Risks and threats can be forerunners to crisis situations for companies and organizations. An informal survey of CEOs, advertising, and other executives and experts yielded what they thought are the most significant dangers businesses will face this year.

Recession

“The biggest and most obvious threat to companies and organizations in 2023 is the global rise of inflation and subsequent economic downturn,” Richard Osborne, founder and CEO of UK Business Forums, said via email.

“Recession is the word on everyone’s lips heading into 2023. While profiting during a period of high inflation isn’t completely impossible, it’s far from ideal when consumers have less purchasing power. The value of a currency is only as high as the number of goods or services that one unit of money can buy,” he noted.

Interest Rates

“The raised interest rates will continue to burn working capital for businesses across the economy,” Salvatore Stile, chairman of Alba Wheels Up International, an international shipping and customs clearance company, said via email.

“Because retailers are concerned with consumer demand, they will likely be more cautious in purchasing inventory to prevent over-supply in the retail market,” he predicted.

“This will burden small and medium-sized companies, who will have to be de facto warehouses for the retailers, as they hold products for more extended periods. We expect freight rates to reduce in 2023 when compared to 2022, as demand for overseas goods has reduced across the board,” Stile observed.

Labor Shortage

“Today’s labor shortage and skills gap challenges will continue into 2023 as HR teams bolster their recruitment and retention efforts to reach and retain talent across all levels of the organization,” Veena Bricker, chief people officer of data center provider Flexential, said via email.

“HR teams will explore more diverse avenues, job boards and organizations to find the shared skills needed to support the business, dipping into all major and secondary markets. We’ll also see attrition measurement practices increase as organizations will be held accountable for their own diversity spectrum—something proved invaluable to existing and prospective talent,” she predicted.

Rapidly Changing Market Trends

Risks and threats can be forerunners to crisis situations for companies and organizations. An informal survey of CEOs, advertising, and other executives and experts yielded what they thought were the most significant dangers businesses will face this year.

“The biggest risk companies have in 2023 is that market trends change much more rapidly than they used to, and being slow to react can be detrimental,” Isabella Sun, CEO of Short Story, a San Francisco-based clothing retailer, said via email.

This year “will require companies to develop an ultra-fast reaction time to macro movements and to use their data and technology to make rapid decisions…organizations need to get maximum utility from the technology and data they have to turbocharge their reaction time,” she advised.

Supply Chains

“We’re still far from solving issues related to global supply chains. And that’s a problem that will continue to plague businesses as we head into 2023,” Bob Rogers, CEO of Oii.ai, a data science company specializing in supply chain modeling, said via email

“What people don’t realize is that most supply chains are configured manually. That means there’s a human adjusting the parameters every time an interruption occurs. But that’s a tedious task that people are simply too inefficient to do successfully on a large scale,” he commented.

Cybersecurity

“Cybersecurity is a hot button for business executives in 2023. This burden is no longer limited to the responsibility of just the IT department,” Howard Globus, founder and CEO of IT on Demand, said via email.

He noted that, “In a 2022 report, Gartner research shows that 88% of board regard cybersecurity as a business risk rather that solely a technical IT problem. The same report says that by 2026, at least 50% of C-Level executives will have performance requirements related to cybersecurity risk built into their employment contracts.”

Damage To Reputations

“The biggest threat to brands and businesses in 2023 will be reputational damage,” Ashlene Larson, the director of PR and social media for advertising agency Planit, said via email.

“Reputational damage continues to be a threat as a result of increasing political extremism, social justice issues, environmental concerns and more. As the media landscape and social media networks become more fractured, consumers do not always know what to believe,” she noted.

“It’s not easy to undo or correct misinformation once it’s out there, and brands will need to remain vigilant with monitoring for threats, being proactive with their responses and continuing to nurture direct relationships with their audiences,” Larson concluded.

Inability To Reach Target Audiences

“It’s become increasingly difficult for brands to reach their audiences as consumers have been inundated with information overload and so many new ways to access and view content across screens,” Amy Leifer, chief advertising sales officer for DIRECTV, said via email.

