Very few corporations in Asia adequately focus on the environment within which they have to work. They are frequently unprepared to deal with the challenges. When they do, by creating and pursuing well-developed strategies, the results can be dramatic.
Although many economies in the region have emerged from the depths of the late 1990s recession, recovery has been uneven, with some sectors and countries lagging. Economic restructuring, particularly in China, combined with rising expectations among workers, have helped increase dissatisfaction and raise tensions between management and employees. It is the low-paid workers in labour-intensive industries who generally bear the brunt of restructuring or downsizing.
The frequent location of manufacturing facilities in remote areas where there are few employment alternatives, urban overcrowding, unemployment, and the difficulties of retraining or of finding new jobs for workers merely add to the volatile mix.
Foreign-invested companies, despite generally progressive human resources policies and practices, are often the focus of labour discontent. Such firms are perceived to have limitless financial resources, which makes them a tempting target for strikes, compensation claims and attempts at extortion. Multinational corporations tend to be more vulnerable than their domestic counterparts to the fallout from industrial disputes. The adverse impact on corporate reputation, brand values or production schedules may well have global implications.
For example, there are daily strikes and actions occurring in many manufacturing sectors in Indonesia, over a variety of issues, with the numbers involved varying from single figures to several thousand. These strikes and actions are mainly focused in the economic power centre of Java, and they range from relatively peaceful, orderly affairs, to protests involving full strike action, violence, and intimidation of local and expatriate management.
Generally, the issues are related to salaries, allowances and welfare, working hours, downsizing, redundancies and resentment over foreign investor involvement. Contracts, particularly those drawn up in previous years, are often suspected of favouring the company and investors over the workforce.
In one particular case, the dispute between Sony and its workers over a change in working conditions last year, the International Metalworkers Federation (IMF), a Geneva based trades union, became involved. It wrote to the Sony corporation chairman in Japan, threatening a campaign to bring Sony’s actions to the attention of the global public. In another instance, an Indonesian coal mining operation was closed down by striking workers who prevented access to the facility, forcing the company to renege on its supply commitments to customers and declare “force majeure”.
What can companies do in such a situation? All too often, foreign companies are unprepared for serious unrest, and are left vulnerable to physical and financial threats and to damage to corporate reputation. Devising and implementing realistic strategies and action plans can help prevent such crises from developing, or, if they do occur, resolve a serious situation before it gets out of control.
Assess vulnerability
Every crisis management plan should begin with a thorough risk assessment, including the evaluation of a company’s weaknesses in the event of industrial unrest. Areas that should be covered include
It is important to form a crisis management team and crisis centre to deal effectively with all possible threats and incidents. This team should identify key points within the organisation that must be safeguarded because they are essential to maintaining operations. If an industrial dispute breaks out, the crisis management team should move quickly to implement measures designed to diffuse and control the crisis - and to keep the facility operating.
While it is not always feasible to avoid industrial conflicts, it is possible to plan ahead and to be prepared. Many companies could have avoided significant damage had they shown more foresight.
The good news is that professional assistance is available, such as crisis management training or hands-on advice in developing and implementing plans to prevent or mitigate the adverse effects of disputes. The not-so-good news is that this advice and the necessity for crisis preparedness will become even more urgent, as industrial unrest and actions against foreign and other companies grow in frequency and intensity.
Ian Gilchrist is operations director of Asian based risk management consultancy Hill & Associates, Tel: (852) 2802 2123, e-mail: info@hill-assoc.com
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