efforts and resources to lowering damage to facilities, people and the environment. Crisis communication entails delivering constant crisis occurrences to stakeholders, decision making within the team tasked with crisis management and organisational decision concerning what amount of information to share. Strategic communicative response protects the reputation of a firm through evaluating the crisis event and deciding on the crisis response strategy that is suitable to the crisis situation. Based on the following scenario, this paper highlights the most suitable response strategy for the company besides determining the best media to deliver messages to the stakeholders. The Scenario A small Chemical Company involved in the production of Formaldehyde used by industrial customers in UK and Europe is located outside an industrial centre. The company is close to an estate holding 3000 people and a river passes along the site boundary. The plant has been in this location for over 40 years, and employs majority of people living in the proximity of the company. As a result, the company is a source of employment to the local community, but some locals object the constant presence of the plant following Formaldehyde leak that was contained with the tank bund three years ago. A second more critical leak has occurred seriously injuring three employees and killing fish stocks in the nearby river. These occurrences raise concerns over the safety of people and world life living near the firm. In this perspective, the crisis manager must select a crisis response strategy that is suitable to the amount of potential reputational damage the crisis has inflicted. The Appropriate Crisis Response Strategy The crisis manager in the company should use the level of threat to indentify the suitable crisis response. According to Coombs and Holladay (2009, p.40), Situational Crisis Communication Theory claims that every crisis response must start with adjusting and instructing information. Instructing information informs the stakeholders how they should protect themselves from the crisis. This includes providing information regarding how to evacuate the crisis site. Adjusting information on the other hand, assist stakeholders in coping mentally with the crisis . Sympathy or concern expression, fundamental information about the crisis, and any other corrective actions to thwart a repeat of the crisis qualifies as adjusting information (Coombs and Holladay 2009, p.40). Following provision of instructing and adjusting information, the crisis manager in the company can try the efforts of reputation repair. Crises threaten to destroy reputations given that a crisis provides individuals with reasons to think faultily of an organization. Threats to reputation, whether perceived or real can damage a brand grown and invested in for over decades (Carroll 2013, p.5) .For instance, the small chemical plant dealing with Formaldehyde production has been developed for over four decades. Coombs (2011) put forward that because there is no firm that is invulnerable to crises, firms should learn how to control and manage crises (152). For a powerful potential reputational destruction to a firm, the crisis response strategy must attempt to accommodate victims. The public expects a firm to do more for victims of a crisis when the firm is held more responsible for the crisis. The selected crisis response strategy should mitigate reputational destruction through showing that the firm cares for the affected and understands the right way to behave to meet the expectations of the public. .According to Coombs (2011, p.152), reputations are endangered during any form of crisis. However, research in public relations and marketing investigates how crisis response strategies are useful in protecting reputation during crisis. It is believed that communication which entails actions and words impinge on how stakeholders perceive the firm in crisis (Coombs 2011, p.152). The key to crisis management entails understanding when to utilise a certain strategy for a given crisis event. Attribution theory is a practical and useful blueprint for matching the crisis rejoinder to the crisis event. The SCCT (Situational Crisis Communication Theory) is a segment of the developing body of research that utilises attribution theory to management of crisis (Coombs 2007, p.166) (See Figure 1). The attribution theory is founded on the principle that individuals assign accountability for unexpected and negative situations. Figure 1: Situational Crisis Communication Theory Model Source: Coombs (2007). Crisis response strategies characterize the actual rejoinders a firm utilises to handle a crisis. Communication hold both non-verbal and verbal factors, and thereby crisis response strategies entail the actions (nonverbal aspects), and words (verbal aspects) that a firm directs towards a particular crisis (Coombs 2004, p.266). Firms utilise the impression management strategies otherwise referred to as crisis response strategies to repair reputational destruction from a given crisis. With respect to the Formaldehyde production firm, the manager should employ the rebuilding response strategies that include compensation and apology where the crisis manger state in public that he recognizes the damage and take complete accountability for the crisis besides providing compensation to the victims. Situational Crisis Communication Theory arranges crisis response strategies through identifying whether the purpose of the strategy is to alter the perception of people towards the crisis or the firm facing the crisis (Fussell 2012, p.2). The rebuilding strategies are suitable for the small Chemical Company as they facilitate improvement of the company’s reputation. Bear in mind that the current crisis facing the company is not the first, but the second. Moreover, the current crisis is more serious due to critical injuries sustained by the three employees and the fact that marine life in the nearby river died from effects of the crisis. Besides, a segment of the local community objects the continued presence and operation of the firm in the area following the first leakage. In this regard, the manager cannot utilise denial strategies that seeks to remove any link between the firm and the crisis because the crisis is evident. The denial crisis response strategy entails attacking the accuser and using scapegoat. The diminishment strategies are also not applicable in the firm’ current crisis as these strategies try to lower attributions of the firm’s power over the crisis and its negative effects (Coombs 2011, p.156). The diminishment response strategies comprises of justification and excusing strategies. As indicated earlier, the rebuilding strategies that entail apology and compensation are more feasible in the current crisis of the firm. This is because these strategies attempt to enhance the firm’s dwindling reputation. The actions that will be taken and words that will be said are created for the benefits of the stakeholders and in efforts of offsetting the negative impacts caused by the crisis (Coombs 2011, p.156). While apology is suitable in the current case scenario, Coombs (2011, p.156), asserts that apology is the most intricate and contentious of the crisis response strategies. As a