Desicritics Section: BizTech

How Companies React To Major Crisis Events

Dr Bhaskar Dasgupta — Sun, 4 Jan 2009 20:17:29 EST

The infamous Mohammad cartoons crisis had reached global proportions. One of the most common reactions by Muslims was to embark on a consumer goods boycott against firms which were primarily Danish, but other firms were involved as well, all the way from New Zealand. Similar situations like these keep coming up, whether it relates to boycotts of Israeli made/associated firms/products, or environmental disasters, or religiously oriented issues, corporate firms keep on getting in the crossfire. Unfortunately and unlike nation-states, they are not organised to handle political, religious and other crisis like this. So it was instructive to read how various firms reacted in different ways to the Cartoon crisis.

The paper was quite interesting indeed. Crisis management of this scale is not something that firms do very well. Take for example the recent news story that Lehman Brothers so totally mismanaged their bankruptcy and demise that it cost creditors up to $75 billion US Dollars. The authors quote some interesting events such as:

Environmental catastrophes such as the Union Carbide/Bhopal industrial accident and the Exxon Valdez oil spill had long-term ramifications for the companies involved. Criminal and terrorist acts such as the Tylenol poisonings, the Lockerbie/Pan American disaster and the 9/11 World Trade Center attacks have sensitised the public to a world of intense danger. Some crises, such as the Perrier water contamination crisis, seem largely of the company's own making through quality control failure.4 Others, such as the Belgian Coca-Cola crisis, seem to have arisen out of nowhere, apparently attributable to mass hysteria triggered by the previous dioxin scare, but intensified by corporate mismanagement. According to Johnson & Peppas: “A senior Coca-Cola Enterprises official, Phillippe Lenfant, did state that the scare had been mishandled, that communication was inadequate, and that the company was unprepared for a crisis of this magnitude

But religion is perhaps the one which is most difficult to deal with. Usually religion is the furthest from the minds of corporate executives (with perhaps the exception of praying for divine intervention when sales tank or losses mount) and the authors point to some events:

In 1994, the McDonald's fast-food restaurant chain, during its promotion of the Soccer World Cup, printed the flags of participating nations on its disposable bags. Included was that of Saudi Arabia, which bears the Shahada (Islamic creed) including the name of Allah. Muslims were outraged that the name of God was printed on material to be crumpled up and thrown away.18 A similar situation arose when Amstel, the Dutch brewer, printed the flags under the caps of beer bottles, in contact with alcoholic beverage. In India, Reebok encountered huge controversy over its brand champion, Indian cricket captain Mohammed Azharuddin, autographing footwear – including on the sole – resulting in the name Mohammed being trampled in the dirt, which was seen by some as particularly offensive.

The authors have given a nice timeline for the Mohammad Cartoons crisis.

30 September 2005: Danish newspaper Jyllands-Posten publishes editorial cartoons depicting the prophet Muhammad.

12 Oct: Eleven ambassadors from Islamic countries complain to Danish prime minister and request a meeting with him.

17 Oct: Egyptian newspaper El Fagr reprints six of the cartoons together with an article strongly condemning them.

21 Oct: Danish PM replies to the ambassadors, indicating that freedom of expression is the foundation of Danish democracy and the Danish government has no means of influencing the press. (Refusal to meet the ambassadors has been subsequently condemned by 22 Danish former ambassadors).

28 Oct: Coalition of Danish Muslim groups files criminal complaint. A regional prosecutor investigates but decides against prosecution.

10 January 2006: Norwegian Christian newspaper Magazinet reprints the cartoons, greatly inflaming the situation.

26 Jan: Saudi ambassador to Denmark recalled; retaliatory boycotts against Danish products initiated in Saudi Arabia with supermarkets displaying signs indicating that Danish products have been removed. Norwegian foreign minister condemns publication of the cartoons in a Norwegian newspaper, on the grounds that they incite hatred or hateful expressions.

