How to create a complete crisis management plan
14 minutes read
Just like any other enterprise, your business might face a crisis one day. But as the proverb goes, “forewarned is forearmed”. No matter what happens, effective crisis management will mitigate the worse of the disaster and ensure your business survives afterward.
In other words, you need a crisis management plan. This is the plan that will define what steps to take when a crisis happens.
Below, we have put together a comprehensive guide with downloadable templates. These tools will help you prioritize and make rational decisions, create an action plan, assess your cash flow, develop efficient crisis communications, and outline an effective sales and marketing plan.
Try not to wait until disaster strikes to make your crisis management plan. With a well-planned response already in place, your business is more likely to diminish the damage and to endure any contingency.
For our guide on how to write a shorter emergency and disaster plan, click here.
1. What are the first steps in crisis management?
The way you prepare your business in anticipation of a crisis now can make all the difference in how quickly you can return to normal operations. Below are the things you must keep in mind.
Put people first and nurture your brand
You may find there are multiple competing priorities as you attempt to pivot business operations in response to a crisis. Staff members and customers should be at the centre of all initial decision-making.
Your employees and customers feel a lot of uncertainty during any given crisis. Manage their concerns and questions and make a timely and relevant two-way communication a priority.
How your business communicates its management of people during a crisis is critical to your brand.
- Your team looks to you to show common sense and compassion during a crisis.
- A people-first mindset will help you and your team make decisions beneficial to your business reputation, nurture a positive brand image and increase brand affinity.
Identify essential functions
Start from the assumption that your business will survive the crisis. For the purposes of big-picture planning:
- Specify the core activities of your business.
- Who are your key customers, suppliers and employees?
- Identify first steps of your plan to survive and quickly rebound.
- For high-level risk management planning, create best and worst-case scenarios and models.
- What are the impacts of the crisis on your cash flow, people, production and distribution?
Build capacity for rebound
Your company might fundamentally change for the better as the result of a crisis, which can serve as the foundation for new opportunities. Use the crisis as the catalyst for change:
- Seek out new suppliers.
- Try new ways of doing things.
- Adapt your products or services to serve customers in new ways.
- Explore and maximize hidden talents and skills of your employees.
Stay on top of innovations you can adopt now that can offer resilience and strengthen your future business.
Make rational decisions
During a crisis, it is normal for our brains to go into “flight or fight” mode. This can hinder good decision-making.
View the current crisis as a temporary situation. What can you do to calmly and logically carry your business during the disruption so you can rebound quickly when the crisis subsides?
BDC’s rational decision-making tool offers a series of questions that can help clarify thinking. Once you engage the logical side of your brain, you’ll start to come up with creative solutions.
Rational decision-making tool
Guided questions to clarify your next steps. Download now
2. How to build an action plan in a crisis
Business planning during a crisis should address critical elements of your business. The objective is to protect your cash flow and employees.
You may be surprised by the new opportunities that arise during the period of disruption. These include experimentation and innovation as part of your operations planning, which help you emerge from the crisis stronger. Perhaps you might identify new ways of working that did not exist before.
Take a step-by-step approach to create a detailed action plan that addresses specific business and workforce activities.
There are seven key areas:
1. Outline an activation protocol
As you create your action plan, elaborate an activation protocol. The protocol should include clear and concise instructions for your employees on who does what and in which circumstances.
Depending on the size of your company, consider embedding an organizational chart into your plan that includes a central crisis management team with local response teams reporting to it.
2. Assess potential threats
When working on your action plan, first identify general industry threats and then move on to particular risks for your company, your local market, your products, services and operations.
Here are the most important crisis-related things you need to know about:
- How could the crisis affect your business?
- What parts of your company are the most vulnerable and could be affected the most?
- Will the crisis impact the operations at your production facility / store / warehouse?
- Are there currently any mechanisms in place at your company to respond to crises?
When a crisis happens, gather and analyze the key facts about the occurrence, its scale and gravity for a more efficient response.
3. Mitigate risks in advance
Take actions in advance to mitigate potential risks and negative effects of a crisis:
- Outline response actions for various risk scenarios. What do you do if you need to shut down production, take security measures, involve emergency services, deal with legal issues or evacuate your production or distribution facility?
- Assess your current suppliers and look for alternatives. Consider employee cross-training to hone essential skills and contingency plans.
- Identify your critical resources. This includes key input materials, critical employees and their skills, and essential equipment.