result, it is important to distinguish amid partial and full apologies. A compete apology must recognize the crisis, admit responsibility and incorporate a pledge not to replicate the crisis. The manager should also express regret and concern. A partial apology is just an expression of regret and concern. In accepting the responsibility can lead to losing lawsuits linked to the crisis. In this context, the manager should embrace a partial apology as expression of regret or concern does not imply the same liabilities as in full apology (Coombs 2011, p.156). The Appropriate Media According to Hale et al. (2005, p.113), scholars have acknowledged the significant role that communication plays in productive crisis management. Studies evaluating crisis communication focus on the prevention and recovery stages. Hale et al further claims that “the amount of information flow through existing channels increases during a crisis” (115). The causes of the rise entails increased intricacy of the situation, the number of instantaneous occurrences, and the role of swift , precise information concerning the crisis events. As the flow of information augments, the applicable channels of information reduce. According to (Chandler 2010, p. 101), core operational concerns for crisis management centres in the direction and control of communications, community outreach, property protection, life safety and logistics concerns. In this regard, it is essential for firms to hold media relations strategies as a portion of their crisis communication plan (Chandler 2010, p. 101). Such a strategy focuses on proactive contact with the news media, speaking out and speaking up on key messages besides examining and reacting to news media reports. With respect to the case scenario herein, the crisis manager must adopt a feasible communication plan. To restore and repair the destroyed reputation, it is essential to craft a message that will address all the stakeholders’ concerns and suitably place the firm for recovery (Coombs 2007, p.166). The manager must ensure that he reaches the key audiences, and given that the news regarding the crises must spread across news media and social networking sites given the increased technological development, the manager should embrace the same media to deliver the messages to the stakeholders. News media and social media are important in delivering the message right to the stakeholders. However, the manager should not depend on news media and social media to get information to the stakeholders. Alternative communication technologies that enable direct contact with the crucial audience are paramount. Coombs (2011, p.164) asserts that social media is driven by audience, and people have to visit the social sites or become followers to gain information. In the present world, social media is a natural portion of the search when persons need information regarding how to protect themselves from risks of crisis. Blogs, content communities, microblogs, social networking sites, and discussion boards are practical places for instructing information. However, the crisis manager must ensure that he hold the resources to handle extra information request that might flow once the stakeholders gain access of the firm’s crisis response. If the crisis team fails to accomplish the information request from social media, this media can tax the aptitude of the manager to appear to be transparent and open. Social media allows rumours to spread quickly, besides allowing stakeholders to challenge the firm (Coombs 2011, p.164). In this view,, the crisis management should use the same media to clear the rumours and state its position. The crisis management team should ensure that it stays in touch with the stakeholders through providing follow-up communication through news media and social media. Follow-up communication entails conveying any promised information besides updating stakeholders regarding novel developments pertaining to the crisis. It is imperative that the crisis manager execute any promise he makes to the stakeholders. This is because organizational reputation and credibility are developed on corresponding actions and words. A firm damages its relationship with stakeholders besides loosing credibility when a crisis manager falls short of delivering on his information promises (Coombs 2011, p.166). A practical message delivery channel will allow the manager to: Update the stakeholders on the advancement of the crisis management effort. Let the stakeholders know how the effort of recovery is progressing Announce the cause of the crises as soon as it is recognized Inform stakeholders about any actions taken to thwart a repeat of the crisis Communicate the implemented changes Report to the stakeholders and other concerned people about the support the organization is receiving to deal with the crisis. Respond to inquiries made by stakeholders Conclusion A company’s reputation is broadly recognized as a treasured resource. Unpredictable events or crises that occasionally disrupts a firm’s operations, intimidates its reputation. However, a firm’s communicative response to unpredictable events or crises serves to lower and repair the reputational destruction. The Situational Communication Crisis Theory models the process of crisis with respect to organizational reputation and crisis accountability. The small Chemical Plant dealing with production of formaldehyde has suffered two crises with the current one being more critical. Three employees were critically injured and marine life in the nearby river destroyed. Some of the local community do not support the continued presence of the firm in the region as it threatens human life and the environment. However, given that the firm supports the economy of the region through employing people from the local community, the firm can use rebuilding response strategies that include compensations to victims and apology to the stakeholders to recover its reputation. This strategy is suitable for the firm because the damage to human life, animal and the environment is evident for the company to denial or diminish. The response communication can be challenged through news media, social media and other communication channels. Reference List Carroll, C 2013, The handbook of communication and corporate reputation. London: John Wiley & Sons. Chandler, R 2010, Emergency notification. London: ABC-CLIO Coombs, T 2007,’ Protecting organization reputations during a crisis: The development and application of situational crisis communication theory’, Corporate Reputation Review, 10, 3, pp.163-176. Coombs, T 2011, Ongoing crisis communication: Planning, managing, and responding. London: SAGE. Coombs, T., & Holladay, S 2009, The handbook of crisis communication. New York: John Wiley & Sons. Coombs, W. T 2004, ‘ Impact of past crises on current crisis communication: Insights from situational crisis communication theory’, Journal of Business Communication, 41,3, pp. 265-290. Fussell, H 2012, ‘Non-profit in crisis: An examination of the applicability of situational crisis communication theory’, Journal of Public Relations Research, 24, 1, pp.1-17 Hale, J., Dulek, R., Hale, D., & Joanne, E 2005,’ Crisis response communication challenges’, Journal of Business Communication, 42, 2, p.112-134. Read More