Key Idea: Things go wrong: an oven fails, a label is wrong, a road closes. This topic is how a business plans for that before it happens, and how it handles a crisis when it does.
Before and during
- Contingency planning: deciding in advance what to do if something goes wrong.
- Crisis management: handling a serious threat while it is happening.
- A good plan makes the crisis easier to manage.
Handling a crisis
- Transparency: tell the truth about what happened.
- Communication: tell the right people quickly and clearly.
- Speed and control: act fast, but keep the response in the business's hands.
Is a plan worth it?
- Cost: Marco's plan costs $4,300 a year.
- Time: 40 hours to write, 10 a year to keep up to date.
- Risks and safety: fewer lost nights, staff who know what to do.
The words to know
| Word | Means | Do not confuse with |
|---|---|---|
| Crisis | a sudden event that seriously threatens a business, its people or its reputation | an ordinary problem |
| Crisis management | the steps a business takes to deal with a crisis as it happens | contingency planning, done beforehand |
| Contingency planning | preparing in advance for events that could disrupt the business | crisis management |
| Transparency | being open and honest about what went wrong | saying as little as possible |
Say whether the case is before the event (planning) or during it (managing). For a plan, weigh what it costs in money and time against the losses it could prevent, using the case's figures.
Exam-style question
Marco proposes a contingency plan for the Mill Lane bakehouse: an oven engineer on call, a standby generator and staff training, costing $4,300 a year. One lost night of baking loses 1,200 loaves, $2,520 of contribution. Explain one advantage and one disadvantage for Lena's Bakery Ltd of adopting the plan.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.
Important: A plan written in advance is contingency planning. What Lena does on the morning the walnut loaves reach the wrong bags is crisis management. Say which one the question is about.
Tap each card to check yourself.
Why does speed matter in a crisis? News spreads fast: the customer's post was shared 2,000 times in under two hours.
Why be transparent, even when it hurts? Customers forgive an honest mistake more easily than a cover-up that is found out.
What does 'control' mean in a crisis? One clear person in charge and one message, so the business leads the story, not rumours.
One way a contingency plan improves safety? Trained staff and drills: a baker burned at 3 a.m. gets first aid straight away.
Why might a small business not write a plan? It costs money and time now for events that may never happen.
Can a plan remove every risk? No. It cannot predict every event, and a plan left out of date may not work.
Exam tips
- Planning is before; crisis management is during.
- Name the crisis factor and show it in the case: transparency, communication, speed or control.
- Weigh a plan's cost and time against the losses it could prevent.
- A plan reduces risk; it never removes it.
- Apply every point with a figure from the case.