30 Jan: Jyllands-Posten publishes open letters in Danish and Arabic: “In our opinion, the 12 drawings were sober. They were not intended to be offensive, nor were they at variance with Danish law, but they have indisputably offended many Muslims for which we apologise.”

31 Jan: Danish Muslim group says the apology is “ambiguous” and demands a clearer one.

1-2 Feb: Media in many European countries (France, Germany, Spain, Iceland, Italy, Belgium, Switzerland etc) and in Jordan reprint the cartoons.

2 Feb: Boycott again mentioned in Friday prayers in Saudi Arabia and Kuwait; in Qatar, the Grand Mufti calls for boycotts of Danish products; in Yemen, posters of Danish PM set alight; in Lebanon, the boycott situation “has worsened significantly”; in Morocco, “the affair continues to run in the media”; in Egypt, “the controversy is the main topic in the media and Danish products have been removed from all Egyptian supermarkets”; in Sudan, “the president has issued a statement forbidding buying or trading in Danish products.”

3 Feb: Wellington NZ newspaper Dominion Post indicates an intention to republish the cartoons in spite of the outrage in the Middle East and the already-significant losses reported by Danish dairy giant Arla.

4 Feb: New Zealand ministers warn that the decision by New Zealand newspapers to publish the cartoons is irresponsible and could threaten NZ trade. Specific mention is made of Fonterra which “sells much of its product in Muslim countries”. NZ meat industry officials lambast the media for placing trade at risk. Danish and Norwegian embassies in Damascus and Danish embassy in Beirut torched.

6 Feb: Supermarkets across the Middle East remove Danish products from their shelves. Arla is losing €1.3m a day in sales.

7 Feb: The Iranian government sets up a committee to look at possibly annulling trade deals with countries that have published the cartoons, threatening more than NZ$100m-worth of New Zealand exports.

8 Feb: Politicians in Jordan call for cancellation of trade worth NZ$70m. Prime Minister Helen Clark condemns the publishing of the cartoons and refers to New Zealand's reputation as a “peaceful and understanding nation”. Arla – Fonterra's partner in the UK butter market – closes its factory in Riyadh as the boycott bites. Fonterra publishes advertisements in Middle Eastern newspapers emphasising the NZ origins of its Anchor brand milk powders. NZ diplomatic posts are placed on high alert.

By April 2006: retailers across the Middle East were beginning to restock Arla's products, although uptake was slow, with only 20 per cent of pre-boycott sales being recorded by the end of May. Market recovery proved slow in spite of Arla investing heavily in advertising campaigns in selected markets such as Algeria.

Dec 2006: The cost to Arla Foods of the boycott of Danish products in the Middle East amounts to approx. DKr400m for 2006. This equates to a loss of DKr40,000 for each of Arla's 10,000 Danish and Swedish co-operative members. “It's a relief that the boycott has come to an end … many products have been sold at discounted prices.” According to Finn Hansen (divisional director, Arla), “the boycott will have pushed back Arla's development in the Middle East two years.”

March 2007: Arla chairman Knud Erik Jensen was able to say: “We're back in the Middle East and expect to return to previous levels of sales by the end of 2007.”

What I found amusing was the last line, all that outrage and foaming and what was the result? Not much and not for long. But time heals all wounds, so to say, and all it needed was a bit of courage and lots of communications to heal those wounds. Arla went after the crisis with a perspective of doing something is better than doing nothing. They tried to communicate the fact that freedom of speech was part and parcel of western life and supporting the Danish stance. This did not work, and then Arla tried to distance itself. On the other hand, the New Zealand firms simply refused comment or tried to comment as little as possible, keeping heads down hoping that it blows over.

I have certain issues with this. Letting things blow over, especially when you are talking about quarterly financial reporting cycles, free flow of capital, footloose capital, fast changing credit ratings and the like is just not possible. Firms cannot absorb losses over such a long period of time. So one thing which corporates should remember is whenever governmental or Societal related boycotts hit you, you should immediately ask you’re your government’s support so that the firm can endure the boycott or survive the event. Public memory is short and as they say, a week is a long time in politics. It might take longer when we are talking about religion, specially considering that religion is the opium of the masses, but pass it will. You just need capital to ride over the issue.

