Deck 5: Crisis Management

Question 1

Due to the minimal damage of crises on a firm's operating performance and reputation, the management of a firm sdoes not need to react to a crisis with a sense of urgency.

Answer 1

False

Question 2

Organizational learning is important to crises management program.

Answer 2

True

Question 3

Organizational policies and learning is an important part of root cause analysis.

Answer 3

False

Question 4

In addition to covering direct harm done to the insured, insurance also compensates for damage done to a firm's reputation.

Question 5

The first stage in the life cycle of a crisis is escalation.

Question 6

The last stage in the life cycle of a crisis is intervention.

Question 7

Crisis escalation includes actions to resolve the crisis, deal with the root cause, and communicate with stakeholders, the public, and government.

Question 8

Intervention involves turning the crisis into a manageable nonmarket issue.

Question 9

Media coverage is essential to influencing the development of the public phase of a crisis.

Question 10

Auditing and risk assessment are components of preparedness.

Question 11

The identification stage of a crisis involves actions by the company or government to deal with the crisis.

Question 12

Root cause analysis involves the identification and analysis of the effects of a crisis.

Question 13

Firms susceptible to a crisis need a crisis management team that can be mobilized quickly and can substantively address the root cause of a crisis.

Question 14

A crisis is a situation in which harm to people or property either has occurred or is imminent.

Question 15

Crises are random and thus cannot be analyzed using a conceptual framework.

Question 16

Reputation risk assessment assesses the potential impacts of a crisis on the stakeholders of the firm and its reputation with them, the public, and the government.

Question 17

Root cause analysis is the most important component of a crisis management program.

Question 18

Crisis response involves communication and rectification.

Question 19

Social importance and potential audience base are factors that influence the media coverage of an issue at the core of the crisis.

Question 20

Only firms that have experienced a crisis take measures to reduce the likelihood of a crisis, formulate management preparedness plans, or develop crisis response plans.

Question 21

Communication with a firm's stakeholders and employees is unnecessary if the firms' management can control the crisis.

Question 22

GreenYouth Corp is a waste management company based in Colorado. It is discovered that one of its plants-in Saguache and Rio Blanco-is violating environmental laws. Which of the following is the first step to crisis management?

A) Company officials arrange a meeting with the stakeholders and a public announcement on the actions to be taken by them.
B) Company officials are notified of the sickness of the residents of Saguache and Rio Blanco due to ground water pollution.
C) Company officials discover that officials at the Saguache and Rio Blanco plants have been dumping hazardous waste at a local dump.
D) Company officials agree to a three-year contract with the government to assure public safety in Saguache and Rio Blanco.

Question 23

________ involves turning the crisis into a manageable nonmarket issue.

A) Escalation
B) Resolution
C) Identification
D) Intervention

Question 24

________ is the first component of a crisis management program.

A) Preparedness
B) Resolution
C) Avoidance
D) Reconciliation

Question 25

Which of the following scenarios represents resolution in crisis management?

A) government shuts an emission management company
B) a media report publishes malpractices in a company
C) company officials are informed about wide-spread defaults by employees in certain branches
D) company officials issue a country-wide recall of computer screens dispatched in the last quarter.

Question 26

GreenYouth Corp is a waste management company based in Colorado. It is discovered that one of its plants-in Saguache and Rio Blanco-is violating environmental laws. Which of the following is the last step to crisis management?

A) Company officials arrange a meeting with the stakeholders and a public announcement on the actions to be taken by them.
B) Company officials are notified of the sickness of the residents of Saguache and Rio Blanco due to ground water pollution.
C) Company officials discover that officials at the Saguache and Rio Blanco plants have been dumping hazardous waste at a local dump.
D) Company officials agree to a three-year contract with the government to assure public safety in Saguache and Rio Blanco.

Question 27

The first stage in the life cycle of a crisis is ________.

A) reconciliation
B) escalation
C) identification
D) intervention

Question 28

In what stage can a crisis explode as a result of media coverage, government actions, or company actions?

A) reconciliation
B) identification
C) intervention
D) escalation

Question 29

Reassessment of crisis avoidance measures and preparedness is irrelevant to a firm after a crisis has been resolved.

Question 30

________ involves actions by the company or government to deal with the crisis and provide assistance to victims.

A) Resolution
B) Escalation
C) Identification
D) Intervention

Question 31

Which of the following statements is true of a crisis?

A) It does not affect the credibility of the company's management.
B) It always results in property damage.
C) It may be revealed directly to the public or identified within the company.
D) It always results from a series of development over time.

Question 32

________ is an aspect of an avoidance strategy.

A) Budgeting
B) Auditing
C) Organizational learning
D) Root cause analysis

Question 33

Resolution involves turning the crisis into a manageable ________ issue.

