Trafigura - Strategic Management from CEO Point of View - Case Study Example

Business Case from CEO point of view [Management] Introduction The firm under study is called Trafigura, which was founded in 1983. Itis Dutch based and deals in base metals, energy resources such as oil. It has 56 subsidiaries with 81 offices across the globe. This study seeks to develop a report on a CEO perspective on the Porto Koelo toxic waste dump of 2006 in Ivory Coast. About Trifigura Trifigura began in 1993 as a private group of companies by six founding co-partners. The business focused on three regional markets, which included South Africa- minerals and oil, Africa-oil and Eastern Europe-metals. In terms of investments, we have continually endeavoured to achieve the company’s mission based on capital investments by establishing its first fund management subsidiary called Galena Asset Management in 2003. By 2010, Trafigura had bought almost 10% of the Norilsk Nickel. In 2013, we had invested $800 million in the Australian energy market. This enabled us to acquire more than 250 petrol stations. In addition, we acquired two oil import terminals and seven fuel depots in three distinct acquisitions through our ancillary Puma energy. In same year, 2013, we announced a deal with the newly created state of southern Sudan. The deal involved exporting of Dar Blend crude oil. The Trafigura has grown in its investments since its inception in 1993. On the other hand, the company’s investment in bonds and equity earnings was exemplary excellent with equity of more than $2 billion and a turnover of $ 73 billion. This figures reflected a profit of $ 440 million. Challenges Like any company, we at Trifigura have experienced numerous challenges, which include oil-for food scandal linked with the Essex Company, waste dumping in Cote d Ivoire, the chemical explosion in Norway and the Malta Controversy. To begin with the Oil-for food scandal involved linking of the Trifigura with the Essex: A Liberian Turbine tanker that had been cleared by the UN to load at Iraq’s primary export terminal. The Roundhead, Inc, a Trifigura subsidiary had purchased oil from a French oil trader called the Ibex Energy and then it made false claims that it had paid Ibex a premium of 40 cents over the standard selling price per barrel in the US. This controversy caused the inception of the Essex at the cost of Curacao before it offloaded the perceived illegal cargo. This made Trifigura to make a compensation of more than $5 million extra shipping costs. The controversy that forms the basis of this study is the waste dumping at Porto Koelo in Cote d Ivoire in 2006, which involved a leased ship entering the port in Amsterdam to offload hundreds of tons of toxic waste. Amsterdam Port Services BV, contracted to offload the waste increased its price by almost 20 times after establishing that the chemicals were extremely toxic. Several companies refused to take up the contract of offloading and processing the waste. It is at this point that Trifigura agreed with a newly formed Cote d Ivoire Company called Compagnie Tommy. The company did not process but instead dumped it. Over 100,000 people who were exposed to the wastes became sick and around ten people died. After establishing that the dumping was illegal, the top executives of Trifigura were arrested and judged in court over illegal dumping. However, they were released upon payment of a fine of 152 million Euros. This payment exonerated us from further legal proceedings in the Cote d Ivoire. Overview of Porto Koelo Following the 2006, Porto Koelo incident in Ivory Coast, our standing has suffered a lot and is feared that this incident has affected our business. It probable that, the incident has branded the company’s’ image negatively. Considering the magnitude of the effects of the incident to the people of Abidjan and its suburbs, the incident has attracted the attention of the whole world through the wife spread news. The dumping of toxic and killer gases was done unprofessionally and against the human rights consideration, which was not our wish. The gases caused severe headaches, burns to lungs, deaths and skin as well as vomiting. According to the meeting we held last, we observed that the enquiry conducted indicated that the act done by the subcontractors was unfortunate. Dumping of the toxic waste at diverse points in the largely populated suburbs without considering the effects that may be caused to the populace was unprofessional and unethical. The biggest challenge we face as company is the tough process of settling the dust about the company’s brand across all its market niches in the globe. This fear follows the BBC’s report and consequent negative publicity. What happened however was beyond our expectations. I believe that there is need for an apt solution, which may include rebranding our image. However, I have learnt that subcontracting might not be the best option to consider in the near future. Following my discussion with the consultant, I realize that some of the underlying issues believed to have led to this incident include risk management, poor leadership, poor environmental risk management and non-compliance. If we adhered to the company’s strict risk management policies, this incident might have not happened. The company’s leadership was expected to investigate the formation of the Compagnie Tommy, which was subcontracted. According to the information, I have so far this company was formed a few days before the contract. This was a clear indication that this company was incompetent and would have been avoided. This implies that, its formation was strategic. On equal measure, when I compare the cost of dumping the waste with that of the initial contracted company in the Netherlands, the difference is too big; this costing would have raised an alarm on the experience of Compagnie Tommy, which agreed to dump the waste at only £ 18,500. To deter future similar incidents, there is dire need to recheck the decision making process by the top leadership and consequent revision of the procedures of contracting, improve and implement the existing environmental risk management systems. Diverse standards should be appreciated and embraced at whatever cost to ensure a procedural path in redeeming the company’s brand. The overall endeavour in the intended procedures and systems is strictly inclined to the improvement of the company’s’ undertaking both locally and globally. I believe that the consultant’s advice on the need to embrace and sustain a high-level of sustainability is fundamental in adding a considerable extent of value to the company, particularly on the systems and procedures of the company. The issue at hand is solvable; however, various sustainability aspects should be incorporated in diverse stages of the organizations’ structure. This process is fundamental for the company, particularly in handling this problem and trying to redeem its image in a bid to retain the market niche relative to the company’s primary objective, which is to do business, make profits as well as sustaining its market niche. However, undertaking this project should be based on an affordable costing and a shorter period. To have a glimpse of the overall process, an outline on how this problem can be solved involves embracing aspects of governance, which include transparency and accountability in leadership, societal participation and safeguarding the environment. In essence, practices such as governance, partners and members’ engagement and disclosure in all the financial documents should be embraced to