“To truly resonate with consumers in 2023, we’ll see brands continue to think outside the box to better understand and connect with their most valued customers through relevant and personalized advertising that leverages creativity and utilizes new technology,” she predicted.

Mental Health Issues In The Workplace

“The biggest risks facing business in 2023 will include an ongoing epidemic of mental health issues that show up at work,” Dr. Christy Gibson, author of The Modern Trauma Toolkit and co-founder of a company that focuses on stress-related work issues, said via email.

“Organizations are ill-prepared for this wave of psychological distress that inevitably shows up in the workplace. They don’t have mandatory trauma-informed training to keep their environments safer.

“They have no skills for psychological first aid. There aren’t in-house skillsets to help people manage emotional problems. The expectations of leaders for employees to return to the status quo as if the pandemic and other collective traumas aren’t happening will further contribute to the global distress,” she warned.

Lack Of Succession Planning

“Boomers are the most massive American population cohort, and as boomers exit the workforce, there’s not enough succession planning or workforce replacement,” Robert Jordan, CEO and co-founder of Interim Executives, said via email.

“Likely, we’ll see more businesses changing hands to outsiders. Successfully transitioning business ownership to either next-generation family members or external new owners will require more time and dedication to training young leaders to take on the reigns,” he predicted.

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Recent news that England’s National Health Service said that it will establish war rooms to help prepare for and respond to the impact of the coming winter underscores the important role the command centers can play in managing crises.

“These centers will be expected to manage demand and capacity across the entire country by constantly tracking beds and attendances,” The Guardian reported. “They will be operated by clinicians and experts who can make quick decisions about emerging challenges in the health service, NHS England said.”

In the corporate world, war rooms can play similarly important roles to help business leaders prepare for, manage and recover from a crisis.

Preparing For Worst-Case Scenarios

“Companies use war rooms to prepare for worst-case scenarios, improve collaboration during events, and help responders adapt and communicate more effectively during crises,” Carla Bevins, an assistant teaching professor of business communication at Carnegie Mellon University’s Tepper School of Business, said via email.

Avoiding Misccommunication

A war room “is a centralized center where information from numerous sources is processed, and open communication creates a clear voice of response,” Bevins observed.

They “are useful when a larger number of people are needed to resolve an incident and when cross-functional involvement is necessary. If teams are working independently on the same issue, this can lead to miscommunication, and it can prolong the issue. War rooms allow all teams to work on a resolution together while communicating openly and adapting quickly. War rooms ensure there are no delays in communicating new and essential information,” she noted.

“Effective crisis communications effort requires coordinated internal collaboration and parallel processing,” and observed that “war rooms create a dynamic environment where these conversations can happen.”

“Make sure that your war room is well equipped with all the tools you’ll need before you need them,” Bevins advised.

Helping To Build Crisis Management Skills

A war room is most important before a crisis breaks out “because it’s in the war room where you rehearse, prepare and build skills in crisis management,” Andy Whitehouse, an assistant professor at Columbia University who teaches crisis communications, said via email.

“In my class, I argue that companies should regularly bring together the crisis team in the war room to role-play a crisis—since this is the only way to ensure that the team has the experience, capabilities and comfort to manage a crisis when it happens. A live crisis in a war room is not the moment to find out that an executive isn’t ready for game time,” he advised.

“Who should be in the war room? It depends on the scenario. Communications, legal, HR and operations will almost always be present, but other leaders, such as the chief technology officer or the head of security, might be there for a specific crisis,” Whitehouse recommended.

‘Use War Rooms Judiciously’

“Use war rooms judiciously. If you continue to use a war room when it’s not needed, its effectiveness can decline. Crises are inherently stressful events where teams work long hours for many days. As the leader of a war room, lead by example by remaining calm and collected,” Bevins advised.

“When you act as a role model, you help create a psychologically safe space where team members see they have an open line of communication. This can encourage them to speak up when they become stressed or. need support,” she observed.

