Rio Tinto-Earthquake Disaster Event - Case Study Example

Rio Tinto-Earthquake Disaster Event Executive Summary The earthquake on 11 March 2011 in Japan that was later followed by a tsunami was a test to business resilience in the company (ABC Rural). Rio Tinto just like many other companies that face natural disasters should have Disaster Recovery Plan (DRP). The priority for this paper is to identify issues and causes of the earthquake first into Rio Tinto office in Japan and the group. This means surveying the converging issues of sales and marketing for the whole company with a bias to the groups that comprise Japan as a sales destination. This should not be limited to an earthquake event but also to organizational ethical issues in regard to corporate governance and social cultural issues therein. The major issues for Rio Tonto is how it should identify how the stakeholders (investors, employees, customer and the public) are affected by an earthquake disaster and what it means for the company. With the understanding that all the stakeholders are critical to the company helps to balance between conflicting interests of the stakeholders. Cause of disaster in this case is the earthquake event which has the effects of destroying roads, power lines and buildings. The consequent effects of the causes range from ethical issues in the case of managing employees and shareholders’ interest. These include the social cultural issues which range from dealing with shortage of basic necessities to general economic struggles across business, social and political avenues. Decision criteria will provide the basis for the proposed alternatives which are basically the Disaster Recovery Plans (DRP). Availability of multiple alternatives is the prelude to selecting the best relevant alternatives to Rio Tinto disaster event. The most economical and convenient alternatives will form the proposed solutions. Knowledge that choice of one alternative brings forth an opportunity cost will be the theme for the implications of the solutions. Establishing ways by the company to ensure its stakeholders survive an earthquake event is the initial solution (CSR &Environmental). Ensuring that company offices are located in less prone earthquake sites, in addition to securing Information systems and technology (RT-IS&T). Finally, ensuring the company complies with the basic corporate governance policies will cast a wider and safer net for the company especially against litigation. Issue & Cause Issue The massive earthquake that hit Japan in March 11 highly interfered with business in Rio Tinto. This earthquake brought the day’s business into a halt as well as leaving the workers stranded not sure on how to commence business the next day. The earthquake affected the marketing processes in relation to communication, transport and human resource management and the community at large in respect to social cultural influences. There were 27 employees in Tokyo office who were and continue to be in the human personnel department view, victims of the earthquake. The Tokyo office is the marketing hub. It was expected that the disaster would render some of the roles of the marketing team impossible which includes but not restricted to strong customer relationship (ABC Rural). Causes The earthquake just like others before comprised shaking and ground rupture as the major effects. The shaking resulted in severe damage of buildings and structures. The earthquake caused fires following damage to the electrical power and gas lines. The Tsunami, which was the long-wavelength and sea waves that were produced by the sudden movement of water, was responsible for flooding. Damage to road, property and bridges are some of the effects of the earthquake, this also had the potential of destabilizing building. The other effect comprised increase in waterborne diseases, shortage of basic necessities in addition to high insurance premiums. A superior understanding of cause effect will help connect the dots of what actually is the cause of specific effects (Hart et al 2001, 181-188). As Roque 2012 explains the workers had to struggle with transport issues with the train failure due to lack of power and poor communication with the customers. Back at their homes, stakeholder’s kids could not access clean water and run the risk of food shortage. Massive blackout made it difficult for study and running basic residential chores. The earthquake interfered with the information system and technology since the power surges affected the company servers. This natural disaster is unique in regard to: The earthquake knocked down substantial power lines which had the effects of stalling business process systems including train operations; communication was cut since social media is pegged on power. Scanty news like the explosion of a gas terminal elevated fear among the residents and the situations lead to panic. The earthquake presented a challenge for Rio Tinto because even if other divisions were not hit, the office in Tokyo remains central to all the company processes since it coordinates all marketing processes. Decision Criteria To be successful Rio Tinto decision criteria has to first focus on the short-term issue which is restoring normal business operations in Japans office. This is because every minute business is halted at the marketing hub is another business lost to a competitor (Hart et al 2001, 181-188). As the director Daniel Hynes of Commodity Research at Citigroup noted in March 2011, some steel mills had been forced to shut down due to inaccessibility to and from their points. The group forecasts suggesting increase in the price of a tone of iron ore both in the short and long-term were not farfetched. This meant the Australian companies that produce iron ore would benefit from the increased demand since they remain the lowest cost producers. This was bad news to the steel department because it only meant less business and income for the company. According to Rio Tinto 2012 Annual Report the company’s initial concerns involved dealing with the copper product, diamond & Mineral and iron ore groups since they had Japan as a sales destination. The report seeks to identify critical business issues in regard to the effects of the earthquake (Roque 2012, 9-31). Decision on which alternative will be given priority and to what extent will be a factor of how it agrees to the International corporate governance practices in regard to the