Crisis and Disaster Management: case of EBay - Essay Example

Crisis and Disaster Management: EBay Crisis and Disaster Management: EBay Introduction Crisis is an occurrence or a series of events that results from a dangerous or unstable situation affecting individuals, community, group, or company (Burtles, 2007). Crises occur with no warning and adverse effect on the security, environmental, political, or economic position of the individual, company, or a group. Disaster management involves the creation of contingency plans that aids individuals, communities, and groups to reduce the effect of hazards and manage during time of disasters (Burtles, 2007). This study aims at evaluating the different crisis that plagued the development of EBay and their respective mitigation measures, the turning point at EBay, the crisis management at EBay, and the prevention steps taken to avoid future crises. The study also analyzes the external crisis at EBay and makes proposals for business continuity with the justification of each proposal. Background of EBay EBay is an e-commerce multinational corporation with its headquarters in San Jose, California. The American multinational provides an avenue for business to consumer and customer to customer sales via the internet (EBay, 2014). EBay was founded by Pierre Omidyar on September 3, 1995.The company deals with different products including fashion, electronics, collectibles and art, home & garden, motors, and sporting goods among other products. EBay provides the sales platform for global users of goods and services and forms one of the most successful internet bubble companies. EBay has operations in over thirty countries. EBay has acquisitions and continues to have Skype, Craiglist, PayPal, and StubHub as part of the enterprise. EBay operates in the information technology sector through the internet (EBay, 2014). Crisis in development of EBay and the measures that solved it EBay is one of the companies that were affected by the 2000 cyber-attack by cyber pranksters resulting in the loss of service for EBay, CNN, and E*TRADE (Havard Business School, 2013: 7). The auction sellers and buyers were mainly affected by the crisis because of the disruption of their sellers on auction on the closing day. Huge losses to EBay, sellers, and buyers on the EBay platform occurred as a result of the EBay hack that affected the confidence of consumers and the bottom-line of the company. EBay dealt with the crisis through the use of a scale up infrastructure that allowed the company to use a $ 30 million backup servers and equipment to increase capacity of the site. The result was a substantial excess capacity in the system reducing the effect of the denial of service that was the manner of the cyber-attack. The auctioneers were then reassured that a reoccurrence would be prevented and amends were made for the disrupted sales but it is evident that excess capacity saved EBay from an enormous crisis as evident by the impact of the cyber-attack on CNN and E*TRADE (Havard Business School, 2013: 7). The purchase of Skype for $ 2.5 billion in 2007 is one of the crises at EBay resulting in the writing off $ 1.4 billion that led to the first time the company recorded a loss as a private corporation. The impact on the business was a reduced confidence from the stakeholders and a reduction in the share prices of EBay. EBay solved the crisis by writing off $ 1.4 billion and aimed at gaining the trust of the stakeholders through increasing the profitability of the company. This was achieved within four years when the company ensured the company had been profitable since the loss to 2009 when John Donahoe announced the June 18 financial results depicting EBay’s transformation. The other crisis that affected EBay in the development stage is the 2008 economic crisis that affected all the companies globally. EBay responded to the crisis under the leadership of John Donahoe by forecasting the mobile revolution and the impact of the Smartphone on e-commerce. The impact was a success in mobile business and online payment systems allowing the company to benefit from the mobile revolution through racking in more revenue that allowed the company to sail through the financial crisis. The one click payment system and efficient mobile app allowed EBay to be profitable despite the economic crisis. Turning point A turning point is a situation or point in time where a significant change takes place in an individual’s life, group, community, or a company (Wong & Shi, 2014). The turning point in EBay was the realization of the importance of mobile platforms and applications, as part of the mobile revolution to drive the online payment methods market and the purchase of online products by customers and businesses. EBay developed applications that allowed for faster transactions and provided convenience for the customers. The implications of this for the company are the need to improve other facets of the organization having been in a position to capture the imagination of the clients on the use of mobile in transactions. Improving the traffic flow to the EBay web site by reducing fees, providing a pleasant experience for the customers, and instituting effective policies and strategies against exposure of information in form of data breach are some of the measures that EBay has to take to ensure the mobile platform works to put the company in a better position in future. Crisis management at EBay and prevention of future crisis EBay has crisis management measures to ensure the company responds effectively to a crisis and has set measures aimed at preventing the occurrence of crisis in the future (EBay, 2014). These measures include the creation of Enterprise Resiliency Team