Content Pages

Table of content i

List of diagrams ii

List of Abbreviation iii

Table of contents

Title Pages

Chapter 1.0

1.1 Introduction to crisis Management and Disaster recovery strategy 2

1.2 Problem statement 8

Chapter 2.0

2.1 Literature Review 9

2.1.1 Key definition 9

2.1.2 Crisis definition 9

2.1.3 Types of crises 10

2.1.4 Crisis Management 12

2.1.5 Stages of crises 14

2.1.6 Crisis Management plan 15

2.1.7 Crisis warning 17

2.1.8 Corporate risk and classification of risk 18

2.2 Smoldering crisis situation 23

2.3 Analysis 25

2.3.1 SWOT Analysis 25

2.3.2 Ishikawa fishbone diagram 27

2.4 Crisis strategic plan 28

Chapter 3.0

3.1 Recommendation 31

3.2 Conclusion 35

3.3 References 36

i

List of diagrams Page

Diagram 1.0 Ishikawa Fishbone Diagram 21

ii

List of abbreviation

Disaster Recovery Plan – DRP

Busines Continuity Plan – BCP

Business process Contigency Plan – BPCP

Disaster Recovery – DR

Disaster Recovery Center - DRC

iii

Chapter 1.0

1.1 Introduction to crisis Management and Disaster recovery strategy

Crisis management is the application of strategies designed to help an organization deal

with a sudden and significant negative event.

First we remain to the main objective of organizational crisis management. The

objective of organizational crisis management is to make timely decisions based on best facts

and clear thinking when operating under extraordinary conditions. At its best, crisis

management is both proactive and reactive. In valuable preparations can be made in advance

of any incident, and decisions and actions taken during an incident can be optimized if crisis

management plans have been put into place. Through a crisis-management approach,

organizations identify the relevant antecedents, consequences and lessons that lead to, follow

and emerge from crisis and near misses.

A crisis can occur as a result of an unpredictable event or as an unforeseeable

consequence of some event that had been considered a potential risk. In either case, crises

almost invariably require that decisions be made quickly to limit damage to the

organization. For that reason, one of the first actions in crisis management planning is to

identify an individual to serve as crisis manager. 

Hence, the effective decisions during a crisis strike a balance between timeliness and

certainty. That is, critical decisions and actions can be managed quickly but not rashly despite

uncertainty and incomplete information. Crisis management enables organizations to identify

and attain this balance more readily.

So, to prevent and maintain if the crisis occur we can practice some step firstly by

planning in detail for responses to as many potential crises as possible. Then, establishing

monitoring systems and practices to detect early warning signals of any foreseeable crisis. 

Next, establishing and training a crisis management team or selecting an external crisis

management firm with a proven track record in your business area.  And finally involving as

many stakeholders as possible in all planning and action stages. 

1

Disaster recovery strategy

A disaster recovery plan (DRP) sometime referred to as a business continuity plan

(BCP) or business process contingency plan (BPCP) describes how an organization is to deal

with potential disasters. Just as a disaster is an event that makes the continuation of normal

functions impossible, a disaster recovery plan consists of the precautions taken so that the

effects of a disaster will be minimized and the organization will be able to either maintain or

quickly resume mission-critical functions. Typically, disaster recovery planning involves an

analysis of business processes and continuity needs; it may also include a significant focus on

disaster prevention.

Disaster recovery (DR) is becoming an increasingly important aspect of enterprise

computing. As devices, systems, and networks become ever more complex, there are simply

more things that can go wrong. As a consequence, recovery plans have also become more

complex. According to Jon William Toigo the author of  book Disaster Recovery Planning.

For example, fifteen or twenty years ago if there was a threat to systems from a fire, a disaster

recovery plan might consist of powering down the mainframe and other computers before the

sprinkler system came on, disassembling components, and subsequently drying circuit boards

in the parking lot with a hair dryer. Current enterprise systems tend to be too large and

complicated for such simple and hands-on approaches, however, and interruption of service or

loss of data can have serious financial impact, whether directly or through loss of customer

confidence.

Appropriate plans vary from one enterprise to another, depending on variables such as

the type of business, the processes involved, and the level of security needed. Disaster

recovery planning may be developed within an organization or purchased as a software

application or a service. It is not unusual for an enterprise to spend 25% of its information

technology budget on disaster recovery.

Nevertheless, the DR industry is that most enterprises are still ill prepared for a

disaster. According to the Disaster Recovery site, Despite the number of very public disasters

2

since 9/11, still only about 50 percent of companies report having a disaster recovery plan. Of

those that do, nearly half have never tested their plan, which is same to not having one at all.

Disaster recovery strategy

Disaster Recovery Plan (DRP) Disaster Recovery Plan is a procedure that should be

performed when the continuation and survival of the business running, namely in the form of

measures to rescue and recovery are concerned, particularly in the information technology

facilities and system info-viding owned enterprises, all a general focus on 'how to restore their

data systems. However, planning requires the involvement of other units and du curves of

Disaster Recovery Plan for greater coverage all have the ultimate goal is to guarantee

sustainability of key business processes. Disaster Recovery Plan is part of the strategies

available to business sustainability plan in the face of disaster that threatens the sustainability

of key business processes.

With the support of the DRC (Disaster Recovery Center) as a place / area storage and

processing of data and information at the time of the disaster that results in data centers that

are experiencing temporary interruption, partial or even total damaged enough to require a

long time to recovery. Core processes is an important process that should always be

performing. This is done to protect the core process of the resources that come from natural

disasters, viruses, terrorism, in and out as well as other source Unpredictable. One effort to

anticipate when these things happen is to develop a Disaster Recovery Center (DRC). Where

in the event of a serious disorder that strikes one or more important in the enterprise work

units such as storage and processing of data and information production process is still running

as it should be because there's DRC took over the functions of the broken is.