ensure that, the company moves to and sustains its position in the market trading. There is need for wide consultation before making a decision that is critical for the company’s operations. I believe that, if in-depth consultations had been made before making the move to contract the Compagnie Tommy, such immense destruction and losses would have not occurred. This implies that, the company’s’ top leadership should embrace well-structured procedures and dialogue biased on in-depth research and situational analysis before making a decision of such a magnitude. There should be well-coordinated participation and teamwork in handling any decision making process. Embracing this culture will see the company avoid unnecessary fines and compensations resulting from uninformed decision-making. For the case of cleaning up the company’s unsound systems identification of all the probable loopholes in the HSEC policy should be done and relevant changes that can work for the company to avoid the occurrence of similar incidents in future, proposed. Despite all the company’s’ activities both locally and internationally are compliable with all the relevant legislations, the diminutive loopholes, which can be attributed to the Porto Koelo incident should be evaluated and corrected. This incident tells us that there are some changes required to be implemented for the betterment of the company to redeem and sustain the positive image. My consultant indicates that the Vitra Group Plc- a contracted company should initiate and enforce the anticipated HSCE changes with the business partners. This company should ensure that, the business partners embrace equivalent, harmonizing policies and principles for compliance purposes to reduce complexity in trading. Harmonized policies and principles help in cutting down the cost of carrying out business transactions. In addition, numerous incidents like that of Porto Koelo would be avoided. I believe that this is an excellent strategy if well implemented; however, some level of scepticism on the process of convincing the business partners to comply with the mentioned policies and principles can be expressed. The preservation on this issue is attributed to the belief that diverse companies or trading partners have dissimilar cultural backgrounds, which may be a barrier in implementing the policies. However, despite the diversity on the cultural backgrounds of these organizations and business partners, they share a common destiny of making profits and expanding their market niche and this only possible if, they agree to flex their beliefs. Expansion of market niches amongst the trading partners is cost effective and profitable and any organization sensitive to the two aspects, which is believable that all organizations endeavour to be compliant with the policies governing trade amongst its trading, collaborates. Vitra Group’s approach on Health and Safety, Environment and Community Relations Health and Safety For the case of the Health and Safety, I would want the Vitra Group plc to endeavour in identifying all risks and hazardous behaviours and then act effectively in extenuating them. Sustenance and improvement of the existing health and safety management systems should be enhanced by ensuring that the organization’s employees have adequate skills and information on handling diverse situations emanating from systems’ failures. This will reduce incidents and hence propel the company to higher heights of performance. Environment I believe that, the Virta Group plc will endeavour in reducing the effects resulting from its business activities on the environment. Apt environmental management systems should be put in place to ensure good living conditions to the surrounding populace. In addition, mitigation practices should be embraced and incorporated into the organization’s structure to ensure timely correction of environmental hazards (DESS, & MILLER, 1993). This will enhance respect for human rights, particularly those that touches on a clean environment. Community Relations We cannot prosper in our operations if our company is not well connected with the community. Public relation managers will be required to engage the community in a bid to enhance the company’s brand of products. However, it should be noted that, apt community relations could only be sustained by high level of respect to the members, reduced health risks and promotion of community based projects. These endeavours help in building a positive brand of the company. This aspect should be a primary disquiet particularly, the Porto Koelo incident. The company’s image and product brand I am aware that the Ivory Coast incident is now everywhere across the globe’s news and it needs immediate action to revert the impacts. The Vitra Company should be in the forefront in bridging the already created gap. As a company we will ensure that, the surrounding community does not continue to suffer from the incident’s effects. The company should make immediate arrangement of clearing the remains of the wastes in Abidjan. These efforts will help in reversing the negative image of the company and environmental effects on the community. This process is likely to cost an approximated value of €120 million over the next 2-3 years. The question that arises involves the extent to which the company’s level of efficiency in solving the problem at hand in tandem with the approximated cost. It seems that the mitigation process is expensive. This implies that, we will achieve its anticipated goals upon spending this large amount of money. In addition to this mitigation process, and endeavour in upgrading the existing standards such as ISO9001 and ISO/TS 29001 to put the company at bar with other organizations in the same industry (DESS, & MILLER, 1993). It is agreeable that, well-managed systems, upgraded standards and good relations with the community will lead to our success in terms of market niche enlargement and increased profits. I believe all that we have discussed we will be able to redeem our image and once again propel our come back to the normal track. SELF-REFLECTION The role-play by the two parties has been excellent because of the apt understanding of the issues of the oil and natural resources. Both parties participated well and provided direction on issues where necessary. It is believable that if the discussion is put into real application, it will save the company’s image and enhance its profitability. I have confidence on the suggestions raised this far. For instance, I find a lot of confidence on the consultant’s description of the overall outline of the system we will apply in organizing our internal systems that involves decision-making and situational analysis. Following my discussion with the consultant, I can now state that redeeming of our image is probable, however we should bear in mind that the task is not easy, as already a great extent of negative publicly has been created by world news (DESS, & MILLER, 1993). Another observation, I have made so far of the intended systems procedures is that, it is going to be expensive to sustain the intended plan of system overhaul. This implies that a proper budgeting process should be implemented to ensure that, we do not overspent on one aspect and strain others. Therefore as Trifigura’s CEO, I conclude by stating that our corporate responsibility and mitigation processes of our internal control systems will play a fundamental role in changing our name to a better brand. List references DESS, G. G., & MILLER, A. (1993). Strategic management. New York, McGraw-Hill. Read More