HR summit 2013 - Role of HR in Crisis Management & Organizational Sustainability

ARiMI
–
Asia
Risk
Management
Ins0tute
NOTES

By MARC RONEZ
Chief Risk Strategist & Master Coach
Asia Risk Management Institute
The
Role
of
HR
in
Crisis
Management
&

Organiza:onal
Sustainability
Preparedness
HR Summit 2013, MBS
Singapore, 25 April 2013

Key
points
on
the
Agenda
for
this
Session

þ  Defining what is a Crisis?
þ  How effective are organizations in managing turbulences and
crises?
þ  3 reasons why Human Resources should be involved in Crisis
Management It’s all about people stupid!
þ  What are the typical behavioral patterns of people during crisis
situations from C-level down to front-line staff? The danger of
neglecting the Human Factor!
þ  Defining the strategic role for HR in crisis preparedness and
organizational sustainability.
þ  HR Crisis Management systems: Stop thinking like a Mechanic and
start acting like a Gardener
þ  Changing the paradigm: Crisis situations as transformational
growth opportunities for organizations and their people
HR & Crisis Management – Marc Ronez - Copyright @ ARiMI 2013 2

1 - Defining what is..
a Crisis and the Need for more
effective Crisis Management


What
is
a
Crisis?

A CRISIS is an event/situation/decision that results in a:
1.  total or partial disruption of key business and
operational processes due to harm to people/
relationships or damage to property, equipment or the
environment
2.  and/or influence stakeholders‘ perception negatively
which - as a consequence of the direct impact and of
stakeholders’ responses - may dramatically impact an
organization's profitability, reputation and hence ‘license’
to operate & long-term operational sustainability.

Pressure
Time
Potential Emerging Current Recovering
Life-‐cycle
from
a
Risk
issue
to
a
Crisis
–
4
phases

Media Coverage
& amplification
Signal
CRISIS
Incident
OR Signal
Issues
Signal

6
Examples
of
Risks
&
Crises..

Terrorism Diseases
Earthquake
Pollution
Bank run
SubprimeExplosion
NGO
Attack Lawsuits
HR & Crisis Management – Marc Ronez - Copyright @ ARiMI 2013

7

Need

for
beMer
Risk
&
Crisis
Management?

71% of Fortune 100 Companies in 1990
are GONE today!
The average lifespan of an organization is
estimated to be between 35 to 45 years
71% Gone!
29% Still
here!

Need
for
more
eﬀec:ve
Risk
&
Crisis
Management?

A continuous and constant stream of crises and corporate failures
over the past 10-15 years have created a strong momentum for
Risk, Crisis & Business continuity management concepts.
9/11
Fukushima

2
-‐
Reasons
why..

Human
Resources
should
be
involved
in

Crisis
Management


3
Reasons
why
Human
Resources
should
be
involved

in
Crisis
Management

A Crisis and its Management has a lot to DO with PEOPLE!
1.  First, people are a source/factor of risk, e.g., people
making wrong decisions, people doing sloppy work, being
complacent, etc.
2.  Second, people are victims of risk, e.g. injuries, deaths,
psychological impact, etc.
3.  Third people are essential in managing risk, e.g., people
using their knowledge, skills, experience and ingenuity to
resolve expected and unexpected risk issues.

1
–
People
are
a
source/factor
of
risk:
Incompetence,
Lack
of

Ethics
&
Fraud
of
Leaders
–
Some
examples

Ken Lay, Enron Chuck Prince, CEO Citi
Group
TT Durai, NKF
Bernie Ebbers
WorldCom
Dick Fuld,
Lehman Bros
Alan Greenspan,
Chairman FED
Madoff, Investment
Ramalinga Raju,
Satyam

Root causes for many Organization's Problems
The examinations that followed many corporate collapses
revealed a common theme behind the institutions‘ troubles i.e.
The People’s Factor!:
 high-profile scandals involving unethical abuse of
corporate power due to greed and conflict of Interests,
 In a number of cases, fraudulent/criminal activities by
corporate officers.
 A lack of responsibility, accountability and oversight of
corporate operations at every level of management;
 An inherent Blindness and human Complacency to Risk;
 A people issue circumventing control systems in place
12HR & Crisis Management – Marc Ronez - Copyright @ ARiMI 2013

Blindness
to
Risk
-‐
Fraud

•  “
•  Madoff is amazing at understanding the US equity
market”
•  Statement by Nicolas Harlick in 2007, a fund Manager
who had $21 million invested with Madoff
Less than a year later Madoff giant Ponzi scheme
exploded loosing a record $50 bn!

