The year 2001 was the year that terrorism took over the headlines, followed by 2002, the year of the corporate meltdown, and 2003 when someone else’s crisis knocked out electric power to 50-million people in the Northeast US and Eastern Canada.

2004 began with singer Janet Jackson’s wardrobe malfunction and ended with a killer tsunami in the Indian Ocean.

Then 2005 came roaring into the world, wreaking death and destructions, destroying lives, cities, and businesses.

2004 had been a relatively calm year compared to recent crisis prone years. But 2005 made some people talk of crises in Biblical proportions.

Just days before the new year of 2005 began, thousands of people were swept away by a gigantic tsunami in the Indian ocean followed by one of the most active hurricane seasons in US history, including Katrina, Rita and Wilma, killing more than 1,300 in the Gulf States alone. Tornados killed scores in the Midwest, wildfires destroyed homes and businesses in the West and Southwest US.

Earthquakes killed more than 81,000 and left 3-million homeless in Pakistan, another 1,300 died in India and a tremor leveled 40 villages and killed hundreds in Iran.

Business was disrupted around the globe. More than 200,000 people lost their jobs as a result of Hurricane Katrina, alone.

This does not represent every crisis, but those business news editors determined of interest to their readers

And the debacle that Katrina and Rita spawned left an entire country stunned by the devastation and more significantly questioning every level of government from the President to city officials.

Businesses that had a plan and were prepared lost just as much as those who were not prepared, but they were able to begin rebuilding and many were back in operation within months.

Those without a plan will likely never recover.

Terrorism Still A Threat

In July 2005 three subway stations and a double-decker bus were bombed in London. 50 died and another 700 were injured. The goal of terrorists is not how many people they kill or maim, but how much fear they can generate and how much they can disrupt a society and it’s business.

ICM definition of a business crisis Any problem or disruption that triggers negative stakeholder reactions that could impact the organization’s business and financial strength

 

ICM tracks 16 broad crisis categories:
In 1990, ICM began monitoring 1500-plus print business sections of newspapers and magazines, business and financial wire services, regional business publications and industry and trade publications world-wide.
•Catastrophes	•Hostile Takeovers
•Environmental	•Labor Disputes
•Class Action Lawsuits	•Mismanagement
•Consumerism Actions	•Sexual Harassment
•Defects and Recalls	•Whistleblowing
•Discrimination	•White-Collar Crime
•Executive Dismissal	•Workplace Violence
•Financial Damage	•Casualty Accidents

 

Origin And Type

The overall number of crises was up significantly in 2005, and the main reason was the dramatic increase in natural disasters and the “after shocks” associated with the loss of lives, homes, businesses and jobs.

After natural disasters, white-collar crime, was still the leading cause of crisis business news, followed by class action lawsuits, labor issues and mismanagement.

Of all the bad news, one of the “good news” stories was workplace violence. It was down another point in 2005, accounting for only 3-percent of all crisis news. And professional hockey, with it’s player lock-out took the place of baseball in the professional sports crisis arena

Crisis Categories Compared 1990-2005 (% of total crises each year)
	1990	2002	2004	2005
Catastrophes	5.5	4.0	6.0	6.0
Casualty Accidents	4.8	4.0	6.0	6.0
Environmental	7.8	2.0	3.0	3.0
Class Action Lawsuits	2.2	20.0	130.0	13.0
Consumer Activism	2.8	2.0	5.0	5.0
Defects & Recalls	5.4	13.0	6.0	6.0
Discrimination	3.3	3.0	5.0	5.0
Executive Dismissal	1.3	1.0	2.0	2.0
Financial Damages	4.2	3.0	4.0	4.0
Hostile Takeover	2.6	1.0	1.0	1.0
Labor Disputes	10.3	11.0	12.0	12.0
Mismanagement	24.1	11.0	14.0	14.0
Sexual Harassment	.4	1.0	2.0	2.0
Whistle Blowers	1.1	1.0	1.0	1.0
White Collar Crime	20.4	14.0	17.0	17.0
Workplace Violence	3.8	11.0	4.0	4.0

 

As we say, year after year, knowing the type of crisis you are most likely to face is important for your crisis planning purposes.

And although most executives and managers think of fires, explosions, natural disasters, even terrorism when they talk about crisis planning, it is the smoldering crisis that is still more likely to hit your organization.

A smoldering crisis is a problem that starts out small and one that someone within the organization should recognize as potential trouble
and try to fix before it becomes a public issue.

