IB Business 5.7 Crisis Mgt. & Contin. Planning (+ Revision)

Which form of leadership may be most appropriate in times of crisis? 

• Democratic

• Autocratic

• Paternalistic

• 1. Laissez-faire

Answer explanation

Whilst an autocratic leadership style is characterised by being domineering and possibly tyrannical, it may be the most appropriate in a crisis. In times of crisis, it is important to make quick decisions and to ensure they are carried out. 

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On which of the following does effective crisis management mostly rely?

• Communication

• Culture

• Management

• Leadership

Answer explanation

Effective and timely communication with both internal and external stakeholders is the best approach in managing a crisis. Whilst demonstrating sound management, leadership and a positive corporate culture may aid a business in a crisis, they are not what effective crisis management most relies on.  

An example of a contingency plan for a fire in a hotel would be: 

• Ensure people stay in their rooms to avoid being burned by the flames.

• Get staff to safety and encourage guests to make their own way out.

• Evacuate all staff and guests, gather everyone in a safe place outside and register all people. 

• Evacuate everyone to a safe place, call the fire brigade and wait.

Answer explanation

This plan is to ensure that all people are outside of the burning building safely, and that everyone is registered to ensure no one is left behind in the building. This is to ensure that no human lives have been lost. 

The main reason for a contingency plan is:  

• To ensure a smooth return to operations after a crisis

• To prevent a crisis from occurring

• To ensure that those responsible for the crisis are held to account

• To be able to predict a crisis before it arises

Answer explanation

A contingency plan aims to pre-empt what may occur and what needs to happen in a crisis, in order to ensure that operations return to normal as swiftly as possible. It aims to keep operations less chaotic compared with if no plan was used. 

Crisis management is about addressing ‘What if?’ questions and developing strategies to deal with crises that might occur in future.

True or false?

• True

• False

Answer explanation

Crisis management is the response taken by the business in the event of a crisis happening. It is a reactive approach and not proactive. Contingency planning is about developing predetermined strategies in case a crisis occurs in future.

A truck company is drafting a contingency plan to prepare for any possible crises.

Part of the company’s crisis management plan is to ensure that it can return to hauling cargo as quickly as possible in case of an emergency incident.

In order to do this, the most urgent action would be to:

• Hire experienced drivers who are used to driving long distances.

• Prepare links with alternative car parts suppliers.

• Find new routes for drivers that are shorter.

• Prepare links with police departments in every country through which the trucks drive.

Answer explanation

Whilst knowing police and emergency numbers is essential in planning for a road incident, having specific links to police departments is likely not the most urgent crisis management action. However, having alternative parts suppliers is, because in case of breakdown or accident, the truck must be repaired in order to continue hauling its cargo. Having alternative links to these different car parts suppliers is something that could hasten the company getting back to business as usual. 

Stock that is held just in case there is an unexpected order or late delivery is called:

• Holding Stock

• Preferred Stock

• Safety Stock

• Buffer Stock

Look at this stock control chart. What is the maximum stock level?

• 30

• 70

• 120

• 150

Answer explanation

On a stock control chart, the maximum stock level is represented by the upper horizontal line. In this case, the maximum stock level is 150 units. 

Look at this stock control chart. What is the reorder level and lead time?

• The reorder level is 150 units; the lead time is nine weeks.

• The reorder level is 70 units; the lead time is one week.

• The reorder level is 30 units; the lead time is three weeks.

• The reorder level is 70 units; the lead time is six weeks.

Answer explanation

The maximum stock level is 150 units. The minimum stock level is 30. The reorder level is 70 units, so when the quantity of stock falls to 70, the business must reorder stock to get back up to the 150 units of maximum stock. The lead time is the time between the stock being reordered and being delivered, which is one week.  

 The impact of contingency planning for a given business or situation can be explained

under 4 main categories - Which is NOT one of the categories?

• Cost

• Communication

• Risk

• Safety

• Time