Blindness
to
Risk
–
Subprime
Buble
&
Human
Greed

As long as the music is playing, we have to keep on
dancing!
Statement by Chuck Prince in 2007, former CEO of
Citibank Group

Blindness
to
Risk
–
Regulator
Sleeping
at
the
Switch

“Improvement in lending practices
have enabled banks to reach out to
Households with previously
unrecognized borrowing
capacities”
Statement by Alan Greenspan, in
October 2004
15
Unrecognized borrowing capacities were
actually the NINA households!

Blindness
to
Risk
–
Sichuan
Earthquake
2008

The use of improper construction materials leads to
many building collapse and dramatically increased to
death toll. 68,000 people were confirmed dead.

Mismanagement
of
Risk:
BP
oil
spill,
Gulf
of
Mexico

2010

The catastrophe resulted in a
loss of:
 Direct Cost to BP: Over
$20 billion
 Market capitalization loss.
i.e. cost to shareholders:
$87 billion
 11 workers dead
BP platform explosion and oil spill could have been
prevented with additional spending of $7 - $12 million on
safety Controls. BUT the Investigation report noted that
focus was on cost and time savings

BP
Management
ini:ally
downplayed
the
Accident

Its CEO Tony Hayward called the amount of oil and
dispersant "relatively tiny" in comparison with the "very
big ocean.”
Later, he drew an outpouring of criticism when trying to
show concern to the victims of the pollution he said that the
spill was a “dramatic disruption to the life of Gulf Coast
residents”, however he then added, "You know, I
understand I'd like my life back too."

CEO Tony Hayward Media Gaffes - Video


Impact
on
BP
share
price
/
market
capitaliza:on

Gulf of
Mexico
Disaster
MTBE
Contamination
lawsuits
$243 Billions
$90 Billions
Enormous Shareholder Value Loss

2
-‐
people
are
vic:ms
of
risk:
IMPACTS
of
any
Crisis

on
Human
Resources

1.  On the People
  Get physically injured, have permanent disabilities and/or die
  Be psychologically traumatized, change of personality & values
2.  On the Organization
  Loss of key staff and intellectual knowledge
  Absenteeism & high turnover
  Underperforming staff due to trauma, low morale & demotivation
  Increasing health benefits costs
  HR-related legal concerns and costly litigations
  Negative publicity for the organization and badly damaged
reputation

22
Vulnerable HC
 Death
 Disability/Injuries
 Traumas
 Resignation
Ineffective HC
 Failure to perform (panic
or paralysis)
 Destructive Behavior
Major Risks about Human Capital during Crises

The
EFFECT
of
a
CRISIS
situa:on
on
people


100%
20%
0
STRESS
causes
Mental
NOISE
during
Crises

People who are under intense stress have
difficulty hearing and processing information
Stress lead to Mental noise that interferes with
a person’s ability to engage in rational
discourse

The
EFFECT
of
a
CRISIS
situa:on
on
people:
Headless

Chickens
&
Zombies

People is very vulnerable to extreme stress and hence are
usually unable to deal effectively with Crise situations..
When confronted with a Crisis, most of the people will turn
into either ..:
1 - Headless chickens 2 - Zombies

26
The
result
is
…

Panic,
poor
decisions
and/or
paralysis
in
the
face
of

disaster!


