Nothing can be more alarming than facing a corporate crisis. Imagine your CEO getting into a public scandal, a product complaint going viral, or an employee strike covered by the media. But one thing’s clear: corporate crisis management is essential for each and every company.
But here’s the problem: While crisis management is key to a resilient organization, only 35% of surveyed respondents set a response plan in place. Further, only 23% of them feel their crisis management functions are well integrated.
💡 Read Crisis Management 101: How to Save Your Business When a Crisis Strikes
So, how negatively impactful a corporate crisis is to a business? And more importantly, how do you deal with one?
This page covers the impact of corporate crises on businesses. Read on to learn some crisis examples and earn some practical solutions.
Ready? Let’s dive right in.
Understanding the Impact of Corporate Crisis on Your Business
PWC released its Global Crisis and Resilience Survey 2023 report. The report cites that nearly 70% of business leaders experienced a crisis for five years, with three as the average number of crises.
As such, consider some of the most recent corporate crises big brands face. Think of the Futures Exchanges (FTX) bankruptcy that was subject to Federal Investigation last year. The same is true with the Silicon Valley Bank (SVB) crisis that has earned public and media interest.
But wait, there’s more: Toyota tried to avoid public backlash after recalling over 100,000 cars. Even M&M’s attempted to evade political mockery after they pulled their spokescandies from circulation.
As you can see, crisis management is vital. When a crisis strikes, you must do what it takes to save your business. Here’s why.
Why is crisis management vital
- Damaged Reputation: A crisis can ruin your brand image and company reputation. What does this imply? Customers won’t patronize your business at all.
- Disrupted Operations: A crisis can disrupt your day-to-day operations. It can delay your products or services, compromise consumer needs, and affect business profitability.
- Employee Turnover: A crisis can make your employees lose their trust and confidence in your organization. Chances are, they’ll resign from work!
- Consumer Distrust: A crisis can drive customers away. Who wants to deal with a company involved in an issue or scandal anyway?
- Poor Sales Revenue: A crisis leads to poor productivity and customer dissatisfaction. That can significantly hurt your sales!
- Financial Losses: A crisis doesn’t only require time and effort to mitigate its risk. It also involves money, whether to manage it or pay a hefty penalty.
- Legal Implications: A crisis can make your business subject to legal consequences. It happens when you fail to comply with legal and regulatory requirements.
- Business Closure: A crisis can go as far as shutting down your business. It occurs when you can no longer manage the crisis.
Given the negative impact of corporate crises, companies and organizations are investing in crisis management. The proof is in the numbers:
The crisis management market could grow from $110 billion in 2022 to $220 billion by 2032. It’s forecasted to expand at a 5% compound annual growth rate (CAGR).
Wondering how to set a corporate management system in place? Learn from the crisis management examples and solutions in the next section.
7 Corporate Crisis Examples (+Solutions and Expert Advice)
Earlier, you learned more about what a corporate crisis is and how it can negatively impact your business. Now, it’s time to identify and learn from different corporate crisis examples. More importantly, learn some practical solutions on how to prevent and address them.
Here’s the good news, though: You can leverage crisis management tools and implement effective solutions to handle a corporate crisis. But the key here is proper planning, robust preparation, and prompt action.
Below are 7 corporate crisis examples, plus possible solutions you might want to consider:
1. Product Recall: Redeeming Product Quality
There is nothing more alarming than receiving customer complaints and discovering product defects. These defects can pose health or safety risks to your customers.
So, what better way to proceed than recalling all your products before they affect consumers? That way, you can contain the problem and minimize its risk.
Solutions:
- Start by recalling all your products.
- Examine the root cause of the product defects.
- Partner with reliable suppliers for material procurement.
- Improve your manufacturing/production processes.
- Set a robust quality control in place.
Expert Advice:
Javier Muniz, CTO at LLC Attorney, always upholds product quality and safety. “Consider an immediate product recall as soon as you discover product issues. This recall doesn’t just entail pulling your items off the shelf. It also involves appeasing the impacted customers. More importantly, it requires protecting your brand’s integrity or renewing your brand’s reputation.”
2. Data Breach: Ensuring Data Privacy
In today’s digital landscape, data breach is rampant among big companies as well as small and mid-sized enterprises (SMEs). In fact, there were about 1802 cases of compromised data, affecting over 422 million people in 2022.
What if it’s a major case of a data breach that can financially and legally put your business at risk? That can be a news headline for weeks or months!
Solutions:
- Contain the data breach as soon as possible.
- Inform all stakeholders affected by the data breach.
- Investigate the incident and hold involved parties accountable.
- Enhance your cybersecurity measures and train all your stakeholders.
- Protect your databases, systems, and networks from potential cyberattacks.
Expert Advice:
Corey Donovan, President of Alta Technologies, recommends always staying on top of data privacy and security. “The last thing you want to happen is a data breach that can compromise business data and customer information. Keep in mind that a breach isn’t just a technical crisis. It’s a trust issue that can leave your clients or customers losing confidence in your organization.”
3. Financial Fraud: Establishing Financial Protection
A business usually exists to make—and not lose, money. But nothing can be more concerning than facing financial fraud, whether committed by internal employees or external parties.
