On Financial Crises

Abstract

In the wake of September 11th, the crisis field has gained a great deal of relevance in both academic and practitioner circles. Suddenly, policymakers and managers have become interested in crisis research findings, funding is forthcoming, and academics of many a feather are flocking to the scene. Crisis used to be a ‘sexy’ topic, but it is now red hot. The crisis field is marked by ill-defined boundaries. It is made up of specialized academics drawn from many disciplines (i.e. disaster sociology, public administration, political science, international relations and management). They tend to define crisis in terms of some basic threat to the core values of a system, necessitating urgent response under conditions of severe uncertainty. It is this catch-all character of the crisis definition that allows for communication between these academics and makes for what I here refer to as a ‘generic’ crisis field. So what interesting research findings has this field yielded? This is best discussed and evaluated on the basis of two crucial questions, which, incidentally, signal the societal relevance of this research field. The first question asks why a social system – a firm, a town, a nation or a global network – experiences a crisis. The second question asks why some systems manage to minimize the crisis impact where others suffer severe damages. A general consensus is emerging in the crisis field with regard to these questions, and can be summarized in a handful of principles. The first principle, which can be considered the bottom line of this research consensus, holds that crises will always be with us. We may learn from previous out-of-the-box events and develop tailor-made coping repertoires only to discover that the nature of crisis is continuously changing. The implications are sobering: crisis prevention is a good idea, but it will never make us safe from new crises. Increased airport safety may be great, but it will not protect us from future terrorist attacks. The second principle is deduced logically from the first. If crisis prevention is essentially impossible, organizational and societal resilience must be the proper way to prepare for and deal with crises. The idea of resilience, perhaps explained best by the late Aaron Wildavsky (1988) in his classic Searching for Safety, directs our energy toward the design of organizational structures that facilitate flexible and resourceful answers to unknown future problems. This translates into a formidable challenge. Whereas modern organizations are typically geared toward routine production – effective and efficient – this principle of crisis management demands inherent redundancy. However, this is not something stockholders, stakeholders or voters tend to reward. British Journal of Management, Vol. 15, 191–195 (2004) 191