- Have a plan and contingency in place for essential equipment and technology.
- Calculate how much time it will require to put your business or its certain elements back on track.
- Figure out if you need an emergency credit line.
4. Manage your product and people
Identify products and services you can deliver despite the disruption. Consider the demand for your products or services, how they may be adapted and what would happen if you had to put part of the operations on hold temporarily.
Examine your cash flow and variable margins and prioritize products or services that contribute to a positive gross margin.
Create measurement tools. Identify quantifiable measures to stay on track, such as units produced, amount shipped, clients retained or impact on cash flow.
Business disruptions will affect employees and require special action planning. Ask yourself if there are employees who have developed key relationships with suppliers or customers. Consider which of your people are critical to business priorities and who is directly linked to mission-critical products and services.
5. Prioritize and create your action plan
Include several areas and functions in your plan.
- Forecast demand and identify resources for the short term and the recovery period. Consider materials and labour required, cash flow and burn rate, accounts receivable and accounts payable.
- Identify required actions. For instance, employee training/hiring, ordering materials or technology, or creating flexible labour schedules.
Use BDC’s action planning tool to list your top priorities.
Action planning tool
This Excel-friendly tool helps you build a detailed plan. Download now
6. Execute and monitor
As you implement your plan, prioritize human and material resources without compromising quality and safety. Have a clear understanding of how you will handle problems and who are the key people responsible.
Monitoring is an important way to know if you are on track or if your plan needs to be adapted.
7. Repeat and refine
Once you have your plan in place, you’ll want to revisit it regularly to make sure you are keeping up with it. Consider adapting your plan to respond to new or evolving risks and opportunities.
3. How to conduct a business assessment during a crisis
A crisis may affect your business in many ways. It might be supply chain issues or distribution delays, or even major changes to what your customers want or need.
Why assess your business in a crisis?
The purpose of a business assessment is to identify core functions and key people in your business. It helps you identify:
- Parts of the business most under strain, so you know what to protect.
- Opportunities to boost certain products or services to meet changing customer demand.
- New ways of working that can benefit both employees and customers
Below are the three steps to conducting a business assessment:
1. Identify essential elements of your business
- Key partners: Who are your suppliers, distributors, agents, customers or other third parties that are essential to your business? Listing them is a first step to remaining connected, harmonizing business plans and identifying risks.
- Key activities: What are the functions that underpin your business? Their protection should be prioritized, even if it requires some adaptation. Non-key activities could be set aside or reinvented.
- Key resources: What are the technology, services, equipment or backup supplies that are essential to your business operations? Look for opportunities to build relationships with additional suppliers, channel partners or service providers. Multiple options help to build resilience into your business.
- Value proposition: A unique value proposition offers a clear gain or solutions to your customers' challenges, meets their needs or simplifies their jobs and lives. Ask if the current crisis may change your customers’ needs and consider adapting your products and services.
2. Assess costs and revenues
- Cost structure: What costs are required to run your business? Are they fixed or variable? Do you identify these by product line, division, geographical segment?
- Revenue streams: Does your business rely on a particular customer, on a customer segment, product or service? Are there secondary or smaller segments that have potential to develop?
3. Analyze customers and channels
- Customer relationships: What activities are in place now to communicate with customers?
- Customer segments: Are you currently grouping segments by product, geography or income? Is there a crossover between them that could offer opportunities?
- Channels: How does your product or service get to the end user? Is it direct? Are you using distributors or selling to other businesses?
As you go through these questions, consider any new opportunities that may arise out of the current challenging business environment.
Use the Business Model Canvas (BMC) tool as a useful framework for understanding your business and its moving parts. Use the BMC worksheet to sketch out your main customer segments, key activities, partners, revenue streams and more.
Business Model Canvas
Chart essential functions, revenue streams and partners. Download now
How to conduct a business risk assessment
The purpose of a risk assessment is to identify and prioritize fundamental areas of your business that may be vulnerable due to a crisis. Once you have completed your business assessment using the BMC, you will have a clearer idea of core business functions, employees, customers and processes that might be under strain. Mapping risk will help you understand how to protect areas of your business.
BDC’s risk assessment tool has a list of seven business areas to consider, a formula to identify the likelihood of each risk and a chart to keep primary risks and backup plans at a glance.
Risk assessment tool
Chart high-level risk scenarios and contingency plans. Download now
Remember to innovate during risk planning
Once you have a high-level view of potential risks to your business, map out risk scenarios in greater detail. As you think about contingency plans, you may identify new areas of opportunity for your business.