Even with the onslaught of disasters in 2005, there were still more smoldering than sudden crises. The percentage of sudden crises jumped to 40% compared to the ten-year average of 31%. Even so, smoldering crises still reflected 60% of all crises that got public attention.

That means that three-fifths of all crises could be spotted in their infancy and most prevented from ever getting out of control and becoming public issues.

We could argue that the hurricane debacle in New Orleans was really a smoldering crisis that was triggered by a really mean hurricane.

There were people in the city and in the federal government that knew the levy system was a disaster waiting to happen and did nothing about it.

There were people in both federal, state and city government that ignored the lack of planning and preparation for a Katrina size assault on the region. All of this is a classic example of a smoldering crisis.

Natural catastrophes were up significantly in 2005 and so were casualty accidents.

One-hundred were killed and 400 injured when a commuter train derailed in Osaka, Japan. Another train crashed in South Carolina killing nine people and releasing toxic chlorine gas.

And although they received little media coverage in the US, there were five commercial airline crashes in 2005. All passengers and crew on an Air France jetliner survived when it ran off the runway and burst into flames.

A West Caribbean Airways passenger plane dove into the ground in Venezuela, killing all 160 on board. 13 died in a crash in Sicily while everyone on board a Helios Airways 737 died on a mountain side north of Athens, Greece. Another 40 perished when a plane crashed into the jungle in Peru.

There were still residuals to the earlier corporate meltdown that struck earlier in the decade. At mid-year Time Warner Inc. agreed to repay investors $300 million for inflating on-line advertising revenues and its number of subscribers.

And class-action lawsuits continue to plague all kinds of industries, including a lawsuit filed in Louisville, KY claiming that thousands of Kentuckians had been scammed into paying too much for funerals.

At the end of the year, six current and former employees of the electronics chain, Best Buy, sued claiming the company excluded women and minorities from top-paying jobs, in favor of white men.

The airlines faced bankruptcy and union revolts and Boeing was thrust back into the limelight after CEO Harry Stonecipher got caught having an affair with an employee, 15 months after he was drawn out of retirement to clean-up a legally and ethically damaged company.

Most Crisis Prone Businesses in 2005 (Ranked by number of database records)
1.	MCI Inc.
2.	Merck*
3.	Northwest Airlines
4.	Boeing*
5.	HealthSouth*
6.	Microsoft*
7.	Qwest Comms
8.	Wal-Mart*
9.	Enron Corp.*
10.	Guidant Corp.
* In top ten previous year

Microsoft and Boeing continued to show up on the ICM top ten list. Microsoft has only missed the top ten list twice since 1997. Boeing has been in the top ten, six out of the past seven years.

And Wal-Mart maintained its top-ten spot with a number of issues including a record $11-million civil litigation fine for hiring illegal immigrants to clean stores in 21 states. Meanwhile Wal-Mart launched a multi-million dollar PR campaign to fight its detractors.

While 2005 was a terrible year for crises, the World Health Organization and the US Center for Disease Control says the world is headed for a potential calamity that may make 2005 look like nothing.

Every 30-40 years the world experiences an influenza pandemic and one is due in the next couple of years. The last pandemic was in 1968 and killed 70,000 Americans. In 1918, the most serious pandemic in the last century killed 500,000 Americans and an estimated 50-million people around the world.

It is a potential crisis that will strike every business and every other organization with major impact on human resources, financial and legal issues.

What will you do if 20-percent of your workforce is out sick and another 20-percent is afraid to come to work? And what if your suppliers and transportation partners are in the same fix?

Now is the time to anticipate personnel policy adjustments, review all contracts for loopholes that might cause you financial ruin in a pandemic, and decide how you are going to stay in business with a negative cash-flow for three to six months.

And what will you say and how will you say it when the next pandemic arrives?


Most Crisis Prone Industries in 2005

(Ranked by number of database records)
1. Pharmaceuticals
2. Software Makers
3. Airlines
4. Petroleum Refining
5. Gas/Oil Extraction
6. Insurance Carriers
7. Banking
8. Health Services
9. Telecommunications
10. Security Brokers/Dealers

 

President Larry Smith brings more than 45 years experience in media, government and public relations to help clients plan, train, and if necessary, manage their organization's crises

The Institute for Crisis Management is a company that concentrates on Crisis Communications Planning, Training and Consulting and serves clients throughout the US and abroad.

ICM develops communications strategies that can avert or at least minimize the disruption and financial impact of a sudden or smoldering crisis so the client business or organization can return to normal as quickly as possible.