Second is that corporates should not tie themselves to government or political stances. That is dangerous. Firms are not organised to handle political issues nor can they spin news as is required in today’s 24 hour news and media management. So they will simply stumble and cause issues for themselves. Keeping the head down is a good idea indeed.

Third is the use of gatekeepers. The authors recommend using gatekeepers to link into the populace. Looking at this cartoon issue itself, who would be the gatekeepers? I wrote some essays on this issue.

So go to Al Azhar or to Qum? Or start debates on Al Jazeera or MBC? Or get some fatwas in your favour? Or start dealing with the famed Muslim / Arab Street? And how do you keep them listening to the message? This area is highly emotional, charged with religious symbolism, prone to minefields, subject to linguistic interpretations, full of politics, in short, everything that a corporate executive will never have had handled before in his life. So how on earth would the executive or the corporate communications team know how to handle such aspects? I mean, they themselves make heavy weather of investor relations with bog standard corporate disasters such as losses. Can you imagine them working with a religiously sensitive topic such as this? That said, there is nothing like getting some discreet conversations underway with the gatekeepers and opinion formers directly (and be prepared to pay out of your nose, as these opinion formers are not going to be cheap), but put them on retainer and see what comes up.

Oh! Also pray.

All this to be taken with a grain of piquant salt!

Going Slow on Highways Development

Ashish — Sat, 20 Dec 2008 08:41:26 EST

The subject of this post can be captured using the word 'Critical'. Are the highways projects being undertaken by the National Highway Authority of India critical for the development of the country ? The current pace of development is so bad that it can also be termed critical. This outlines the problems that this country faces in terms of infrastructure.

The development of good, fast highways is an extremely important part of the infrastructure of the country; it helps in keeping the movement of goods across large distances, enables greater mobility of people, reduces the dangers of perishable items expiring, reduces cost fluctuations caused by distance factors, improves the life of vehicles and tyres, reduces fuel consumption, and a few others. In India, one of the best things that the BJP Government is remembered is for the massive road projects that it launched, and with the Highways Minister Col. Khanduri running it, the projects were on track. Given the importance of this area, one would have thought that the Congress Government would ensure that the projects are on track. However, for some time now, it has been clear that these projects are not on track, and here is a severe admonishment of the Government from the Delhi High Court:

The Delhi High Court seems to have hit upon the root cause of why crucial highway projects across the country have been moving at a snail's pace in the past few years. And the discovery has left the court both shocked and angry. The HC found that the ministry of surface transport and highways was indulging in "day to day interference" into the affairs of the National Highways Authority of India (NHAI), a statutory body granted functional autonomy by Parliament.

"The actions of the Union of India...indicates that not only autonomy granted to NHAI by Parliament through a statute enacted in this regard has been curtailed and eroded, but NHAI is sought to be reduced to a mere department of the ministry of road transport and highways," an anguished HC noted. The court discovered through evidence tabled before it how the ministry kept forwarding bidders to NHAI, asking the latter to re-evaluate their applications even though NHAI had finalized its bidding process for the Hyderabad project.

Unfortunately, this is not the only case where the Congress Government interferes with institutions. The strictures on the Health Minister over its interference in AIIMS, the severe crippling of the autonomy of the CBI, and numerous other cases are already there; in many of these cases, there has been adverse opinions from various courts that the Government shrugs off.

Shareholder's Dissatisfaction at Satyam's Board

Ashish — Fri, 19 Dec 2008 10:10:40 EST

If you have been reading the financial papers for the past two days, you would have realized that suddenly something seemed to be happening at Satyam, and if you were more interested, you would have read that suddenly Satyam seemed to be in the eye of a storm regarding issues of corporate governance.