A) inorganic
B) market
C) cross-subsidization
D) nonmarket

Question 34

The last stage in the life cycle of a crisis is ________.

A) resolution
B) escalation
C) identification
D) intervention

Question 35

In formulating a strategy for addressing a crisis, as long as a firm has strong brand reputation it need not consider its exposure to liability or response to stakeholders and the public.

Question 36

Crisis management can assist during a crisis but is not intended to anticipate the possibility of a one.

Question 37

The appropriate response to a crisis depends on the root cause and the specifics of the situation.

Question 38

Which of the following scenarios represents intervention in crisis management?

A) government shuts an emission management company
B) a media report publishes malpractices in a company
C) company officials are informed about wide-spread defaults by employees in certain branches
D) company officials communicate that actions are being taken to ensure stakeholder safety

Question 39

________ is the last component of a crisis management program?

A) Escalation
B) Preparedness
C) Root cause analysis
D) Budgeting

Question 40

________ is a situation in which harm to people or property either has occurred or is imminent.

A) Crisis
B) Insolvency
C) Bankruptcy
D) Liquidation

Question 41

Which of the following is a function of root cause analysis?

A) it identifies the causes of a crisis
B) it identifies the geometric and geographic properties of an organization
C) it assesses risks and their causes
D) it assesses the potential impacts of a crisis on a firm's reputation

Question 42

Consider the case of Wal-Mart and Hurricane Katrina where Wal-Mart analyzed sales data prior to a hurricane. It also used forecasts from the National Weather Service and private meteorologists and projected the path of the storm. Wal-Mart initially sent supplies to its stores in Florida where the storm was projected to hit. When the storm crossed the tip of Florida without causing much damage, Wal-Mart turned its attention to the Gulf Coast. With the aid of its meteorologists it projected landfall just east of New Orleans and immediately began sending generators and supplies to its distribution centers in the Gulf region.
Can companies prepare for a major crisis or is the case of Wal-Mart and Hurricane Katrina an exception?

Question 43

________ does not help a firm to directly manage a crisis situation?

A) Insurance
B) Risk assessment
C) Auditing
D) Organizational learning

Question 44

Which of the following portrays an avoidance strategy in a crisis management program?

A) An oil exploration and petroleum company appoints a contractor to publish advertisements explaining its packaging process to stakeholders.
B) A pharmaceutical company appoints a contractor auditor to assess the manufacturing process.
C) A company appoints a knowledgeable spokesperson to inform the public about its waste disposal mechanism.
D) A waste management company appoints a team of workers to reduce pollution of nearby water sources.

Question 45

Which of the following portrays a response strategy in crisis management program?

A) A computer screen manufacturing company decides to recall its faulty dispatch.
B) A pharmaceutical company appoints a contractor auditor to assess its manufacturing process.
C) A company appoints a knowledgeable spokesperson to inform the public that the water bottled by it is safe and tamper-proof.
D) A waste management company reveals that the root cause for incorrect disposal method was lack of sufficient training to its employees.

Question 46

Reputations are easier to build than dissipate. Discuss.

Question 47

________ provides the basis for resolution of the present crisis, avoidance of future crises, and preparedness for crises that do result.

A) Auditing
B) Root cause analysis
C) Insurance
D) Risk assessment

Question 48

What do you understand by the intervention stage of crisis development?

Question 49

Once a crisis has been resolved, a firm must reassess its ________ and its preparedness.

A) organizational policies
B) communication methods
C) crisis avoidance measures
D) root cause analyses

Question 50

Describe the pattern of crisis development.

Question 51

________ are the two principal components of crisis response.

A) Auditing and analysis
B) Communication and rectification
C) Agreement and settlement
D) Risk assessment and negotiation

Question 52

Seawell is a retail company with branches all over Georgia. Seawell has experienced several tropical cyclones and decided to stock essentials like bottled water, flash-lights, and survival food in the cyclone-prone areas. Which of the following components of a crisis management program is applicable here?

A) resolution
B) response
C) preparedness
D) avoidance

Question 53

Which of the following can enhance the effectiveness of communication in crisis management?

A) releasing incomplete information immediately
B) communicating with stakeholders
C) communicating with employees
D) government approved messages

Question 54

One4All is a software company that provides classroom management tools as well as computer management software tools to schools and universities in Massachusetts. It reacts to the government's decision to increase taxes on software companies by shutting business in the region. Which of the following responses to crisis management is applicable to this situation?

A) conciliatory
B) agreeable
C) hardball
D) denial

Question 55

You are a newly appointed vice president in a large chemical firm. One of your first tasks is to develop a crisis management program for the company. Outline the steps in such a program.