Disaster Recovery Center is a facility of the enterprise that works to take over the

function of a unit when there was a serious disorder that strikes one or more units of important

work in the enterprise, such as the storage and processing of data and information.

3

You’ll want to consider issues such as budgets, management’s position with regard to

risks, the availability of resources, costs versus benefits, human constraints, technological

constraints and regulatory obligations.

Let’s examine some additional factors in strategy definition people. This involves availability

of staff/contractors, training needs of staff/contractors, duplication of critical skills so there

can be a primary and at least one backup person, available documentation to be used by staff,

and follow-up to ensure staff and contractor retention of knowledge.

Physical facilities, Areas to look at are availability of alternate work areas within the

same site, at a different company location, at a third-party-provided location, at employees

homes or at a transportable work facility. Then consider site security, staff access procedures,

ID badges and the location of the alternate space relative to the primary site.

Technology, You’ll need to consider access to equipment space that is properly

configured for IT systems, with raised floors, for example; suitable heating, ventilation and air

conditioning (HVAC) for IT systems, sufficient primary electrical power, suitable voice and

data infrastructure, the distance of the alternate technology area from the primary site;

provision for staffing at an alternate technology site, availability of failover to a backup

system and failback return to normal operations technologies to facilitate recovery support

for legacy systems; and physical and information security capabilities at the alternate site.

Data, Areas to look at include timely backup of critical data to a secure storage area in

accordance with RTO/RPO requirements, method of data storage (disk, tape, optical,)

connectivity and bandwidth requirements to ensure all critical data can be backed up in

accordance with RTO/RPO time scales, data protection capabilities at the alternate storage

site, and availability of technical support from qualified third-party service providers.

Suppliers,  You’ll need to identify and contract with primary and alternate suppliers for

all critical systems and processes, and even the sourcing of people. Key areas where alternate

suppliers will be important include hardware (such as servers, racks), power (such as batteries,

universal power supplies, power protection), networks (voice and data network services),

repair and replacement of components, and multiple delivery firms (FedEx, UPS, etc).

4

1.2 Problem Statement.

Based on the case study of the company we chose which was facing smoldering crisis

is Europlus Constructions Pvt. Ltd. Which were having problem in the management and

indecision The company were facing the problem of abandoned housing construction project.

The main cause of the problem faced was from financial problems. The problems arised from

an weak management decision making in the management of the company. The crisis they

faced is categorized as human error.

The weakness of management had caused the financial department to have difficulties

thus resulting errors in balancing the cash out flow anf the cash in flow for the expenses of the

project. Furthermore, the problem caused from the weak management also causes the arise of

another problem. Which were, the failure to claim back their matured investments valued RM

1.3 Billion in total due to the termination of construction works. In addition, the termination

also was due to the shortage of steel supplies and sand for the continuation of the project.

Besides the problems faced by the company, the problems they faced also causes

problems to the purchasers of the housing development. The problems faced by the purchasers

are such as they are unable to occupy their house units on the promised date. Next, eventhough

the house is incomplete the purchasers have to pay monthly instalments of their housing loan.

Then, the purchasers have to rent temporary house until the project is complete. Furthermore,

there were several of the purchasers have been blacklisted by the financers due to inability to

regularize their housing loan accounts.

5

Chapter 2.0

2.1 Literature review

2.1.1 Key Definitions

Organizations and individuals find themselves frequently in situations which can be

defined as crises, such as the BP disaster. The necessary processes to react to a crisis are to

prepare for it and respond to it, in short, crisis management. A critical constituent of crisis

management is crisis communication. The variety of crisis events, types, and scenarios and the

diversity of crisis research make it necessary to establish a framework and set the boundaries

for this research project. Crisis, crisis management, and crisis communication are inseparably

connected to each other and are to be explained and narrowed down in progression from crisis

to crisis management to crisis communication (Coombs, 2010a).

2.1.2 Crisis Definitions

There are many descriptions of crisis, and although there is no commonly shared definition.

The focus of these selected definitions is on organizational crisis and although they may have

conceptual similarities, they are not exactly the same. These are the definitions of crisis based

on different books and authors.

A specific, unexpected and non-routine event or series of events that create high levels

of uncertainty and threaten or are perceived to threaten an organization’s high priority goals

(Ulmer et al, 2007, p.7).

A crisis, by definition, is an event, revelation, allegation, or set of circumstances which

threatens the integrity, reputation, or survival of an individual or organization. It challenges

the public’s sense of safety, values, or appropriateness. The actual potential damage to the

organization is considerable and the organization cannot, on its own, put an immediate end to

it. (Sapriel, 200, p. 348)

Adkins (2010) combined the most common crisis definitions and summarized them

into the following. Crisis is an unexpected and unpredictable event which is caused by some

6

type of event, threatens organization’s stakeholders’ expectations, places no routine demands

on organizations, produces uncertainty in an organization, has a negative impact on

organizational performance, potentially produces negative outcomes, threatens high-priority

organizational goals, harms either the organization or the public, and produces accusations

concerning the organizations involved.

Falkenheimer and Heide (2010) propose a definition which is utilizable for

organizations as well as for society: A crisis means that the normal order in a system is

destabilized, which creates considerable uncertainty and requires rapid intervention.