Size Does Not Matter

“I was trained in IT using war rooms starting back in the 90s for outages at the large financial services firms,” Karolyn Hart, founder and president of InspireHub, recalled via email. “I think what would surprise people is that they aren’t just effective for large companies but even for small tech firms. Perhaps, especially so.”

“Our team has been remote for 9+ years, and we have a virtual war room…Even today, with all [the] automated alerts and technology now available, nothing replaces everyone being gathered together,” she noted.

‘No Chicken Little Moments’

“Our war room is only called when a certain…criteria that we have established is not being met. Everyone in the company understands what that is and the steps that are necessary to call a war room. There are no ‘chicken little’ moments because when this happens, we know for certain it’s serious. The alerts go out, and the team assembles,” Hart said.

“We assemble in our war room, and the team knows their roles. (Who is troubleshooting, who is running liaison to customers (if impacted), who is testing, etc.).

“When I arrive [at the war room], my job is to keep the team calm. Science has proven that software developers’ ability to troubleshoot goes down with anxiety and stress. I ask questions along with everyone else as we troubleshoot, but I feel my biggest contribution is keeping them calm,” she commented.

‘Not Just For Firefighting’

War rooms can be useful even when there is no immediate crisis, such as preparing for the threat of an economic-related challenge like inflation and recession, according to Ram Charan, a former Harvard business professor and co-author of Leading Through Inflation, said in a statement.

“An ideal war room is not just for firefighting; it is also strategic. Early warning signals will tell you not just where the problems are emerging but also their pace. They allow you to be predictive, prescriptive, and preemptive.

“If the CEO doesn’t take the initiative to create a war room, the board should propose it. Maybe do an off-site with the top team. Conversely, the CEO may want to call a special meeting of the board solely to discuss how inflation and recession will affect the company.

“If you don’t have a war room, you’re falling behind,” Charan warned.

The post The Important Roles War Rooms Play Before And During A Business Crisis appeared first on Crisis Ahead.

Twitter employees were given two days to respond to Elon Musk’s ultimatum to commit to a new “hardcore” company or leave with severance pay. His edict poured more gas on the fire at the social media platform, could have a devastating impact on workers, and raises more questions about the future of the organization, according to HR experts and other observers.

Employees were asked to respond by clicking on an icon if they wanted to stay. “This will mean working long hours at high intensity,” Musk said in an email to Twitter’s workforce. “Only exceptional performance will constitute a passing grade.”

“By mid-Wednesday, members of Twitter’s Trust and Safety team—who are responsible for keeping hate speech and misinformation off the site—were discussing a mass resignation, according to three current employees who spoke on the condition of anonymity for fear of retribution,” the Washington Post reported.

Coming days after Musk fired thousands of Twitter workers, his latest action is another example of how to make a crisis worse.

Experts shared their observations and predictions of how the ultimatum will affect Twitter’s dwindling workforce and the company.

Keeping Morale Low

“Employee morale at Twitter was already abysmally low; it’s hard to see how this ultimatum does anything but keep it that way,” Nicholas Creel, an assistant professor of business law at Georgia College and State University, said via email.

“What’s more, the hardline stance Musk is taking will practically ensure that anyone applying to work there going forward will have to be prepared to give up hope of much of any personal life, all while accepting that their job security will be in the hands of a mercurial micromanager with outrageous expectations. In other words, the talent pool Musk can now expect to recruit from will be exceedingly small,” he noted.

Strategic Direction

Lost in the national headlines about the ultimatum was what Musk said about the company’s strategic direction, and perhaps his first words on the subject.

In his message to workers, he said Twitter will “be much more engineering-driven. Design and product management will still be very important and report to me, but those writing great code will constitute the majority of our team and have the greatest sway. At its heart, Twitter is a software and servers company, so I think this makes sense.”

