Increased risk paved the way for crisis management

Abstract

When discussing crisis management, it is now implicit that this is a matter concerning corporate management. Crisis management cannot be addressed without risk management. Effective crisis management results from prior work based on prevention, preparedness, and risk mapping. However, this was not always the case. The demand for managing corporate crises, particularly in Brazil during the 1990s, was primarily directed toward communication, based on the understanding that a negative event represented a threat to reputation. It took time to recognize that risk and crisis management should also be an integral part of the crisis response process. Studies by various authors as early as the 1980s advanced the understanding that crises should be regarded as events inherent to the nature of organizations and that their management should therefore be a responsibility assigned to managers—an essential competence that should involve compliance, auditing, and corporate governance. The history of crises and practical experience also demonstrated that most negative events resulted from poor administration or management errors. This is why crisis and risk management have become indispensable topics on the agendas of corporate boards, particularly those of large companies.