It all started when Satyam announced that it was planning on spending $ 1.3 billion on diversification, and that too, this amount would have been spent on buying Maytas, a company in which the promoters of Satyam hold a 35% stake. This was not a deal that was approved by shareholders, and apparently not even by the board.

The shareholding of the promoters in Satyam is only 8%, with institutions holding a majority, and this action by the promoters saw an incredible reaction on the stock exchange. Immediately after this move, there was a reaction from shareholders, with the ADR on the US market falling by 52%. The next day, financial newspapers unanimously denounced this move as a gross violation of all norms of corporate governance, and in moves that would have scared the promoters, institutions threatened to review whether there is a trust in the management of the company.

Now, this proposed move has been withdrawn, but has left a mark on the management of the company that is difficult to get away; it will take time before the trust quotient can be restored:

Even as Satyam's deal to buy Maytas had to be hastily annulled in the wee hours of Wednesday morning as the company lost 52% on its ADR listed on the New York Stock Exchange (NYSE), a credibility crisis has begun to grip India's fouth largest IT company. "How can we trust the management of this company and its board of directors after it tried to enter into a deal that prime facie would benefit only the promoters who just own 8% of Satyam ? We have to examine whether the management needs to be changed," cried analysts in a reflection of the deep anguish caused by the now stymied move.

"58% of Satyam is owned by FIIs and they had no inkling that such a deal was in the works. There were questions about the future of Satyam after acquiring these companies when it doesn't have any experience in these businesses. It makes more sense to deploy your funds in related businesses or pay your investors," said Sourav Mahajan, analyst with Karvy.

The company is doing fire-fighting, but this is not the US. In the US by now, with company promoters holding 8% and with such a move, there would have a far more critical reaction. Here, institutions typically do not show much emotion even when they hold a majority of the stake in the company; in fact, the public and private displays of reaction is unprecedented. This reaction is obviously not what Satyam was expecting.

However, one expects that with the share buyback announced after this as an attempt to mollify shareholders, there may not be much beyond what has been stated; the only difference being that the management of Satyam (and other companies) would be a bit wiser about what they can do or cannot do. What remains true in this case is that the board of the company proved ineffectual, and needs to be looked afresh.

A Tale of Two Countries

Neelakantan — Mon, 1 Dec 2008 09:36:51 EST

Two countries. Separated by about 24 hours at their (official) birth, both countries have taken a different path.

Over more than 60 years of independence, both countries have advanced, in slightly different directions though. Today, both the countries use the abundant manpower available with them. They have set up industries from scratch with barely any foreign assistance. Today they are renowned across the globe for their industries. Global interns are keen to work in these enterprises and it is a talent magnet from around the world. The training centres are huge and require considerable investment. Selection procedures are tough and require a decent level of motivation. Both countries have access to the latest communication systems including Blackberries which they use for effective project management. Some projects bomb, but they take in their stride. Clients and vendors are global, as has to be the case whenever the projects of large of such nature. Billing can be upfront or milestone based and can be paid in almost any currency. Many of these companies have operations in other parts of the world - both acquired and organically grown - which allow for a certain degree of operational independence from the headquarters (and plausible deniability if required). A company needs to have, preferably, multiple training centres, offices and enough back up and risk planning capability. It is also important that they are located in catchment areas for the labour. And recruitment centers for have to staffed with local experience. Campus recruitment is ideal though laterals are hired too...The industries that these countries offer expertise in, is considerably mature today...

But in those common paths, there is a distinct difference. Like the by now cliched story of Bollywood movies with twins separated at birth the story of these two countries is remarkably different.

Today, one country is the epicentre of global terrorism outsourcing and another one is the epicentre of global technology outsourcing. Just as every single terror attack big or small finds a linkage in Pakistan, almost every single IT product big or small has some Indian connection.

Without the terror and the technology part, you will actually not see any difference - both of these countries used globalization for entirely different aims. Which goes on to show, each of these countries could have swapped paths or could have used it in a synergistic manner.

