CFO Differentiates a Crisis from a Disaster

Tarun Chopra, CFO of Clements Worldwide

Tarun Chopra, the CFO of Clements Worldwide, a global insurance company, recently agreed to an interview with CFO Journal Senior Editor, Emily Chasan. In the interview, they discussed the preparations required for disasters and crises – as well as the differences between the two concepts.Chopra acknowledges that although crises and disasters may ultimately have similar impacts on business entities, they are inherently different and should be treated as such. He states, “A disaster is an event, but a crisis is a situation.”

Disaster and Recovery

Because a disaster is an event, it generally has a discernable beginning and end. As such, a strategy for recovery can be implemented and measured for effectiveness. Chopra uses the example of a natural disaster; it is a situation in which a plan for business continuity can guide company leaders through the ordeal.

Crisis Management

Since a crisis is a situation, however, there are not identifiable limits. The recent Target data breach is an example of a crisis, and responses to a crisis may be much less controlled than in the event of a disaster. Chopra goes on to say, “more often than not, you don’t make your best judgments when you are in that crisis.” It is precisely this type of troubled thinking that warrants a crisis management plan.

Clements Worldwide utilizes a thought leadership group to work with the company’s management to “role play” through potential crises. The group may pose questions, such as how the company might respond to a situation similar to Target’s, and what the actual impact of the situation would be with regard to financial costs, customer confidence, and more. Chopra says Clements has their own business continuity plans, and they regularly look at those plans from the perspective of crisis management to make any necessary changes. Even though the specific incident has not necessarily happened to them, it is possible since it has happened elsewhere, and the company should be prepared. “It’s like a fire drill,” Chopra says. “You’re basically going through a drill and saying, if something like that happened to us, these are the steps we would take.”

Do you find worth in differentiating between crises and disasters?