27
3
-‐
People
are
the
SOLUTIONS
too!
Relationships
Behavior
Knowledge
Human Capital Skills
Command of a
body of facts
through
Education
Facility, developed
through practice,
experience to carry
out a technical or
social task
observable ways
of acting that
contribute to
accomplishing a
task
Social ties
within the firm
and with key
external parties
Relevant
Applicable
Aligned
Effective

The
Human
Factor
in
Crisis
-‐
KEY
to
Success
or
Failure

NOKIA
Well-Handled Supply chain
Disruption ensured effective
BUSINESS CONTINUITY
ERICSSON
Badly-Handled Supply chain
Disruption led to BUSINESS
BREAKDOWN
How a small fire in a Philips Electronics Manufacturing
Plant changed the mobile phone industry
≠

The
Human
Factor
-‐
KEY
to
Mi:ga:ng
Crisis
Impact

2010 Haiti earthquake
Magnitude 7
About 220,000 fatalities
2011 Japan earthquake &
Tsunami
Magnitude 9
About 19,000 fatalities

The
Human
Factor
in
Crisis
-‐
Key
to
Saving
Lives

About 600 people died in Tower 2. Loss of lives could
have been minimized with more effective early
recognition of the crisis situation.

In
summary:
The
essen:al
Importance
of
the

HUMAN
Factor
in
today’s
business
world

In today’s Information & Knowledge Economy,
Organizations increasingly rely more on Human
Capital (knowledge workers) to build competitive
advantages and generate their profits, rather than just on
equipment, technology and systems.
But no matter their size, durability and successes,
organizations are very VULNERABLE when something
go wrong with their people. At the same time, people
are the solution too!

3
-‐
What
should
be..

the
Role
of
HR
in
Crisis
Management

Preparedness


Role
of
HR
in
Crisis
Management
Preparedness

Question: Should HR functions have a STRATEGIC role to
play in risk management and crisis management in their
organisations, or should they merely play a supporting
operational role?
Clearly HR SHOULD have a STRATEGIC role and
responsibility to :
1.  ensure their organizations are aware of the impact of
internal strengths & vulnerabilities on the human side
to different types of crises and
2.  to ensure the crisis management plan covers all
potential HR risks, concerns and needs.

Public
Relations
Risk
Management
Business
Continuity
Operations
dddddd
Legal
eee
Human
Resources
HEAD OFFICE CORE CM TEAM
Crisis
Management
Teams
should
include
HR

Finance
Crisis
Comm.
Operations
Continuity
Emergency
Responses
Human
Support
SITE CRISIS CONTROL TEAM

Crisis
Management
Team,
Systems,
Procedures
–
Key

Points
about
HR

1.  Necessity to coordinate and integrate with other key functions and
plans i.e. Risk Management and Business Continuity Management
2.  Clarify who should be on your CMP team. Role of CEO, HR, PR,
Lawyers & others.
3.  Clarify lines of responsibility, authority, and communication
channels?
4.  STREAMLINE procedures and set up a specific structure and
system applicable during a crisis, e.g. limit of authority & resources
might be different from normal times
5.  Develop and maintain a comprehensive contact list for teams (24
hour contact information) and establish a notification system.
6.  Designate who will handle communications with the staff, media,
public, government agencies and other key stakeholders.

For Organization to manage Risk & Crisis
Effectively, they need to..
Stop THINKING like
Mechanics…
Start ACTING like
Gardeners.

Start
ACTING
like
Gardeners.

¤ Do not waste your time trying to to predict
everything,
But Instead build:
þ Organizational RESILIENCE against the
potential Black Swans crises and
þ The CAPABILITY to ADAPT to exploit
uncertainty & changes to create new
opportunities for growth and profitability.

PREPAREDNESS is ESSENTIAL
For Effective Crisis Management

39
Preparing
Human
Capital
for
Crises

Test
and
Improve
with
adequate
&
regular

Scenario for simulations / table top exercises

þ  Explosion
þ  Pollution
þ  Fraud by employee
þ  Problem with JV Partner
þ  Web rumors & attack. Surviving a Crisis in Cyberspace
þ  NGO attack
þ  Terrorist Attack
þ  Kidnap of Staff
þ  Sexual harassment complain
þ  Criminal indictment of executives
þ  Class action lawsuit

The
Role
of
Training
–
Internalizing
what
to
do…

þ Understanding individual roles and responsibilities
þ information about threats, hazards, and protective
actions
þ notification, warning and communications procedures
þ means for locating family members
þ emergency response procedures
þ evacuation, shelter, and accountability procedures
þ location and use of common emergency equipment
þ emergency shutdown procedures
þ Etc.