Citibank - The New State Bank of America

Aaman Lamba — Mon, 24 Nov 2008 08:03:44 EST

The United States Government took a giant step towards nationalization of the American banking system by announcing a plan to fund and backstop Citigroup, the beleaguered financial giant that has lost over $160 billion in market cap. The guarantees being provided include an additional capital infusion of $20 billion, loss guarantees up to $306 billion in a layered manner between Citi, the Federal Reserve, and the FDIC.

In return, Citi would issue $7 billion of 8% preferred stock to the government and additional stock warrants of about $2.5 billion. It would also promise not to pay out more than 1 cent dividend on common stock for the next three years. Finally, and most notably, the government would have final approval over all executive compensation and bonuses.

This last point is perhaps the most far-reaching, and as we all know the adage about paid pipers and their tunes, Vikram Pandit is henceforth a Federal Government employee, with hopefully greater job security than he had before this weekend. This mechanism gives government regulators a greater say over banking operations, and potentially opens the door to similar measures being adopted for other banks, or even other industries.

President-elect Barack Obama might end up appointing an auto czar, a music supremo, and perhaps even look to employ Bill Gates as CIO. The corporatization of the state will have an impact on the way it is run, which could work positively, but states have been corporatized for a long time, and this will only accentuate the incestuous relationship between neo-liberalism, corporatism, and statism.

Unfortunately, the victim in this circle jerk will be liberalism. Friedrich Hayek put it well when he noted,

If we ever again are going to have a decent money, it will not come from government: it will be issued by private enterprise, because providing the public with good money which it can trust and use can not only be an extremely profitable business; it imposes on the issuer a discipline to which the government has never been and cannot be subject.... The monopoly of government of issuing money has not only deprived us of good money but has also deprived us of the only process by which we can find out what would be good money.

Consider a humble bank manager in the Midwest a year from today having to evaluate between a loan to a start-up promising to improve productivity by over 20% with more efficient outsourcing automation. He is about to sign on the dotted line when he gets a call or a buzz from his friendly neighborhood Congressman, suggesting it might be a better idea instead to fund the local chapter of the UAW.

Welcome to Citibank, the new State Bank of America.

Book Review: Hacking VoIP

Ganadeva Bandyopadhyay — Sun, 23 Nov 2008 12:37:48 EST

In a concise two hundred and eleven pages the author has attempted to cover the protocols, security threats and their countermeasures, audit issues related to Voice over Internet Protocol(VoIP). As outlined in the beginning of the book, the audience is the VoIP administrators and other related IT personnel tackling the nitty-gritties of implementation and day-to-day functioning VoIP in an enterprise network.

With a clear primary goal of discussing security exposures and their possible solutions, the book does a good job as it takes through a security specific discussion and labs on signaling via SIP(Session Initiation Protocol) and H.323. There are also discussions on security issues related to media layer as implemented via Real-time transport protocol and security issues for both signaling and media in Inter-Asterix eXchange(IAX).

Some of the interesting topics in the book also include exploiting weaknesses in SNMP utilizing a tool such as GetIf and making free calls using VoIPBuster. The book ends with the topics on countermeasures and audit portions. Major approach presented is the ability to provide security at both the session and media layer.

With a focused audience and a clear goal, the book does justice for a technology moving towards maturity even as it finds a growing acceptance in the enterprise. Only one suggestion can be to include some more developments, solutions and techniques still not implemented in enterprise networks but having good scope.

Book Review: Head First Statistics

Ganadeva Bandyopadhyay — Sat, 15 Nov 2008 01:29:26 EST

Head First Statistics is more a study guide covering basic topics of most statistics courses or even parts of statistical topics in application areas such as analog and digital communication, noise theory. Measuring central tendency, measuring variability and spread, calculating probabilities, using various distributions for solving problems, correlation and regression are some of the topics covered across fifteen chapters.