The majority of crisis definitions are used to reflect serious events which have the

potential to seriously damage an organization (Coombs, 2010). Ulmer, Sellnow, and Seeger

(2010) observe that the term crisis is often used to portray bad experiences and difficult times,

but not all bad experiences or difficult times are actually crises. Sometimes events or issues

are named “crises” in order to draw widespread attention (Seeger et al., 2006). Generally a

crisis could be summarized as a serious event which has the potential to affect an organization

and/or its stakeholders negatively if the situation or incident is not managed properly

2.1.3 Types of crises

Crises come in all shapes, types and forms and can affect all kinds of organizations and

key figures. Well-publicized events such as the Chernobyl reactor accident that happened in

1986 , the 9/11 terrorist attacks in 2001, the tsunami in Indonesia, the swine/bird flu threat, or

the global financial crisis, the missing of flight MH370, the collapse of highland tower, made

the news around the world and maintained intensive media interest for weeks and months.

These events brought crises into the media spotlight and increased public.

Crises are not separate or isolated incidents any more. A single crisis event has the

potential to develop into a world-wide crisis. Most crises nowadays are global due to the

development of new communication technologies. Crisis events are broadcast globally and

even remote areas of the world are now accessible to media and connected to 24-hour-

networks. Through new technologies, delays between an incident and the resulting media

7

coverage are unlikely and media have a heightened interest in crises, because crises are

dramatic and negative and therefore newsworthy.

In addition, crisis creates damage and costs money, which creates the demand for

knowledge on how to avoid crisis, minimize the potential loss, and respond appropriately to

protect investment, human resources, and reputation. Falkenheimer and Heide (2010) explains

that crises are social, political, and cultural phenomena that originate in a great number of

interacting causes and events, which through their complexity cannot be predicted. Benoit, on

the other hand, argued that although crises come in a variety of forms, some potential crises

can be anticipated. An airline, for example, has to expect an airplane crash every moment, just

as a restaurant should always be prepared for cases of food poisoning. Furthermore,

organizations are exposed to possible crises every day which can damage an organization’s

reputation and cause stakeholders’ disapproval. Crisis events can range from property damage

or loss, loss of life, environmental harm, to questionable decisions of the management.

A crisis can threaten the survival of an organization and damage its financial, physical,

and emotional structures. Crises are more and more likely events for organizations, due to

rapid technical development and globalization among other reasons, and every organization

can be affected. As Mitroff stated “... people want to believe that it could not happen to them.

It not only can, but unfortunately, the probability is very high that it will”. A crisis destabilizes

the normal order in organizations and managers are forced to respond rapidly to radical

changes, disruptions, and uncertainty caused by crises situations. Jaques (2010) emphasized

that “virtually nothing can damage organizational reputation and financial performance more

rapidly and more deeply than the impact of a major crisis”. The bottom line is that no

organization, public or private, is safe or immune to crisis as crises are a fact of organizational

life (Coombs, 2007).

8

2.1.4 Crisis Management

Due to the heightened exposure of organisations to natural and human catastrophes,

crisis management is an expanding area of interest. It is one of the dominant areas in public

relations research and a crucial organisational function. Crisis management is a tool designed

to fight crisis, minimize the inflicted damage and protect the organisation, stakeholders and

industry from harm.

Crisis management processes include preventative measures, crisis management plans,

and post-crisis evaluations (Coombs, 2010; 2007). Coombs (2007) and Heath (2010) divided

crisis management into three main work categories: First, pre-crisis (is concerned with

prevention/preparation – what can be said or done to reduce the chance of crisis and moderate

its harm if it occurs); second, crisis (actual response to a crisis); and third, post-crisis (revision,

follow-up information, lessons learned, and preparation for next crisis). Pearson and Mitroff’s

more detailed classification divided crisis management into the five phases of signal detection,

preparation and prevention, containment and damage limitation, recovery, and learning. As

both definitions illustrate, the descriptions are very similar, except that Pearson and Mitroff’s

model divides pre- and post-crisis management into two more, separate sections.

Nevertheless, all authors describe the same management functions.

Sapriel (2003) stated that crisis management must be directed from the top of the

organization and implemented in all key business functions. She pointed out that statistics

illustrate that most organizational crises originate with management inaction or neglect and are

non-event-related. Bad business judgment or mismanagement (corporate, individual, or

governmental) is more likely to threaten organizational existences than one-time events

(Heath, 2010).

9

Conventional management is often of little use in crisis situations and it does not help

with coping or preventing crisis. Furthermore, as Mitroff (2004) noted, conventional ways of

thinking are often the cause of major crises as examples such as Ford/Firestone,

Enron/Andersen, or the Mad Cow disease demonstrate.

Crisis management and crisis communication are also interconnected with the areas of

issues management, risk communication, disaster communication, and reputation

management. These allied fields overlap in conceptualization and application and share an

important connection to crisis communication

10

2.1.5 Stages of crises

According to Steven Fink, successful crisis planning removes much of the threat and

uncertainty in potential future crises, and allows for more control should a crisis appear ( in

Paraskevas, 2006). Despite finks approach to crisis planning being fairly old, dating back

almost 25 years, it mirrors the approach of current management. Fink states that a crisis can

consist up to four different stages, first is prodormal crisis stage, second is acute crisis stage,

third is chronic crisis stage and fourth is crisis resolution stage. Steven Fink’s statements

shows that any crises can be described as being in an of the four stages. It is important to

identify early warnings signals for the crisis, even though it might be hard to recognize them,

especially crises in prodormal state. A crisis may even be apparent to an organization, yet no

action is taken too prevent it. Once the organization has passed the initial stage, the crisis will

start causing harm depending on how well prepared and effective the organization is. The third

stage is referred to as the ‘clean up’ stage. The organization tries to retrieve from the crisis,

and learn from the mistakes it made and the success of it’s crisis response. In the final stage,

the organization goes back to normality, and resumes with its business as usual. ( Paraskevas,

2006 )

11

2.1.6 Crisis management plan

Individuals need to adopt a step by step approach during critical situations. Planning i

sessential when facing a crisis. Getting hasty during a crisis doesnt help in solving any

problem during a crisis, instead it will make the situation even worse. It is essential to think

rationally an devise strategies which would work best during emergency situations.