Innovations that come out of risk planning may include:
- adopting new technology
- sourcing new suppliers
- building relationships with a new segment of customers
- creating new revenue streams
- finding ways to serve new markets
Often, businesses come out of risk planning more robust and with greater opportunities on the horizon.
4. How to communicate with your employees effectively
Efficient employee communications are fundamental to your business success during any disruption, and a solid plan will help you rebound more quickly when the crisis is over.
Keep a dialogue with your employees and clients in a crisis so that they remain informed and reassured in a timely and relevant manner.
Why do you need to consider employee communications in a crisis?
Employees are looking to you for reassurance and guidance. Clarification of goals and regular feedback can help them stay on track. Here are some ideas of how to reach out to individuals and teams to let them know they are a priority:
- Communicate clearly and frequently about any changes to business activities, goals, planning, growth, implementation or procedures.
- A once or twice daily check-in can be helpful for teams to align goals.
- Avoid micromanaging your employees. Stay focused on daily, weekly and monthly targets.
- Look for opportunities to strengthen relationships with them.
Three key communication priorities for leaders
- Reassure: This is what employees need most of all. They want to know that they’re on the right track. They need to be in touch and receive frequent feedback.
- Inform: Employees need to know the what, who, how, when, and where, particularly as things shift day-to-day.
- Mobilise: Only express a sense of urgency when it’s relevant. Otherwise, employees need a clear vision, identified actions and clear instructions so they can move forward at their own pace.
Set up employee communication channels
Have ready to activate, easily accessible communication channels. Make sure that you have multiple ways to reach employees and take down their phone numbers, emails, etc.
Have a set of easily adaptable key messages written in advance.
Develop mechanisms that will allow you and your team members to locate each other quickly. For instance, set up specially-designated telephone lines and messenger channels.
Promote employee wellness and health
Uncertain times will cause stress and anxiety. Let employees know that their wellbeing is important to you. Encourage them to:
- Stay informed with news and facts during the crisis, but also take breaks from news and social media about the negative occurrence.
- Take care of their health before, during and after the crisis.
- Consider leveraging mobile apps that focus on mental health and wellness.
Use the employee communications plan to get a set of 12 ready-made tips, plus a one-page chart to organize essential messages, when you’ll reach out to staff, and how you can reach them (social media, conference call, email, etc.).
Employee communications plan
Chart key messages, timing and ways to communicate. Download now
5. How to adapt your sales and marketing in a crisis
During times of business disruption, demand for your products and services may vary from the norm. Relationships with customers and channel partners need special attention.
Adapting to consumer behaviour and maintaining your pipeline of sales and prospects is critical to ensure your business will resume to normal when the crisis is over.
Keep customers engaged during a crisis through sales and marketing
A disruption can be a great time to reflect on new ways of reaching customers and shifting rapidly as the business environment changes. Here are some considerations:
- Anticipate customers disengaging or changes in their buyer behaviour and test different methods and new ways to reach out to them.
- Consider temporarily changing your distribution and delivery methods.
- Embrace technology, even if it has not been part of your marketing strategy in the past. E-commerce will allow you to reach more customers and keep them engaged.
Download our sales and marketing planning tool to get eight ways to keep customers engaged during a crisis, plus a one-page chart to track different scenarios, activities and timelines that will help you stay connected to your customers and prospects.
Sales and marketing planning tool
Chart how you will reach customers under various scenarios. Download now
How to get started with e-commerce
Business disruption is often a catalyst for innovation and change, as well as the right time to figure out the basics of e-commerce.
Tips to get you started with selling online
- Make adjustments to your marketing plan: Target online content to the customers already identified in your previous marketing plan. You don’t have to reinvent the wheel.
- Start with just the top-selling products or services: Limit online inventory to your most popular offerings and test your system. You can add more later.
- Hire a web developer: An expert developer can design a site on an easy-to-use platform that can be added to and adapted over time. Ask if they can also help you with basic search engine optimization (SEO), which will help customers and prospects find you on Google and other search engines.
Developing and expanding your e-commerce platform
Once the urgency of the crisis has subsided, you can start to make improvements to your basic site. Future e-commerce considerations may include:
- Improving your search engine optimization (SEO) so more customers can find you online.
- Gain more organic traffic with a content marketing plan.
- Quit using Excel by directly integrating inventory software with your web orders.