While the discussion is paced to be reader friendly, there seems to be an emphasis on distributions with entire chapters dedicated to some of them. The quality of the examples can do with some upgrading for a consistency within the book. Maybe lesser number of useful examples such as the one bringing out the various statistical concepts related to measuring central tendency in improving a health club could be continued across multiple chapters. This could ensure the continuity as the concepts build on one another.

To summarize, a good statistics study book with an emphasis on distributions. It would be good to see some of the other statistical concepts to be given more coverage in future editions. At least one other book which can be an additional read to this book would be Statistics in a Nutshell.

Book Review: Nagios - 2nd Edition

Ganadeva Bandyopadhyay — Fri, 14 Nov 2008 02:52:39 EST

The book comes across as a wonderful companion for utilizing Nagios- an open source system and network monitoring tool. There are twenty six chapters covering a lot of depth and variety with respect to Nagios.

There are five main sections in the book, viz. Source code to a running installation, In more detail,The web interface and other ways to visualize Nagios data, Special applications and Development. Some of the more unusual topics worth mentioning is the configuration for external notification via SMS and via email, monitoring room temperature and humidity, monitoring SAP systems via plug-in check_sap.sh and via SAP's own monitoring system CCMS and monitoring oracle database with oracle instant client.

The chapters are very concise and readable especially for the system, network or other infrastructure administrator already hard-pressed for time. One of the important facets of this book is that although there is an attempt to present the useful information, it also motivates the reader to go further and explore based on the suggestions and hints that is provided in the book.

To summarize, a highly recommended book for interesting and very useful topics in present-day IT infrastructure.

Book Review: Head First Physics

Ganadeva Bandyopadhyay — Thu, 13 Nov 2008 10:18:58 EST

Here is a refreshing approach to the subject of Physics which is one of the elementary science subjects in any high school. Emphasizing a “reader as part of the problem” approach among the many innovations in this book, it is a delightful read.

The book covers almost all the topics of algebra-based mechanics and practical physics in its eight ninety four pages, including an index. In spite of being such a huge book, the book makes for a consistent pace of understanding and comprehension as it starts from guidelines to think like a physicist, units and measurement more advanced topics such as gravitation and orbits, oscillations and finally coming back to applying the algebra and physics formulae to having a new understanding to thinking like a physicist.

With memorable examples and various innovations of the Head First series on full exhibition, the book is one of the must reads taking away from drab text-books and learning by memory approaches to learning physics. One of the outstanding aspects of this book is the continuity of the topics as they connect with each other while interpreting the examples.

Swiss Bank Accounts

Blokesablogin — Wed, 12 Nov 2008 09:57:02 EST

This small article in the Washington Post brings yet another angle to the economic crisis that the US is facing. Hopefully, part of the money salvaged from these accounts can reduce the bailout money put up by taxpayers.

According to Transparency International, an anti-corruption agency, the estimated value of Indian individuals' worth of "funds" stashed away in Swiss Banks are to the tune of over $ Trillion. It is not surprising that the poor and rich divide has increased in the past few decades.

Reading these articles makes me wonder what anyone can DO with these "ill gotten" wealth? We all have an expiration date invisibly stamped on us. So, we cannot carry any material wealth along with us. The Reliance story is one of many that shows how money, left behind, creates schisms amongst the most cordial of relations.

Why, then, the insecurity of wanting to stash funds away for whatever purpose? Like the story of Tolstoy reminds us, at the end of the day, all we need is 6 feet of land (not even that if you are cremated!).

I sincerely hope that people who have these mysterious accounts put that money in circulation. If auction houses like Christie's existence are to be validated, many of these account holders use grand sums to buy art and such that have very little value in the "real" world and are "dead" investments. A vacation, on the other hand, would help support the tourism business including travel, stay, food and other activities.

Sometimes, when I see the pro-rich agendas of law and policies, I wonder if it is not a bad idea to ensure the demise of the poor by starving them or working them to death and the few remaining rich can have the earth to themselves- It sounds like a good plan. A perfect epilogue to the small-scale genocides we are reading about world-wide. And someone like me will not be there to write such a blog either!