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Four Types of Crisis - But All a Crisis in Trust

Research has identified that big businesses are at risk of 4 Types of Crisis. The typology is defined by the cause, outcome and potential for recovery. All have the same emotional impact – they damage trust.

Four typologies are bound to lead to complexity but because the types ultimately have the same emotional reaction (distrust) the prevention or remedy is largely based in addressing the emotion.

Keep the emotion in focus and addressing the type of risk; Operational, Behavioural, Informational and Corporate (and it would be surprising if they didn’t overlap) can be designed in or, at least, mitigated.

The Crisis Management study by Freshfields Bruckhouse and Deringer ( http://bit.ly/1nDyGa9 ) supports work by the World Economic Forum on global risks.

What is fascinating is how different types of crisis have different impacts – but most damage business outcomes. Immoral Behaviour has the biggest initial impact on share prices but Operational failures are likely to damage for longer. Many companies will not recover for 6 months or more and the doubt will linger for a long time.

Crisis Management comes into play when Risk Management has failed and the best way to manage is to set standards that are way up stream from the risk. Designing in the generators of trust enables this and will involve understanding what triggers the emotions of trust and distrust – whether it’s operational, behavioural or otherwise.

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