- Keep in touch with customers by sending automated emails.
- Boost your social media presence by posting consistently.
Download the adapting your marketing strategy guide to get an easy-to-follow PowerPoint presentation that includes information on how to use a disruption to develop marketing scenarios and marketing communications plans, as well as an introduction to e-commerce.
Adapting your marketing strategy guide
Sales and marketing priorities during a crisis. Download now
6. How to project your cash flow
Cash flow is the balance of money your company takes in versus how much it spends over a defined period. A crisis could affect how quickly your business can collect money from customers and pay suppliers.
Cash-flow assessments can help you identify potential problems and act quickly to determine if you need to adapt payments or apply for emergency business financing.
Three things that affect cash flow:
- Accounts receivable (cash inflow): Money customers owe you for goods or services they have purchased.
- Accounts payable (cash outflow): Money you owe to suppliers. If you buy items on credit, it’s part of your cash outflow, but the cash is delayed to a later date.
- Inventory: The raw materials and finished goods purchased from suppliers and then sold to your customers to generate revenue. When you buy inventory on credit, it creates accounts payable — cash you will pay out in the future. When you sell inventory on credit, it creates accounts receivable — cash you will receive in the future.
The cash conversion cycle
How fast can you take in cash, convert it to inventory, and then turn the inventory back into cash? That is what the cash conversion cycle is about. A shorter conversion cycle is better. It means cash isn’t left unavailable to your business for long periods, and that inventory isn’t sitting and collecting dust.
The quicker you can collect money owing from customers (accounts receivable), the shorter your cash conversion cycle.
How to calculate your cash conversion cycle
Average days inventory + Average days receivable – Average days payable = Cash conversion cycle
Understanding the results
A positive cash conversion cycle means slow cash flow. It means daily operations are tying up cash and you may require financing to support the business and pay suppliers on time.
A negative cash conversion cycle means quick cash flow. Your day-to-day operations are moving cash quickly through the business and you will not have problems paying supplier invoices.
Five ways to improve your cash flow during a crisis
The key to improving cash flow is prioritizing your expenses and getting customers to pay promptly.
- Cut non-essential expenses and belongings: Put on hold optional spending and sell inessential assets.
- Issue invoices faster and frequently: Mobile technology can help you get the invoice to the right person quickly and more often.
- Offer discounts for prompt or early payment: Even a 2% incentive can encourage people to pay. It can cost you money, however, so consider if you need to use this method.
- Ask for a deposit or upfront payment: If you have a good relationship with a customer, they may be willing to pay in advance for products or services. During a time of crisis, renegotiate terms wherever you can.
- Electronic payments: Set up credit card and e-transfer options so clients can pay immediately.
When business is as usual, regularly keep your books and monitor your financial statements to ensure you are always aware of how your company is doing. This will help you take quick action to better protect your business during a crisis.
Cash-flow assessment tools
Conducting regular cash-flow forecasts is part of good business planning.
During a crisis, conduct various scenario assessments, including short- and long-term forecasts. These can help you anticipate the need to adapt payment schedules, change processes, or prioritize certain business lines over others. It will also help determine whether you require financing.
13-week rolling cash-flow management tool
A 13-week cash-flow planner forecasts your business’s cash inflow and outflow over the length of a fiscal quarter (13 weeks).
Use the 13-week forecast to:
- perform short-term planning and tracking
- assess burn rate scenarios (how much cash you spend over time)
- understand your business’s performance on a granular level that might be overlooked with a monthly or yearly planner
Monthly cash-flow management tool
A monthly cash-flow planner forecasts your cash flow for the next 12 months. It can be used in conjunction with the 13-week cash flow to get a full picture of the financial health of your business.
Use the monthly planner to:
- estimate your cash flow in the medium to long term
- understand your business’s performance on a larger scale
Cash-flow assessment tools
Download the cash-flow projection tools (13-week and monthly) as Excel files. Download now
Summary: Use the crisis to find new opportunities
Take a snapshot of your current business and assess risks so you know what to protect and where to adapt. From there, create high-level risk scenarios and contingency plans to build more resilience into your business.
Use the times of business disruption as an opportunity to develop new operational scenarios that explore additional sources of revenue, while reducing costs. These can be an important means of improving cash flow under difficult circumstances.
The planning tools and tips listed above can help you map out your next steps, identify new opportunities, mitigate risk and create resilience in your company. They will help you emerge even stronger in recovery.