Crisis management plan refers to a detailed plan which describes the various actions

which need to be taken during critical situations or crisis. Therefore, any plan prepared by

superiors, membersz of crisis management team and related employee to help the organization

overcome crisis in the best possible way is called crisis management plan.

In an organization it is vital to have its own crisis management plan. The reason is

because the crisis management plan helps the employees to adopt a focused approach during

emergency situations. Besides that, crisis management plan also elaborates the actions to be

taken by the management as well as the employees to save the organization’s reputation and

standing in the industry. It gives a detailed overview of the roles and responsibilities of

employees during crisis. In addition, Individuals representing the crisis management team

formulate crisis management plan to reduce the after effects of crisis at the workplace.

Furthermore, crisis management plan helps the managers and superiors to take quick and

relevant actions as per the situation and protects an organization from inevitable threats and

also makes its future secure. Therefore, such plans can reduce instability and uncertainty

amongst the employees and help them concentrate on their work.

Crisis Management Plan should be made in the presence of all executives. Every

member of crisis management team should have a say in the plan. It is important for each one

to give his / her valuable inputs and suggestions. Furthermore, crisis management plan should

take into account all identified problem areas and suggest a possible solution for all of them to

help the organization come out of crisis as soon as possible. Besides that, the management

team have to make sure the plans are realistic and solve the purpose of saving organization’s

reputation and name.

12

2.1.7 Crisis warnings

Before crises occur, the majority of crises sends a trail of early warning signals, which

announce the possibility that a crisis will take place these signals are sometimes very weak or

hard to detect. There are many limitations to crisis warnings. Some of the limitations of the

crisis warnings are such as weak or subtle signals, sources of crisis signals not viewed as

credible, signals or threats embedded in routine messages, risk/threat messages systematically

distorted, signals not reaching the appropriate persons.

Companies, similar to individuals, try to deny their weaknesses. The reasons why

organizations do not engage in a proper crisis management are because of their denial. Denials

causes the organizations deny that they might be vulnerable to threats of imminent crisis and,

thus, decide that no measure is to be taken. Next, disavowal, where the organizations

recognize that a crisis will affect the organization, but its impact is considered to be too small

to be taken into consideration; in other words, the magnitude and importance of the crisis are

significantly diminished. Besides that, grandiosity is also the reason, organizations presume

that “we are so big and powerful that we will be protected from the crisis.” Then, idealization,

it is where the organizations consider that crises do not happen to good organizations, thus

ignoring all existing signals of crisis. Besides that, the reason also is from intellectualization,

the organizations minimize the probability of occurrence of a crisis. Next reason is,

compartmentalization, it is when the organization believes that if a crisis should affect the

company, it will affect only some departments.

2.1.8 Corporate Risk and Classification of Risks

Generally, risk is the possibility for danger, negatively unexpected circumstance to

occur (Oxford English Dictionary, 2013). In most of economic publications, risk refers to the

negative deviation from the plan (Maylor 2010). In finance, risk is related to the hazard

towards an investment, or loan (Encyclopedia Britannica, 2013). In terms of corporate and

business, risk is the possibility that an event, either expect or unexpected, may create an

unfavorable effect on the organizations. Corporate risks are classified by the impact they

13

might create on different business operational activities. This means that a risk can be

repeatedly divided into different classes. Such as business risks, property risks, information

risks, environmental risks, etc. are some common classifications.

There are many types of risks that are faced by most organizations. According to the

book Common Business Risk Types ( David & Desheng W 2008 p. 7 ) the risk comes from

external environment , business strategies and policies, business process execution peoples,

analysis and reporting and technology and date.

Risks from external environment are from the competitors, legal and regulatory,

catastrophic loss, medical cost, utilization trends and customers expectations. Next, in the

business strategies and policies the risks are from the strategies and innovations, capital

allocation, business product portfolio, organization structure, and organization policies. Then,

from the business process execution is planning, process technology design technology

execution continuity, vendor or partner reliance, customer satifaction, regulatory compliance

and privacy, knowledge or intellectual capital, and change integration. The risks from people

is such as leadership, skills competency, change readiness, communication, performance

incentives, accountability, fraud and abuse. The risks from an analysis and reporting is

performance management, budgetting and financial planning, accounting tax information,

external reporting and disclosure, pricing margin, market intelligence, and contract

commitment. Finally in the technology and data risk type is technnology infrastructure and

architechture, data relevance and integrity, data processing integrity, technology reliability and

recovery, and finally information technology security.

People want to avoid risk, however, the economy as a whole, encourages businesses to

take risks. Business operations, the activities of extracting capitals from one source to other

sources, literally mean taking risks for more profits. Moreover, taking risks in one way or

another brings competition and innovation. Thus, risks are issues that needs structure

management plans, to be understood, prepared for, and to be improved.