stakeholders. The nature of information technology infrastructure is that it incorporates all company data and therefore the information system is not restricted to the hit region. The challenge of technology will follow what the Resolution Copper Mining (RCM) and Information systems& Technology (IS&T) developed as a disaster recovery plan (ABC Rural). The criteria in this case will have special interest in establishing the best mix between business ethics and best cultural practice concerns in regard to all the stakeholders (Bourrier 2002, 173-180). Priority due to the length of the paper will focus on restoring the Japan marketing physical office and its employees to normalcy. Alternatives Earthquake engineering would be the alternative where the company foresees the impact of earthquake and tsunami on buildings and other structures. Rio Tonto office structures can be modified by seismic retrofitting in an effort to improve their resistance to natural disasters. This alternative will be an option in the event another earthquake is imminent in the near future. Earthquake insurance can be another alternative as it can provide the company with financial protection in the event of a loss arising from an earthquake. The company may decide to shift the burden of securing an earthquake contingency that does not lie in its specialty and the insurance will do the disaster recovery management at a fee. Another alternative for the company would be relocating their Japan offices to regions within the country (Japan) that are less prone to rare and powerful earthquakes. The regions that lack seismic building codes more often will be the subjects of major catastrophes. Choice of this alternative would position the company at a close range to the other alternative of relocating to another country or continent that has insignificant risk to the event. The other alternative is the option to deal with the event or situations that will result in severe damage to the company business processes as it happens. The basic event guiding recovery plan includes events that will inhibit firm’s ability to conduct normal business processes, access information or communicate. To ensure that the disaster challenges are tackled, there is need to form disaster recovery teams which will be responsible for making pre-determined decisions on the spot. The roles of the team members may not necessarily reflect their current job roles. If a DRP succeeds in managing an event it should be filed as a Business Continuity Plan (BCP) since it will have proved itself (Lagadec 2004, 160-169). The success of any recovery plan will be based on how well a company carries out its event risk analysis. The most critical business process for the Tokyo office is Information systems & Technology (RT-IS&T). Rio Tinto is safe in regard to RT-IS&T since its region team based which is situated in Salt Lake City and all business systems are backed up in their servers. Solutions Simple ways the company employees can act to survive an earthquake should start by being prepared. Since earthquakes do not last for long (a few seconds) measures like securing major appliances that are either tall or heavy to prevent them from falling over would help. Applying what (Roque 2012, 9-31) refers to as common knowledge practices like remaining indoors and standing against an interior wall are as important as staying low and covering ones head with ones arms are expected. It is recommended that one remains still until one is sure the shaking is over then evacuation can begin. If an employee is out in the open, one should ensure they are clear of buildings, power lines or any structures that could easily fall off since a small piece of rock could break a leg. In addition, the company should include blankets, sturdy shoes, and dust masks among other basic hygiene supplies. The company can form a training program where the staffs practice the right things to do because it could be the difference between life and death. The nature of information technology infrastructure should be that it incorporates all company data and therefore the information system is not restricted to the hit region. The challenge of technology will follow what the Resolution Copper Mining (RCM) and Information systems Technology (IS&T) developed as a disaster recovery plan. Contingent plans had to find the best mix between business ethics and best cultural practice concerns in regard to all the stakeholders. Employees expected that the company not only work to return things to normalcy but also expected that they be considered in their efforts to restore their lives back in track. Investors needed to be assured that the disaster was not going to affect their investments adversely as that would lead to a drop in the company stakes. The company should be flexible in relation to Customers expectation that the company deliver on their mission of remaining the efficient supplier and customer service provider. The public expect that the company show concern by offering to support other agencies in returning this community to normal (RCM 2012, 9-36: Wright 1990, 35-42). No alternative plan can take care of all these concerns without compromising others and therefore the key here is recognizing the best mix that could have been applied given the prevailing circumstances. Implications A choice of the company dealing with disaster events as they happen could be the better option for Rio Tinto. Hiring an insurance firm to deal with natural disaster events like earthquake will not only see the company pay high premiums but will be limited by the definition of company’s’ contingency plan(Nathan 2000, 159-170). Only the company can be able to design the best survival tactics in the event of disasters because the management understands itself better. Relocating to a less earthquake prone area is a case of changing the forest with the same habitats. The way out for Rio Tonto is to continue getting creative by using the stepping stones of previous disaster management plans. Ethical and social cultural factors will always be variables to the corporate governance function. Reference List ABC Rural. Retrieved fromhttp://www.abc.net.au/rural/news/content/201103/s3171510.htm?site=perth Bourrier, M. ‘Bridging Research and Practice: The Challenge of ‘Normal Operations’ Studies’. Journal of Contingencies and Crisis Management, 10(4), (2002) 173-180. 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