6 Types of Business Crises (With Examples)

We keep hearing we live in uncertain times. You never know when and what can change the trajectory of the businesses. Knowing this is why it’s surprising that only 49% of U.S. businesses have a formal crisis communications plan. 

In addition, only 28% of businesses say they have an informal (e.g., undocumented) crisis communications plan with options, actions, and decisions that may be required for specific, defined crisis scenarios.

An informal plan is better than no plan, but when a crisis hits, a seamless communication plan will help you avoid bumps.  

Organizations trying to excel in their crisis management strategies must address crises with a more strategic approach.

Common Types of Business Crises With Examples

Crisis management teams are helpful for proactive preparedness, anticipating potential problems, and making key decisions to resolve them. They also understand the different types of business crises. Here are the six most common types of different business crises with examples. 

1. Financial Crisis

A financial crisis occurs when a company faces severe monetary challenges, such as bankruptcy, insolvency, or liquidity issues, which can threaten its financial stability and overall operations. 

Examples of the financial crisis include Delta Air Lines filing for bankruptcy due to losing customers following the 9/11 tragedy and businesses closing down their locations due to COVID restrictions in 2020. 

2. Data Breach Crisis

A data breach crisis occurs when sensitive information is compromised, leading to privacy breaches, regulatory penalties, and loss of customer trust. 

This type of crisis has gained much attention, and security has become a top priority for many companies after the infamous Facebook x Cambridge Analytica scandal

When it comes to data security, centralized digital data is easier to secure and manage than physical documents; companies invest in automated data extraction solutions. Data extraction can enforce consistency and adherence to predefined rules, improving regulatory compliance. 

3. Labor Crisis

This crisis involves conflicts with employees, labor unions, or work-related incidents that disrupt operations, cause strikes, or damage an organization’s reputation as a responsible employer.

The most recent and famous example of a labor union strike is the ongoing SAG-AFTRA strike that started in May 2023, caused by the disagreement over streaming residuals and regulation of self-tape auditions. 

@NazaninNour on X (formerly Twitter)

4. Reputation Crisis

A reputation crisis arises when negative publicity, scandals, or controversies damage an organization’s image, credibility, and public perception, often decreasing customer trust and stakeholder confidence.

An example of such a crisis happened at the height of the 2020 Black Lives Matter movement when CrossFit’s former CEO, Greg Glassman, stated that “he didn’t mourn George Floyd’s death.” He followed it by saying that racism and police brutality weren’t systemic problems. As a result, brands such as Reebok and Rogue dropped the brand. After apologizing, he stepped down, but not after hundreds of former Crossfitters wanted nothing to do with the brand.

5. Product Recall Crisis

This crisis emerges when a company needs to recall its products due to safety concerns, defects, or health hazards, resulting in potential legal liabilities, financial losses, and reputational damage.

Arguably, the most definitive product recall of all time is the Tylenol incident in 1982, which started when seven people in the Chicago area died between September and October. This situation became the gold standard of how a company can successfully handle a major crisis due to Johnson & Johnson’s swift response. 

They recalled all Tylenol products from store shelves. Johnson & Johnson used the media to issue a national alert to tell the public not to use the Tylenol product. They established a 1-800 number to respond to inquiries from customers concerning the safety of Tylenol.

6. Natural Disaster Crisis

Natural disaster crisis encompasses disruptions caused by unpredictable events like earthquakes, hurricanes, floods, or wildfires that can impact a business’s facilities, supply chain, and operations, requiring immediate response and recovery strategies.

Amazon and Mayfield Consumer Products made headlines in December of 2021 due to their poor handling of one of the most devastating tornadoes of the year. It became known that around 15 employees asked to go home early when tornado warning sirens began blaring. At least five workers reported that supervisors warned employees they could be fired for leaving before the end of their shifts. The negligence of the companies cost eight people their lives. 

Best Practices in Crisis Communication

Develop a plan before you need it

Effective crisis communication begins with preparation. Develop a comprehensive crisis communication plan outlining roles, responsibilities, communication channels, and protocols for different crises. Regularly update and test the plan to ensure it remains relevant and effective. Provide training to key personnel to ensure they are equipped to handle communication under pressure.

Delegate responsibilities and minimize miscommunication

While creating your plan, consider the selection of an appropriate spokesperson, strategies for proactive mitigation of harm, and guidelines for responding to social media for your staff. It’s also important to decide which communication channels will be employed to ensure employees remain informed, whether utilizing your corporate intranet, SMS, email, or group chat platforms.

The plan should also include:

  • Hierarchy for information sharing
  • Roles and duties of team members
  • Frequently asked questions
  • Anticipated risks that may arise
  • Approach for introducing updates and next steps

Respond in a timely manner

In any crisis, timely communication is crucial. Provide accurate and transparent information to stakeholders as soon as possible. Avoid withholding critical details or downplaying the severity of the situation, as this can erode trust and credibility. Transparency helps manage expectations and demonstrates your commitment to addressing the issue.

Prioritize your team

When a crisis hits, remain calm. Work with your crisis team and employ a systematic approach to crafting and disseminating communications. When in doubt, over-communicate. And always put your people first. 

Like it or not, people will be talking and sharing information about the crisis. Taking charge of your crisis communications is your opportunity to reinforce transparency, decency, confidence, and loyalty.

Consult legal and crisis management professionals.

It’s wise to have a legal professional on standby before you issue any communications to the public, as they can ensure compliance with regulations, mitigate any potential legal and reputational risks, and provide insights based on precedent and past cases. This strategy helps the organization anticipate potential legal challenges.

Navigate Business Crises With Transparency

Crises can be unpredictable and challenging to manage, and a crisis communication plan can provide a roadmap for handling the situation and mitigating its impact. By staying prepared and adopting a proactive approach to crisis management, organizations can emerge stronger and more resilient from even the most challenging situations. 

About the Author

Lizi Gigauri is a Jr. Marketing Coordinator at Alphamoon. She supports Sales and Marketing teams via content, copy, and research. You can find her on a bike or at the cinema in her free time.