42
Pressure
Time
Potential Emerging Current Recovering
Road
Map
to
Managing
Risk
&
Crisis
Signal
CRISIS
Incident
OR Signal
Issues
Signal
Opportunity to influence Difficult to influence
Media Coverage
& amplification

43
If a company manage the crisis properly there actually may
be beneficial outcomes that go far beyond survival and
preservation of corporate value:
1.  Increased visibility and name recognition.
2.  An opportunity to show competency and leadership.
3.  Improved relations with important stakeholders’
groups, such as employees and customers.
4.  Lessons can be learned and changes made to prepare
for future crises.
5.  Building competitive advantage against less well
prepared competitors
Managing
a
Crisis
well
–
Can
bring
lots
of
Beneﬁts


Marc
Ronez
-‐
Chief
Risk
Strategist
&

Knowledge
Leader
at
ARiMI
-‐
Asia
Risk

Management
Ins:tute

An ERM & Governance expert with 20 years of experience both as a practitioner,
trainer & coach for large MNCs, Governments & Charities. Marc has an MBA from the
University of Chicago GSB, an MSc in Insurance & a LLM from the University of La
Sorbonne
What do I do? Help managers & leaders to use Risk Management to:
þ  Resolve difficult operational and business challenges
þ  Take & manage risks effectively to build sustainable & profitable growth models
Marc’s specific areas of expertise include ERM, risk decision-making processes,
corporate governance, Business Ethics, Social Responsibility, risk-aware culture,
risk communication and crisis management, business model/Strategy Risk
Management, corporate learning systems development.
44

Risk
Management
is
a
con/nuous
journey,
not
a

des/na/on!

Marc Ronez is on Linked in & WordPress
You can find his profile & read his blogs at:
P: sg.linkedin.com/pub/marc-ronez/1/3b6/465/
B: theriskmanagementparadox.com
B: riskmanagementdemystified.com
45

ARiMI
–
Asia
Risk
Management
Ins:tute


ARiMI
is
an
applied
research
and
business
studies
ins0tute
that

was
set
up
in
2003
(in
partnership
with
NUS
ext)
and
has

established
itself
as
the
Ins0tute
of
Reference
for
Enterprise
Risk

Management
studies
in
Singapore
and
in
the
region.

We
FOCUS
on
programs:

1.  For
Decision-‐Makers
(Middle
to
Top
Management):

Developing
PRACTICAL
Knowledge
&
Skills
in
Risk
&
Crisis

Management

2.  For
Organiza:ons:
Building
CAPABILITIES
for
Sustainable

and
Proﬁtable
Growth
by
EMBEDDING
Risk
Aware
&
Crisis

Readiness
Culture

ARiMI,
Asia
Risk
Management
Ins:tute


ARiMI
-‐
Focus
and
Exper:se

● Crisis management &
Business Continuity
● Leadership risk decision-
making and Social Capital
● Reputational Risk &
stakeholders management
● Corporate governance &
business ethics
● Business Innovation &
Corporate Transformation
Research
● Professional Designation
Programs
CERM (Certified
Enterprise Risk Manager),
CPRM (Certified
Professional Risk
Manager), ARM
(Associate in Risk
Management), FSRM
(Fellow in Strategic Risk
Management)
● Public Seminars and
Workshops
● Corporate Training &
learning Programs
Education
● Risks & Opportunities
Assessment & Mapping
● Crisis & Business
Continuity Mgt
● Reputation Risk Mgt & CSR
● Business Ethics & Fraud
Risk Mgt
● Risk Appetite & Risk Aware
Culture Readiness
● Project risk management
● ERM Implementation
Innovation & Change Mgt
Expertise

49
For more information on ARiMI,
check our website at:
www.arimi.org
Developing Effective Leaders & Decision-
makers for complex & volatile times

Important Note: Please note that that this presentation and its
contents, is the intellectual property of the Asia Risk Management
Institute Pte Ltd. It has been prepared for this HR Summit 2013
session and it cannot be used for any other purposes without the
specific written consent of the Asia Risk Management Institute.

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