14

As risks are not likely equal, based on the frequency of happening, based on level of

consequences, or base on the nature of risk. These are the common ways for risks to be

classified. From likelihood point, risks can be named from likely risks; possible risks;

hypothetical risks to imaginary risks; where losses can happen usually, reasonably, or be

theoretically possible or even unlikely exist. We investigate different risk types based on the

nature of them. The discussion will involve hazard risk, financial risk, operational risk and

strategic risks.

Hazard risks are risk related to working environment, property, and natural catastrophe.

Originally hazards refer to potential harms that can affect health and safety of personnel of

property (The University of Newcastle, Australia). Besides common hazard groups such as

physical, chemical biological, mechanical and psychological which arise from workplace

premises and environment or work practices, risk can grow from uncontrollable factor like

natural disasters. It is commonly agreed to be employer’s responsibility to fix hazards.

Exposure to hazards in workplace does not always result in injuries or severe health effects.

However, preventing hazards from happening ensures personnel to work under no pressure of

being harmed.

Financial risk is a broad term covering many negative risks related to financing, for

instance, liquidity risk, funding risk, interest rate risk, investment risk, pricing risk, credit risk,

and so on. Financial uncertainties can return as favor for one business but loss for another. For

example increasing in fuel price can plus the financial statement for a company that produce

or supply fuels, but this price change can create huge extra costs for a transportation agency.

The consequences and the exposure’s extent an organization may suffer from financial risks

depend on the scale of the company’s financial transactions: how much of the borrowings in

compare to its business scope (CPA Australia, 2006).

Financial risk management is considered a specialization of risk management. In

addition to careful revise on business cash flow and operational forecast, management use

hedging - including stocks, insurances, etc. – as a method for reducing risks in operations and

other investments.

15

Operational risks frequently are summarized as human risks, due to the discussion that

the human error leads to business operations failure. Nevertheless, operational risks include all

risks that incur from organizations’ internal activities involving people, products or services

offered, operational systems, and external factors (Global Association of Risk Professionals,

2011). Banking is the sector facing operational risks with most probabilities. The Basel II

regulations Basel Committee on Banking Supervision listed seven categories of operational

risks: internal fraud; external fraud; employment practices and workplace safety; client,

products and business practice; damage to physical assets, business disruption and system

failure; and finally, execution, delivery and process management.

Even though banks and investment businesses are most vulnerable to operational risks,

other types of businesses share a common threat from this kind of risk. Small day to day losses

due to customer dissatisfaction or bad reputation can add up and cost any firms significantly

damage. Some risks might be more sensational than others; however what matters is a strong

and suitable management structure according to the selected operational risk methodology.

Especially, a business manager needs to build a sufficient system of staff and resources, as

well as provide an appropriate leadership behavior. In addition, monitor, review and update

current management data and structure is a crucial step in managing operational risks (An

Oracle White Paper, 2010).

Strategic risks imply the probabilities of a loss arising from a poor strategic business

plan, decision, or from the inconsistent and inappropriate implementation according to the

plan. Strategic risks pose threat to earnings, capital availability and corporation’s viability.

Because strategic plans indicate the operation direction as well as framework, vision and

objectives of an organization, the lower the probability of strategic risk stays, the stronger the

organization is. Thus, boards of directors are focusing on how organizations identify, assess

and manage their risks. Strategic risk management requires concentrations on risks to

shareholder value as the ultimate goal (Beasley, et al. 2008) while considering the effect of

external and internal scenarios to the ability of organization to achieve its goals. Strategic risk

management is a primary component of an enterprise risk management (ERM, to be

16

introduced in the later part of this Literature review sector) process. Understanding the

strategies of the organization is the essential foundation step in a strategic risk assessment. The

assessment process should continuously reflect the corporate model, and be supported by valid

strategic risk profile, together with risk management communication and action plan. (Frigo

M., et al. 2009)

17

2.2 Smoldering Crisis Situation

Europlus Construction Sdn Bhd Abandoned Housing Project

The housing project is located at Seri Kembangan, Serdang, Selangor. The construction

of this project involved several phases of development. These phases are Phase 1A (238

housing units), Phase 1B (150 units), Phase 1C (68 units) and Phase 2 (133 units). The

percentages of completion of each of these phases as at November, 2007 are 86% (for Phase

1A), 80% (for Phase 1B), 70% (for Phase 1C) and 90% for Phase 2.

Lestari Permai was lauched in the early 2004. This project should have been completed

in 2 years after the date of the sale and purchase agreement executed, it should be duly

occupied by early 2006. The main reason for the abandonment of this project was the financial

problems faced by the developer–Europlus Construction Sdn Bhd, being a subsidiary for

Kumpulan Talam Corporation Berhad (‘TALAM’). The holding company–TALAM too faced

financial difficulties as they failed to balance the cash out flow and the cash in flow of their

housing ventures, as the result of the repayment obligations they have to make to their

financiers for an investment of a land of 11,878 acres, overdraft facilities and repayment of the

company bonds in maturity against the cash in flow from the expected progress development

claims and receipts, which Talam failed to obtain, due to termination of the construction

works. The termination was caused by the shortage of steel supplies and sands.

Besides, to overcome the problems of their abandoned housing projects, TALAM have

taken the following steps which is making new appointment of a new contractor and undertake

certain joint ventures with other housing development contractors such as IJM (Corporation)

Sdn. Bhd., IJM (Projects) Sdn. Bhd and Salam Kurnia Sdn. Bhd and refund the deposit

payments made by purchasers of eight housing projects.