tasked with a number of roles. These functions include ensuring EBay and adjacent units of the business are available at all times, identify and respond effectively according to threats, provide executives with information for developing resilience strategies and operation management, and foster resilience and preparedness at EBay. Depending on the event, EBay has organized the response efforts to follow by the different teams in dealing with the event. The organization involves the corporate and executive team at the highest level consisting of senior corporate functions and corporate and executive management. The second level consists of regional groups having local business unit executive management and senior regional corporate functions. The lowest level is the site based teams to allow response to the event at the level of the event and comprises of local site support and local business unit management. The response to the event begins from the lowest level and escalates to upper levels in response to increased complexity and impact on the organization (Hiles, 2007). EBay has instituted technology recovery measures aimed at management of crisis including website disaster recovery including defining support structures, reducing geographical redundancy and documenting recovery plan. Non-website crisis management measures include following policies and standards in the business, having system independence analysis, aligning recovery of the system and applications to business unit requirements and having business units and technology owners be accountable. The other crisis management plans relating to the non-website of EBay include testing along the maturity path and documentation of recovery plan. Participation is the other crisis management measure at EBay with monitoring and support, experts on subject matter, vendors, alternate workforce, and technology managers all participant in the development of recovery measures and crisis management. Prevention of future crisis, EBay has instituted testing mechanisms for all the plans that are used to prevent the occurrence of a crisis and the measures that are taken when the crisis occurs. The testing is done in three stages including policy and standards where EBay ensures the testing procedure is tested t meet the needs of the organization. Stating the testing frequency, types of plans, criticality, and maturity have to be considered in the policy and standards at EBay. The policies and standards have to be approved by corporate officers after review and made available through different channels to the organization. Following the testing maturity path, the plans are tested annually and aligned to goals and best practices allowing for plan and strategies validation. Issues realized in the testing process are documented and corrected, and participation by key staff is mandatory to ensure familiarity, as measures of ensuring crisis do not occur in the future. Other measures ensured to avoid future crisis is augmenting training and awareness at EBay where all members of staff are engaged on the business continuity plan. Fostering a culture of resiliency allows the organization to prepare for the occurrence of a crisis and the training of coordinators of different roles in the organization. Future risk assessment is one of the measures taken by EBay to mitigate the occurrence of a crisis. The assessment ensures the organization as an understanding of the organization and all the problems are solved early to ensure the problems do not escalate into a crisis. Periodic review of risk management policies is the other measure taken to prevent a crisis in the future at EBay (Cohn, February 13, 2014). Periodic reviews allow the organization to understand the state of the organization to avoid a reoccurrence of a crisis like the three months it took for the company to realize the data breach in May 2014. Analysis of the an external crisis and the proposals for business continuity and their justification This part of the study aims at analyzing a crisis at EBay that was because of external forces and determined the stage of the crisis. The crisis that is very recent and pivotal at EBay is the security breach that was later to be referred as the EBay hack crisis (Webb, January 13, 2014). The crisis is pivotal for EBay becomes of the reputational and financial challenges that emanated from the knowledge of the breach and the impact it posted in terms of ability of EBay to gain consumer confidence and augment profitability. The security breach resulted in the stealing of email addresses, customer names, passwords, phone numbers, physical addresses, and dates of birth, which were all encrypted information posting security defects and potential lack of confidence on EBay by the consumers (Webb, January 13, 2014). The EBay hack prompted EBay to request over 230 million customers to make password changes as a measure of securing their information. Various issues resulted in public outrage from the EBay hack crisis in terms of the manner in which EBay handled the crisis and warrant mention in this paper. These issues include the perceived lack of transparency by EBay by the public since the attacks were under investigation from early May, and the public was informed towards the end of May. The other issue was the inability of the EBay crisis management team to unearth the hacking for over three months since the start of February with the other issue being the inability of EBay to communicate directly to the consumers who received news of the hack via the media and other third parties. The lack of informing the public, apology of the mistake, and advising the customer upfront to change their password are the other notable issues at