8 Example of Crisis Management in Business That Every Entrepreneur Should Avoid

8 Example of Crisis Management in Business That Every Entrepreneur Should Avoid

In the fast-moving business world, crises are common, testing how adaptable and quick businesses can be. From unexpected market shifts to team conflicts, how entrepreneurs manage these crises can lead to success or failure.

Entrepreneurs can learn from others’ mistakes to avoid these traps. This article will guide you through eight major business crisis management errors every owner should avoid.

1. Ignoring Early Warning Signs

Entrepreneurs often miss the early signs of a crisis in growing a business and achieving success. 

Whether they come in poor short-term performance indicators, a decreasing number of satisfied clients, or internal quarrels among the employees, not taking them seriously can lead to dire outcomes. Such as Blockbuster’s demolishment is a meaningful illustration, for example. 

However, the emergence of online streaming platforms and the ongoing evolution of consumer trends have made the conventional rental model, which Blockbuster stubbornly adhered to, extremely outdated. 

The lesson here is clear: entrepreneurs must stay focused on early signs and take quick action to avoid any possible crises.

2. Lack of Contingency Planning

The unpredictable nature of entrepreneurship lies in businesses facing unanticipated disturbances if there is no verified contingency plan. For instance, the British Airways incident in 2017 when a global IT outage affected thousands of flights and passengers. 

It also damaged the company’s image and reputation. On the contrary, the lack of contingency planning on the side of British Airways prolonged the mitigation process and increased the magnitude of the impact. 

Entrepreneurs have to predict all likely threats, such as natural calamities or technical failures, to build up an all-inclusive plan of action in case such threats happen and stabilize the business operations.

3. Poor Communication

Communication has been highlighted as the most important skill in crisis management, yet some entrepreneurs still need to grasp it. They either make the situation worse or erode trust among stakeholders. 

Think about the United Airlines incident in 2017, when a video of the physical removal of a passenger from an oversold aircraft went viral and resulted in a severe PR nightmare.

United’s initial response excluded all empathy and transparency, consequently yanking at the public’s emotions, which made the situation worse. 

Through non-transparency, United simply pumped up the crisis and transformed its brand into an object of hatred in the long run. 

Communicating openly and quickly becomes a necessity for entrepreneurs to keep all stakeholders involved throughout the crisis, which can minimize the difficulties of the situation.

4. Mismanagement of Financial Resources

Financial misconduct can become problems that endanger a business’s economic health and viability. The Enron scandal points out that even rampant corruption and financial wrongdoing can be ended by greed at all costs. 

With its manipulative accounting methods and numerous fraud exercises, Enron hid numerous debts and boosted its earnings, fooling investors and regulators. 

Then the truth came out, and it was one of the biggest corporate bankruptcies in history that not only shattered investors’ confidence but, as a result, led to various reforms. 

Entrepreneurs must be vigilant in their accounting, maintain precise records, and responsibly follow all ethical standards to avoid the same disaster.

5. Neglecting Employee Welfare

Employees are the pillar of every organization; however, their well-being is overlooked in the search to fulfill the bottom line. 

The case of Amazon makes the subject of disregarding employee prosperity visible. Reports that show exhausting working conditions, inadequate compensation, and surveillance have caused disgust in the public and harmed the company’s image. 

Amazon’s business grows unabated, but how it manages its workforce raises doubts about its organizational viability over the longer term. 

Entrepreneurs must prioritize the welfare and morale of the workforce by establishing a respect, support, and empowerment culture to avoid employee dissatisfaction and turnover crises.

Non-compliance with the rules may impose serious penalties on firms in today’s business environments. For instance, the Volkswagen scandal in 2015. The automaker was found altering emissions testing processes to disguise the ecological performance of diesel cars.

The news about the VW scandal sparked controversy, which later resulted in numerous billions of dollars in fines and highly damaged the reputation of VW.

To be legal and regulatory issues free, entrepreneurs must understand and comply with the existing laws and regulations, build an effective compliance program, and put a strong ethic and accountable culture in place.

7. Overlooking Technological Risks

The growing computerization of the world causes the identified technological threat to be fundamental to business. In 2017, Equifax had a cybersecurity failure, resulting in data exposure to 147 million consumers, which shows the importance of preemptive data security.

Entrepreneurs should emphasize security by buying security equipment at a higher level, performing regular auditing, and applying the best practices that prevent tech disasters.

8. Failure to Adapt to Market Dynamics

Marketers must be agile and adaptable in markets, otherwise known as highly changeable and volatile. While the fall of Kodak is an excellent real-life example of the dangers that reluctance might bring about, every organization today feels pressured to meet the changing market demands for innovation. 

In the end, Kodak even though Kodak is credited for pioneering digital imaging technology, it did not benefit from this innovation, which ultimately led to its collapse. 

Entrepreneurs must examine and acclimatize to maintain market share, focus, and pivot efficiently when new technologies and market trends arise.


Crises are bound to happen in the ever-changing world of business. However, they’re not a big worry if businesses learn how to deal with them. By looking at others’ mistakes and learning from them, business owners can become stronger and keep their businesses safe in the long run.

So, being proactive about managing crises is essential for getting through tough times and coming out stronger.

Related Post