Moreover, these are among the problems faced by purchasers as the result of the

abandonment. The problems that they had faced is inability to occupy the housing units on the

date as promised by the developer, they have to pay monthly instalments to their respective

financiers, as the financiers have released substantial portion of their housing loans to the

developer. Besides, they also have to rent other houses in the course awaiting the completion

18

of the purported housing units. Other than that, there are purchasers who have been blacklisted

by the financiers as they are unable to regularize their housing loan accounts, there also are

purchasers who have divorced due to the mounting living expenses and insufficient incomes,

partly due to the abandonment, meetings and discussions with the authorities, for example, the

Ministry of Housing and Local Government (MOH), always failed to render any positive

outcomes and MOH, hitherto, have unable to solve their problems. There are also some

purchasers who have received wrong information regarding their housing project, from MOH

and MOH does not categorise the late and problematic housing development projects

undertaken by Talam and its subsidiaries as ‘abandoned housing projects’ in accordance with

the MOH common and official definition of abandoned housing project on ‘abandoned

housing project’. This has caused problems to purchasers, in their attempt to obtain

confirmation of their projects as ‘abandoned housing projects’ for the purpose of getting

reduction of monthly instalment payment from their respective financiers. In addition, MOH

had failed to enforce and carry out the legal provisions in the Housing Development (Control

and Licensing) Act 1966 (Act 118) and its regulations and this had resulted in certain losses to

the purchasers due to the abandonment.

Apart from Lestari Permai, there are many more housing development projects carried

out by TALAM and its subsidiary companies, which are also facing the same problems, late

delivery and abandonment which is Bukit Beruntung (Europlus Sdn. Bhd), Putra Perdana

(Kenshine Sdn. Bhd), Taman Puncak Jalil (Maxisegar Sdn. Bhd), Lagoon Perdana (Tenaga

Gagah Sdn. Bhd), Ukay Perdana (Highrise) (Ukay Land Sdn. Bhd), Bukit Pandan Bistari

(Supreme Precious), Ukay Perdana Superlink (Ukay Land Sdn. Bhd), Saujana Putra (Galian

Juta Sdn. Bhd), Lestari Puchong (Lestari Puchong Sdn. Bhd), Bukit Pandan (Mudi Angkasa

Development Sdn. Bhd), Bandar Pinggiran Cyber (Perspektif Perkasa Sdn. Bhd), Sierra Ukay

(Terang Tanah Sdn. Bhd), Lestari Perdana (Abra Development Sdn. Bhd), Saujana Puchong

(Expand Factor Sdn. Bhd), Saujana Putra (Galian Juta Sdn. Bhd), La Cottage (Metro Tegas

Development Sdn. Bhd), Saujana Putra (Sanjung Hemat Sdn. Bhd). Besides, Templer Saujana

(Abra Development Sdn. Bhd) and Kinrara Perdana (Sentosa Restu (M) Sdn. Bhd) are also

apart from Lestari Permai that include in housing development projects carried out by

TALAM.

19

2.3 Analysis

2.3.1 SWOT analysis

The strength. A construction company’s strengths can come from a number of different

avenues. Construction is an industry where efficiency and staying on schedule is particularly

prized, so having strong project management skills is a strength. So is a strong brand name,

given that construction tends to be an expensive field to enter. If a company has a diversified

array of projects and expertise, that provides a cushion against a slowdown in any one

particular sector, which is definitely a strength.

The weakness. If too much of a construction company’s business is with any one client

or in any one particular geographic area, that leaves it vulnerable to a slowdown. A company

specializing in remodeling homes may be in trouble in a market where more people are eager

to buy, while companies that rely on constructing new homes face challenges in cooler

markets where people stay put. If a company is lacking a key team member or skill, that puts it

at a comparative disadvantage. Also, if the company promotes its managers based on their on-

the-job expertise, it may leave the company in an inferior position to rivals with a more

professional management team.

The opportunities. If too much of a construction company’s business is with any one

client or in any one particular geographic area, that leaves it vulnerable to a slowdown. A

company specializing in remodeling homes may be in trouble in a market where more people

are eager to buy, while companies that rely on constructing new homes face challenges in

cooler markets where people stay put. If a company is lacking a key team member or skill, that

puts it at a comparative disadvantage. Also, if the company promotes its managers based on

their on-the-job expertise, it may leave the company in an inferior position to rivals with a

more professional management team.

The threats. For a construction company, some threats may be beyond your control,

such as an industry slowdown caused by difficult economic times. Others external threats may

expose an internal weakness. For example, in a buyers' market, those wishing to procure

20

construction services may treat the purchase like something they'd buy from an Internet deal

website, using the technology at their fingertips to gather multiple bids and drive profit

margins down. If your cost structure is higher than your rivals, that combination of customer

initiative and market dynamics is a major threat to your ability to compete for business.

Changing market preferences can also be a threat. If your core business is building assisted

living facilities in a market where seniors increasingly are looking to remain independent as

long as possible, your units are going to be less popular than senior housing facilities with

amenities like larger bathrooms and easy access to restaurants and shopping.

2.3.2 Ishikawa Fishbone Diagram

Diagram 1.0

21

2.4 Crisis Strategic Plan

Every crisis is unique. This makes it difficult to foresee all required strategies and

components in advance. Every strategy and component must be cautiously modified to suit the

particular situation (Avery & Lariscy, 2010). Additionally, organizational contexts are diverse,

dynamic, and multifaceted. Contextual factors and situational variables have to be taken into

consideration, because what is usable and expedient in one industry may have limitations to

applicability in another (Seeger, 2006). Other factors for contemplation are the type of crisis

and the surrounding circumstances. Kent (2010) supports this notion by adding that there is a

need for more research examining which strategies work best or are most useful in specific

circumstances. The knowledge of how one specific organization handled a crisis is less useful

than consolidated findings about how a number of organizations handled similar crises in

similar circumstances. This section of the chapter is going to provide an overview over crisis

communication strategies and compare two different approaches with each other.