A major scandal can make your clients, investors, and other stakeholders question your financial integrity. They will no longer do business with you moving forward. Therefore, consider leveraging actionable intelligence to analyze financial data, discover any discrepancies, and act on them immediately.
Solutions:
- Conduct a thorough fraud investigation.
- Hold responsible parties financially liable and legally accountable.
- Establish solid bookkeeping and accounting processes.
- Implement robust financial oversight and reporting mechanisms.
- Secure your systems and networks, as well as safeguard financial data and information.
Expert Advice:
Shawn Plummer, CEO of The Annuity Expert, highlights the importance of financial security and protection. “Financial fraud poses a menace to your organization’s integrity and stability. You should do what it takes to prevent this at all costs. Robust oversight, financial transparency, and data protection are measures you should all consider.”
4. Workplace Harassment: Promoting Employee Safety
The workplace should be a safe space for workers to earn a living, but not all the time employees feel safe at work. Harassment has always been a major concern confronted by even top brands and big organizations.
In fact, over half of employees have encountered inappropriate, unethical, or illegal behaviors at work, with the following as the most prevalent:
- Bullying (51%)
- Sexual harassment (40%)
- Racism (30%).
Solutions:
- Investigate harassment allegations in the workplace.
- Identify perpetrators or culprits and issue them proper disciplinary actions.
- Review and update company policies, particularly the employee code of conduct.
- Provide regular orientation and training to prevent future incidents.
- Foster your employees’ overall well-being and promote a culture of safety.
Expert Advice:
Jim Pendergast, Senior Vice President at altLINE Sobanco, regards workplace protection as a corporate social responsibility, alongside business sustainability and charity team building. “As a company or organization, you are responsible for protecting your employees and promoting their overall well-being. Then, you can extend such responsibilities to the communities beyond the four walls of your office.”
5. Employee Strike: Prioritizing Employee Needs
One of corporate crisis examples is also employee strike. A strike is a collective and organized action taken by a group of workers within a company. It happens when a vast majority of employees aren’t happy and satisfied with what your organization provides.
Workers usually hold a strike to protest against workplace conditions, demand better wages, and/or address labor-related concerns. However, there is more to these than meets the eye.
Solutions:
- Be willing to listen to your employees’ issues or concerns.
- Negotiate with your employee representatives.
- Arrive at a win-win solution that benefits both parties.
- Open lines of communication in the workplace.
- Enhance labor relations through employee engagement.
Expert Advice:
Nihan Çolak Erol, COO at Wingie, suggests preventing employee strikes from happening. “Know that a strike is a clear indication that your business doesn’t take care of your people. Listening to, understanding, and addressing employee concerns is better than negotiating with representatives and handling strikes. In the end, your organization should always promote harmonious labor relations.”
6. CEO Scandal: Upholding Effective Leadership
Nothing is more disturbing than a CEO scandal. Suppose you are involved in a trademark infringement issue. In this case, consider using Furm to check for trademark copies and come up with an original one.
However, this is just a simple scandal some business executives face; others commit unethical and immoral acts. Even Mark Zuckerberg of Facebook or Meta and Elon Musk of Twitter or X had their fair share of CEO scandals after they were recently subject to public scrutiny.
Solutions:
- Investigate the scandal in which your CEO is involved.
- Resort to damage control to renew your leader’s reputation.
- Consider replacing your CEO, whether through resignation or demotion.
- Select the right leader for your business or organization.
- Reinforce a code of ethics and governance to prevent future issues.
Expert Advice:
Hardy Desai, Founder of Supple, advises business executives to always act ethically, legally, and professionally. “As a CEO, you define the corporate culture and reflect the business reputation. You’ll drag the whole company or organization down with one wrong move or decision. That’s why you should always demonstrate unwavering commitment to effective leadership.”
Read 3 Good Crisis Management Examples
7. Natural Disaster: Establishing Contingency Plans
A natural disaster is a common cause of most companies’ crises. However, many organizations are often caught off guard as they don’t know when and how a particular calamity strikes.
Whether a fire outbreak, sudden earthquake, or a devastating storm, the key here is to establish a contingency plan for a potential disruption.
Solutions:
- Act on the disaster immediately by activating your contingency measures.
- Implement your disaster recovery plans as soon as the disaster ends.
- Ensure the safety of your employees and other affected stakeholders.
- Work on restoring the disrupted operations as soon as possible.
- Review and improve your contingency plans for potential disaster in the future.
Expert Advice:
Donna Horwitz-Heller, Product Marketing Manager of Bigvu, cites the value of proper planning and ample preparation. “Natural disasters can strike anywhere at any time. So what better way to do than to plan and prepare ahead of time for such possibilities? Set your contingency plan and establish your team beforehand. In the end, it’s better to be safe than sorry.”
Final Words
Corporate crisis is inevitable, as it can strike anytime and anywhere. Whether it’s a product recall, an employee strike, or a natural calamity, you must come in prepared and ready.
That said, examine some of the corporate crisis examples presented above. More importantly, consider our practical solutions on how to deal with them. Not only should you address one, but you should also find ways to prevent a crisis and mitigate its risk.
Ultimately, an inevitable corporate crisis doesn’t have to stop your business from growing and succeeding!
