types of crisis

There are many types of crisis and each one differs from the other. This article will examine the various types of crisis and their causes.  It also discusses the recovery processes for each type. 

Types of Crisis and their Causes

Source: One Minute Economics

A crisis is any unforeseen event that may or will negatively affect the well-being of a group of persons or society. A crisis is usually an ugly situation that comes unannounced. It affects both humans and the environment. 

Here are some of the causes of a crisis:

  • Poor judgment
  • Leadership failure
  • External attack
  • Bad Maintenance
  • Rumors
  • Improper planning
  • Unethical behavior
  • Errors
  • Breakdowns

Financial Types of Crisis

types of crisis
Photo by Kanchanara

A financial crisis refers to a series of events that led to the near-collapse of the banking system. The seeds of this crisis were planted as early as the 1970s when the Community Development Act required banks to relax their lending standards for low-income consumers. 

The act led to the creation of the subprime mortgage market. A global financial crisis is triggered by an event that disrupts the normal flow of insurance or credit. The economic system tips into recession when the flow of funds to entrepreneurs decreases. 

In some cases, the crisis is systemic, while others are nonsystemic. In either case, the crisis can lead to a number of adverse outcomes. Many companies are forced to shut down. Many people have lost their jobs and their homes.

There are various types of financial crises. Generally, they are characterized by people withdrawing their money from savings and investments. In some instances, a financial crisis may be broader in scope, affecting the entire economy of a country or region. 

Common indicators of a financial crisis include stock market crashes, bursting of financial bubbles, and sovereign defaults. In the past, these events were often attributed to a lack of regulation or insufficient supervision of the financial industry.

A currency crisis is a financial emergency that impacts the entire economy, including non-economic sectors. The crisis often results in the replacement of key leaders, such as the finance minister and central bank governor. 

A banking crisis can also occur when deposits are withdrawn from a bank. When a bank is unable to pay back these deposits, more people will withdraw money from the bank, increasing the risk of default. 

A bank run can destabilize the entire financial system, resulting in the collapse of the bank.

Natural Types of Crisis

In recent years, natural crises have become more frequent, often resulting in significant losses of life and property. These events disrupt business and can result in lawsuits and reputational damage. In order to address these issues, organizations must devise new company values and cultures, which should guide both management and employees. 

One area of specialization for the management of natural crises is the use of social media. For example, Twitter has been widely used in natural crises. The immediacy of Twitter messages makes them more effective than traditional media. 

Moreover, tweets can be spread far and wide if they are retweeted or liked by other Twitter users.

In natural disasters, the first line of defense against such incidents is to coordinate crisis communication. In most cases, governments are the first to handle such communications, but in some cases, nonprofit groups take the lead. 

They act as crisis managers and loudspeakers in crises, and they’re often deemed effective channels of dissemination, visibility, and personal protection. 

However, these organizations must balance the needs of stakeholders and manage their public image. This makes crisis management a complex undertaking.

Technological Crisis

teal LED panel
Photo by Adi Goldstein

If your business relies heavily on technology, you will be keenly aware of how disruptive a technological crisis can be. An eCommerce website or a software company may lose millions of customers when their servers crash or their brand reputation could suffer. 

Dealing with a technological crisis begins with a collaboration between you and your IT provider. Your priority should be to prevent the problem from affecting more customers. Then, work with your IT provider to come up with a plan for recovery.

A technological crisis can occur when common technological tools and appliances fail unexpectedly. These can range from hardware and software failures to industrial accidents. In such cases, businesses can suffer tens of thousands of dollars in revenue. 

In the meantime, competitors can increase their launch speed and market share by implementing better technology. 

During such a situation, you must quickly react and take steps to mitigate the impact and recover. Often, the only way to prevent this situation from reoccurring is to put in place backup systems.

Organizational Types of Crisis

The first step in resolving an organizational crisis is to identify it early. By detecting the crisis at an early stage, it is much easier to contain and manage it without putting too many resources at risk. 

Every organizational crisis emits early warning signals. To recognize these signals, organizations must develop methods to identify them and respond appropriately to them. Read on to learn how to do that. Listed below are a few tips for identifying an organizational crisis at an early stage.

An organization’s environment exerts pressure on its employees. According to organizational psychologists, the external environment can be both predictable and manageable. According to the life-cycle model, organizations go through three developmental phases. 

Each phase is triggered by a crisis, and the resolution of a crisis triggers the next phase. During this phase, employees are encouraged to adopt flexible roles, cross-functional teams, and joint problem-solving. 

According to Arjen Boin, organizations undergo three types of learning: experience-based learning and explanation-based learning. Experience-based learning involves a memory of a past event. 

Explanatory learning requires a rational scientific search for the causes and an audit of the organization’s current performance.

Personnel Crisis

group of doctors walking on hospital hallway
Photo by Luis Melendez

A personnel crisis occurs when one or more employees engage in misconduct or unethical behavior while employed by the company. The most prominent examples of such crises occur in the tech sector, like when Gold’s Gym filed for bankruptcy and permanently closed 30 locations. 

A company may also experience a personnel crisis when an employee engages in personal or unethical behavior while employed by it, which can cause a backlash against the company. If you think this is unlikely to happen in your organization, consider the following types of personnel crises:

An organizational crisis is when an abrupt change or event causes an organization to suffer from a crisis. 

This change or disruption disrupts the normal operation of the organization. It often results in restlessness among employees. A crisis can also affect a community, group, or society as a whole. 

It usually occurs at short notice and creates situations where time is of the essence and rapid decision-making is necessary. But it doesn’t have to be like this. There are steps you can take to ensure that your company remains productive during a crisis.

Psychological Crisis

The aim of this section is to compare different psychological interventions for individuals suffering from a psychological crisis and to identify the most effective intervention depending on clinical manifestations. 

This is a critical step because no prior systematic review has systematically reviewed the effects of various interventions on the incidence and severity of a psychological crisis. In addition, no prior research has conducted Bayesian network meta-analyses of COVID-19. This will help guide future research. 

To do so, the researchers reviewed a variety of relevant studies on the subject.

A psychological crisis occurs when an individual experiences a significant life event that is so stressful that normal coping strategies no longer work. The person is experiencing such extreme emotion or delusions that their judgment becomes seriously impaired. 

These symptoms can range from extreme anger, sadness, agitation, hallucinations, delusions, uncontrollable behavior, and complete withdrawal from society. 

In many cases, this type of situation requires immediate intervention. However, a psychological crisis is not always life-threatening. The person may simply be experiencing severe emotional distress.

Types of Crisis and How to Manage Them?

Step 1

The first step in managing a crisis is to understand your priorities. This means ensuring that you don’t waste your time on unrelated tasks and that your priorities remain consistent. 

Step 2

You should also identify the resources required to resolve the crisis.  Make sure you communicate with relevant teams and your client. 

Step 3

You should always be available for questions or comments about your crisis management strategy. In addition to keeping everyone updated about the crisis, you should also maintain a record of any information released.

Conclusion

Crisis management is an important skill for anyone in a leadership position. Oftentimes, victims of crisis suffer physical symptoms like loss of body parts and migraine. The consequences of a crisis are usually on a long time. And some crisis can be systematic while others non-systematic.

A crisis can also affect a community, group, or society as a whole. It usually occurs at short notice and creates situations where time is of the essence and rapid decision-making is necessary. But it doesn’t have to be like this. There are steps you can take to ensure that your company remains productive during a crisis.

Sofia Nikolaishvili
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Sofia Nikolaishvili

After earning a professional degree in linguistics and literature I decided to try out blogging to explore my passion for writing and gain first hand experience. I write about everything I'm interested...

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