From Hurricane Winds to Vanishing Credit: The Many Faces of Crisis

Fear and pain. Ad hoc rescue. Panicked days. Collapse. Turmoil. Meltdown. We typically reserve these types of phrases for natural disasters and other emergencies that pose an immediate threat to life, limb, and property. Recently, however, news outlets such as the Financial Times, the New York Times, the Seattle Post Intelligencer, and Reuters have used these words and other similar language to describe what pundits around the world are simply calling the “financial crisis.” Indeed, during the past few weeks, the world has turned its attention to the United States’ financial markets, which are in the midst of a rapidly changing landscape of tightening credit, bankruptcy, and volatile share prices.

So what do we really mean by the word “crisis?” Given the diversity of circumstances that we may call crises, it appears that some definition of crisis is necessary if we are to understand crisis leadership. Scholars differ on some of the nuances of what a crisis is and what it is not, but most agree that crises are unexpected, high-impact events characterized by high levels of uncertainty and ambiguity. They are situations in which we question the stability of what we previously thought stable and the assumptions upon which we previously acted with confidence.

Given this rough definition of a crisis, one way we may think of crisis leadership is as a process of positive influence toward safety, security, and stability. Metaphorically, crisis leadership encompasses the means through which we emerge from the fog of chaos into the clarity of familiar surroundings.

With these concepts in mind, the status of the United States’ financial system is certainly one of crisis. Most experts didn’t expect the sub-prime mortgage market to collapse, leading to a worldwide tightening of credit and failure of stalwart organizations such as Bear Stearns and Lehman Brothers. And it’s even more unlikely that anyone could have predicted that today the federal government would enact a $700-billion plan intended to bolster the nation’s financial system. In terms of crisis leadership, who are some of the key players? Treasury Secretary Henry Paulson? Federal Reserve Chairman Ben Bernanke? Thousands of American constituents voicing their opinions?

If anything, the financial crisis is an example of how crisis leadership affects many vital aspects of life we often take for granted, be it the ability of a levee to hold, the rapid arrival of first responders, or the stability of business, labor, and our financial future. Further inquiry into successful crisis leadership, then, is not just an interesting matter of scholarly pursuit—it’s a crucial matter of survival.