The Frequency and Cost of Corporate Crises1

Abstract

This paper sheds light on the pattern and consequences of crises experienced by corporate Australia during the last decade.Crises are defined here as a single incident or issue with consequences that threaten the organisation's viability; thus, this study observes 55 corporate crises in Australia between 1990 and 2001. Half were operational crises; the prevalence of extortion and product recall made wholesale and retail trade the most crisis‐prone industry. In Australia, over a quarter of companies affected by crisis did not survive.Direct costs typically exceed $10 million, with a quarter costing over $100 million. Because many crises are due to systemic deficiencies in industries or companies, their causes are often apparent (at least in hindsight).