‘Drawing A Line In The Sand’

“Asking for commitment is one thing. In this case, you have a guy who is drawing a line in the sand and asking for a blank check,” Mark A. Herschberg, an instructor at the Massachusetts Institute of Technology and author of The Career Toolkit: Essential Skills for Success That No One Taught You, said via email.

“Leading is about getting followers to commit to a vision. Musk does not have a clear vision outlined, and worse, has a history of being capricious as well as firing detractors. Why should someone commit with no clear upside when the risks of frustration, termination, or overall company failure are high?” he asked.

“When the house is burning, it’s one thing to rally people to take risks to put it out. You’d appeal to a sense of purpose, teamwork, and [a] larger vision. It’s another to say something akin to you damn well better do it my way, or else don’t do it at all with no discussion. My guess is employees who haven’t yet quit or been fired will be updating their resumes and ramping up their job search,” Herschberg concluded.

Not A Free Or Rational Choice

“Moral actions are those that do not violate an individual’s ability to make free and rational choices. At first glance, Musk appears to be giving employees a choice, but it is one that is neither free nor rational,” Sarah Cabral, a senior scholar in business ethics at the Markkula Center for Applied Ethics at Santa Clara University, said via email.

“It is not free because it is coercive, and it is not rational because the terms are unclear. Employees only have 24 hours to decide their future and no meaningful sense of what the new ‘hardcore’ environment will actually require of them,” she pointed out.

‘A Horrible Idea’

“Trying to bully or coerce employees into assenting to a certain style of work that has not been the norm in the organization is a horrible idea,” Kia Roberts, principal and founder of Triangle Investigations, said via email.

“There is a way that management can and should operate where they identify the levers to pull to increase employee productivity and encourage employees to stay with the organization, but issuing ultimatums is certainly not it,” she counseled.

Encouraging Union Organizing

“I would expect at least two union organizing campaigns to take hold if Musk stays at the helm of Twitter,” Nora Burns, a workplace culture researcher, and former HR executive, said via email.

Musk “is demonstrating the very worst of 1940s leadership strategies while using an international megaphone to spread the word. Unions were at their strongest during the 40s when these manipulative, bullying, and ‘love it or leave it’ techniques were too often applied to the workforce,” she observed.

“Ultimatums have no place in any relationship, and the employment relationship is no exception. Musk seems to have forgotten that Twitter as a whole is a relationship business,” Burns speculated.

Impact On Recruiting

“There will be very little recruiting happening (almost all of the recruiters got let go). The few who join the organization…will be those attracted to Musk’s ‘hardcore’ management philosophy. I predict there will be few takers,” Ron Oltmanns, a leadership coach, and consultant, said via email.

“Leaders in a crisis need to think hard about whether “shock treatment” is really required like what Musk has administered to Twitter. Only in extreme cases is it necessary. Otherwise, you’re taking existing problems and multiplying the troubles, not solving problems,” he noted.

Doubling Down

“The best takeaway for business leaders here is to recognize that the first step in managing a self-imposed crisis is to stop doing the thing that got you in trouble, to begin with,” Nicholas Creel, the assistant professor of business law at Georgia College and State University, recommended.

“Musk is doubling down when he ought to be pulling back, so we can probably expect his problems to only get worse from here,” he predicted.

Musk’s Track Record

Longtime observers of Musk’s management style may not be surprised by what he is doing with Twitter or how he is doing it. His track records at the other companies he owns — SpaceX and Tesla — could provide a roadmap for the billionaire’s next moves.

“Musk’s strategy can be characterized by common themes across three areas: what fits into his vision for problems to solve, how he designs an organization as a solution to those problems, and why he can so effectively mobilize resources towards those solutions,” according to the Harvard Business Review.

Edward Segal is a crisis management expert, consultant and the bestselling author of the award-winning Crisis Ahead: 101 Ways to Prepare for and Bounce Back from Disasters, Scandals, and Other Emergencies (Nicholas Brealey). Click here to Order the book.

Segal is a Leadership Strategy Senior Contributor for Forbes.com where he covers crisis-related news, topics and issues. Click here to read his recent articles.

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