Theories, models, and communication approaches suggest diverse, but often similar

strategies to handle a crisis. The similarities make it difficult to relate strategies to certain

theories or models. For instance, Benoit’s Image Restoration Theory and Coombs’ (2007a)

Situational Crisis Communication Theory have crisis communication strategies in common.

Although differently named or categorized, they suggest similar tactics in crisis situations. For

instance, a strategy which is called “shifting the blame” in Benoit’s denial category is named

“scapegoating” in Coombs’ denial category, but both strategies intend to blame someone else

outside the organization. Another example is Benoit’s reducing the offensiveness category,

suggesting “minimization” (crisis is not that bad) as a strategy which is similar to Coombs’

diminishment category, proposing “justification” (minimizing the perceived damage) as a

possible strategy. Benoit assigned his image restoration strategies into the five groups of

denial, evasion of responsibility, reduction of offensiveness, corrective action and

mortification.

Coombs (2007) grouped his SCCT-strategies into four clusters of strategies which are

perceived as similar. Denial strategies seek to reject the organization’s responsibility for the

crisis. Diminishment strategies attempt to reduce attributions of organizational control over the

crisis or the negative effects of the crisis. The rebuilding strategies try to improve the

22

organization’s reputation. Denial, diminishment and rebuilding strategies also include varying

degrees of accommodation, which shows concern for the victims and reflects on how much

responsibility the organization accepts for the crisis. Bolstering strategies are complementary

to the other strategies and aim to build a positive relationship between the organization and its

stakeholders.

Coombs (2007) noted that the variety of crisis response strategies is an indicator for the

fragmentation in the crisis management and crisis communication research. Seeger (2006)

claimed that developing best practices in crisis communications bears certain difficulties, as

there are significant variances in crisis types and it is challenging to identify a significantly

large sample of cases to create generalized rules and principles. Moreover, also type,

organizational history and the specific dynamics of the crisis are critical factors which play an

important role in crisis and make generalization difficult.

Kim, Avery and Lariscy (2009) analyzed public relations research from 1991 to 2009,

using the framework of Benoit’s Image Restoration Theory and Coombs’ (2007) Situational

Crisis Communication Theory. Their study shows that the most frequently used crisis response

strategies by organizations were bolstering (58.8%), denial (56.9%), mortification (45.1%),

attack-the-accuser (36.7%), and shifting-the-blame (34.7%). They observed that the most

effective crisis strategies were full apology (71.4%), mortification (52.4%), corrective action

(52.2%), and bolstering (50%). The least effective strategy, in regard of the outcome of the

crisis situation, was denial although it was the most often used strategy. The majority of crises

were preventable crisis (53%), accident (31%), and victim (20%). Their research apparently

demonstrates that practitioners do not seem to consider advice directives developed by

academic research (Galloway, 2004; Sterne, 2008). The findings suggest that there may be a

gap between crisis communication practice and academic research. For instance, the denial

strategy, which ignores the victims of a crisis, is only useful if the organization has really no

responsibility for a crisis (Coombs, 1999). Lee’s (2000, as cited in Lee, 2004) analysis of

strategies used by organizations in Hong Kong indicated that shifting the blame, minimization,

no comment, apology, compensation, and corrective action were the most often used

strategies. This shows strong similarities, except for the no comment strategy, to Kim’s et al.

(2009).

23

Chapter 3.0

3.1 Recommendation

Based on the case study of Europlus Construction Sdn Bhd, the company were having

problems in their financial management that causes total loss to their customers, clients,

employees, shareholders and the stake holders. These problems faced should be solved and

prevented in the future. Furthermore, there are various ways for solving the problem faced.

Such ways is such as applying strategic management and directing it toward the overall

organizational goals and objectives. That is, effort must be directed at what is best for the total

organization, not just a single functional area. Some authors have referred to this perspective

as “organizational versus individual rationality”. That is, what it might “ look “rational” or

most appropriate for one functional area, such as operations, may not be in the best interest of

the overall firm. For example, operations may decide to schedule long production runs of

similar products in order to lower unit cost. However, the standardized output may be counter

to what the marketing department needs in order to appeal to a sophisticated and demanding

target market.

Next, eliminate eiscretionary spending. If the company were planning on painting

buildings, buying new equipment, or hiring additional employees. Only if a particular expense

is essential to carrying out a crucial marketing or diversification plan should be implemented

ahead. In virtually every other instance, just close your checkbook. Even if the company made

a contractual commitment to spend money, you can try to negotiate your way out of it. If the

company are willing to pay a reasonable buyout fee, it's legal and honorable. After all, once

clued in to the financial problems, the other party may be happy to accept a partial payment

rather than risk the business failing and receiving no payment at all. If the other party simply

won't renegotiate, accept a reasonable buyout offer.

Next, the company should buy more carefully all businesses buy things. It should go

without saying that it will help preserve cash if the company buy in smaller quantities and

negotiate lower prices. But given that prices usually go down when volume goes up,

24

accomplishing these things together may seem impossible. But when times are tough and

suppliers are hungry for business (especially from companies that pay on time). Don't

overlook basic expenditures, such as phone service, electricity, copying, janitorial services,

and payments to independent contractors. Even for smaller purchases, often it's best to ask for

bids (prices) from a number of suppliers, including the old standbys. And don't sign a long-

term contract with the first vendor who offers a better deal. If someone eager to get the

company’s business offers a lower price, the vendor used now will probably try to keep the

business by going lower still.