EBay in solving the crisis. The impact of the misinformed manner of dealing with the crisis was evident in the stock sales of EBay with EBay shares declining by 1.73 percent after news of the hack was received and 49% of adults reported their less inclination to deal with EBay in future. The hack shows that no matter how large a company is, the security systems are never 100% calling for the need for frequent checks and updates to avoid cyber threats (Webb, January 13, 2014). The stage is in the resolution stage at EBay because of the realization that the information that was accessed by the attackers was not financial information and the subsequent controls that have ensured the access to information stopped. The crisis is however not fully resolved because EBay has not achieved the full trust of the consumers and has to work harder through developing a business continuity plan to manage better in times of crisis. The potential crises at EBay include the reoccurrence of cyber-attacks on the EBay security system for encrypted data and the attack on the functionality of the website (Snedaker & Rima, 2014). These are considered potential crisis because of the increased sophistication in technology by cyber attackers and the acceptance of the fact that any security system is not 100 percent. Proposal for business continuity and justification Business continuity plan is the measures instituted by an organization to ensure the organization is in a position to continue normal operations despite there being a crisis (Geelen-baass et al., February 2008). For EBay the crisis are mainly in form of cyber-attacks that affect the ability of the organization to provide the platform for sale and purchases and online payment of services through its affiliates as well as communication among the parties (Ebsco publishing (firm), 2006). Therefore, the business continuity proposals are mainly related to ensuring EBay manages the website and its other affiliate businesses and reducing the potential of disastrous effects of a cyber-attack or technology related crisis. The other proposal for the business continuity plan is implementing change controls and procedures to ensure change in the operating environment is well envisaged and documented with great attention to detail and specifications (Wong & Shi, 2014). The change controls and procedures will enable EBay to manage change in the external environment that affects the ability of EBay to prevent hacking and other external risks that may result in a crisis. Testing very frequently is the other recommendation for EBay than is currently done is the other business continuity recommendation Effective communication is the other recommendation for EBay business continuity plan that will allow the organization understands the most appropriate manner to communicate with management, clients, employees, stakeholders during a crisis (Burtles, 2007). Effective communication entails understanding the amount of information to provide the customers and employees to avoid misleading the public while ensuring the trust is maintained when the public understands the nature of the crisis. The suggestions are being the first to communicate, informing the public, stating the steps being taken to manage the crisis, and advising the public on the way forward are examples of effective communication for EBay during a crisis. The justification for having effective communication during a crisis is that it will allow EBay maintain client trust and confidence, assure employees of the ability of the company to overcome the challenge, and avoid reputational damage. Documenting and have backups of the information, employees, excess capacity of the website are the other continuity plans for EBay (Burtles, 2007). The justification is that it allows the organization to have employees, information, and excess capacity to be able to run the business when the crisis is in progress (Emerald (firm), 2002). Documenting external contacts including information technology gurus and other personnel who may be required to provide help in times of a crisis is the other business continuity measure. This is justified because it allows EBay to have access to help within a short time and aid in resolving the crisis swiftly. Having instant messaging and other channels of communication are the other ways of doing business despite a crisis at EBay with the main reason being to allow for communication between employees, management, customers, and other stakeholders. Summary and conclusion In conclusion, EBay has been faced by numerous crises in the course of its development but the resilience of the company and the successful culture at the organization has allowed the company to overcome challenges. Disaster preparedness also forms the main reasons for the ability of EBay to overcome these challenges. The development of a business continuity plan guiding the different avenues through which EBay will ensure continued business operation during a crisis is a measure to ensure EBay comes out successful in the current and future global environment. Business continuity plans are very important in the current volatile economic environment and form one of the main tools that a business should have to overcome business disruption by crisis. EBay is a target for cyber attackers and the concept of developing a business continuity plan is very relevant to the company and allows the company to be more successful without worrying of reputational damage from such crisis resulting in lack of business. References BURTLES, J. (2007). Principles and practice of business continuity tools and techniques. Brookfield, Conn, Rothstein Associates. COHN, J. 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