Content

Pages

Table of content

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

1.2 Problem statement

Chapter 2.0
2.1 Literature Review

2.1.1 Key definition

2.1.2 Crisis definition

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
1

List of diagrams

Page

Diagram 1.0 Ishikawa Fishbone Diagram

21

List of abbreviation

Disaster Recovery Plan DRP

Busines Continuity Plan BCP
Business process Contigency Plan BPCP
Disaster Recovery DR
Disaster Recovery Center - DRC

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

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.

Youll want to consider issues such as budgets, managements position with regard to
risks, the availability of resources, costs versus benefits, human constraints, technological
constraints and regulatory obligations.
Lets 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, Youll 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, Youll 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.

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 organizations 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
publics 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 organizations 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-hournetworks. 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 organizations
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).

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 Mitroffs
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 Mitroffs
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).

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 Finks 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 its 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 organizations 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 organizations
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 employers 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 exposures extent an organization may suffer from financial risks
depend on the scale of the companys 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 corporations 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 developerEuroplus Construction Sdn Bhd, being a subsidiary for
Kumpulan Talam Corporation Berhad (TALAM). The holding companyTALAM 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 companys 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 companys 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 onthe-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 companys 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, Benoits 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 Benoits denial category is named
scapegoating in Coombs denial category, but both strategies intend to blame someone else
outside the organization. Another example is Benoits 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 organizations 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

organizations 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 Benoits 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). Lees (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 Kims 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 longterm contract with the first vendor who offers a better deal. If someone eager to get the
companys 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 compans 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 companys 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 companys 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 Apractioners 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 Todays 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