Other than that, the company stop paying for equipment the compan’s don't need.

When times are good, it's easy to commit to buying or leasing expensive equipment trucks,

cars, bulldozers, electronic gear, forklifts, and so on. Take a hard look at everything owned,

especially items that are still paying for. Sell everything that are don't need. Even if the

company sell a vehicle for less than the company owe and must make up the difference to pay

off the loan, the compan often net large cash savings over time. And if the company still need

the item from time to time, the company can probably rent it by the day for far less. Don't

forget leased equipment. If the company are leasing equipment there is no need absolutely

need, ask the leasing company to renegotiate payments or cancel the lease in exchange for

taking back the equipment. If no one takes the requests seriously, don't be afraid to involve a

lawyer, who should be experienced in explaining that without quick cooperation, the business

may fail. Especially if the leasing company believes they might close down and file for

bankruptcy, it will likely make it a better offer or take the equipment back.

Next, sublet unneeded space. If the business is losing money, the company’s real estate

may now be the most valuable asset make sure it's producing every penny of income it can.

Especially if the business downsizes, rent out unused space if the lease allows it (you may

need to obtain your landlord's prior consent). You might even want to look at moving your

business to another location and renting out the entire building. It is concluded that it would be

impossible to find a subtenant because other businesses also have surplus space. List a part of

the company’s vacancy online and canvass the area for a subtenant who can no longer afford

space of its own. In addition, be creative. Even formerly fiercely competitive retailers may

25

survive by operating out of the same space or combining office, warehouse, or even small

manufacturing operations.

Next, cut the work week of the employees. Another way to spread the economic pain

while saving jobs is to cut the work week. For example, going to a four-and-a-half day work

week saves 10% of payroll; a four-day week saves 20%. Similarly, putting a freeze on

overtime hours will save you money. If the employees are highly motivated to see the business

through to better times (and appreciate the fact that the cuts avoid or reduce layoffs), the

change won't significantly reduce productivity. People will realize that to keep the enterprise

afloat they need to work a little harder and smarter to accomplish the same amount of work in

less time. A few employees may quit, but in a poor economy most will be disposed to hang on

to what they have.

Finally, cut back on insurance expense faced by tough economic times, the last thing

the company want to do is eliminate essential insurance coverage for fire, theft, and liability.

But by increasing deductibles and canceling less essential coverage for things like business

interruption or the death of a key employee, may be able to reduce the overall payments. It

makes more sense to scrimp on insurance if your business is organized as an LLC or

corporation than it does if you are a sole proprietor or partner and therefore personally liable

for business losses. Also, if the business is co-owned and you have established a buy-sell

agreement to allow surviving owners to buy out the deceased owner's inheritors, you might

have also bought a life insurance policy to provide funds for the purchase. If so, consider

canceling this policy, and if you have had it for a while, pulling out its cash value, if any.

26

3.2 Conclusion

From our studies and case study of crisis management and smoldering crisis we can

conclude that crisis cannot be avoided, we have to be prepared to face the crisis. Preparing for

crisis faced can help in minimizing the impact towards the organization. Furthermore, the

management must be keep updated to make sure that the management is being improvised and

benchmarked to make sure the organization in an order so that there will be no panic when

crisis arise.

27

3.2 References

1. Adkins, G. L. (2010). Organizational Networks In Disaster Response

2. The Handbook Of Crisis Communication. (2007). Chichester

3. Ashcroft, L. Crisis Management – Public Relations. Journal Of Managerial Psychology

3. Coombs, W. (2010). Information And Compassion In Crisis Responses: A Test Of Their

Effects.

4. Financial Risk Management Second Edition – Apractioner’s Guide To Managing Market

And Credit Risk. Steven Allen (2007)

5. Strategy (2008 – 2009). David J. Ketchen & Alan B. Eisner

6. Essentials Of Strategic Management – The Quest For Competitive Advantage 2nd Edition.

John E. Gamble & Arthur A. Thompson, Jr.

7. Strategic Management 2nd Edition. MBA Masterclass (2010)

8. Financial Risk Management (2006)

9. Enterprise Risk Management. David L. Olson & Desheng Dash Wu

10. Case Studies In Finance – Managing For Corporate Value Creation 5th Edition. Robert F.

Bruner

11. Risk Management For Accountants. Barlow, Lyde & Gilbert (2007)

12. Cases In Management Accounting – Current Practices In European Companies. Tom

Groot & Kari Lukka

13. Risk Issues and Crisis Management in Public Relations: A Casebook of Best Practices 4th

edition. London, UK: Kogan Page. Regester, M., & Larkin, J. (2008).

14. Crisis Management: Planning for the Inevitable. Fink, S. (2010)

28

15. Effective Crisis Communication: Moving From Crisis to Opportunity. Thousand Oaks,

CA: Sage Publications, Inc. . Ulmer, R. R., Sellnow, T. L., & Seeger, M. W. (2007).

16. Effective Crisis Communication: Moving From Crisis to Opportunity 2nd edition. Ulmer,

R. R., Sellnow, T. L., & Seeger, M. W. (2011).

17. Security Strategies For Today’s Dangerous World Addendum - Crisis Management

18. Effective Risk Management Strategies For Small-Medium Enterprises And Micro

Companies. Lap Duong

19. Http://Emeraldinsight.Com

20. Journal Of Management Education . Http://jme.sagepub.com

29