Managing crisis and reputational risks
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The document analyzes the Shell-Ogoni affair, focusing on the crisis management and reputational risks faced by Shell in Nigeria's Niger Delta due to environmental concerns and local community agitation. It highlights the impact of operational negligence, communication failures, and the need for stakeholder engagement in managing reputational risks. The paper offers insights into the historical context, the dynamics of the crisis, and the lessons learned in crisis management for multinational corporations.
Managing crisis and reputational risks
- 1. Crisis Management and Reputational Risks The Shell-Ogoni Affair as Case-Study By Bolaji Okusaga
- 2. Outline 1 PART 1: Situation Analysis PART 2: Agitations from Oil-Producing Communities and the Oil Industry Reality PART 3: Communications Challenges: PART 4:– Crisis Management: The Shell/Ogoni Affair as a Case-Study PART 5:– Tracking Reputation PART 6:– Managing Stakeholders Strategy Leadership Governance
- 3. Strategy Leadership Governance PART 1: Situation Analysis
- 4. Oil revenues provide 95% of Nigeria’s foreign exchange earnings The activities of large oil corporations such as Shell, have come under great threat as a result of restiveness in the Niger-Delta over environmental and developmental concerns. Agitation for resource control and a greater say in the activities of Oil companies by local communities have led to series of violence and hostage taking directed at the industry Strategy Leadership Governance Operating Environment
- 5. Strategy Leadership Governance Prevailing Issues Gas Flaring and Other Environmental Issues Shell Nigeria is alleged• to have contributed more greenhouse gas emissions than all other operators in the industry industry thereby degrading the environment. Aside from this, there is also the issue of Oil spillage and its effect on rivers and farm-lands Ogoni Crisis • The Nigerian government’s June 4, 2008 decision to replace the Shell Petroleum Development Company (SPDC) as operator of oil concessions in Ogoni areas came after fifteen years of crisis in Ogoni land leading to the withdrawal of the Company from Ogoni land Niger-Delta Hostage Taking and Illegal Bunkering • Hostage taking has become very rampant in the Niger-Delta. The demands of the hostage takers include more local control of Nigeria's massive oil wealth -- the proceeds of which typically end up in the pockets of crooked leaders
- 6. Friction with Communities Over the years, Shell has come under fire from oil producing communities for issues ranging from oil spillage, gas flaring, the absence of development in local communities and helping to fuel Crisiss. In the atomsphere of distrust, suprious allegations thrive. One such case is that of the Odimidi community, which claims that Shell pipelines are causing tremours in their community. Perhaps the most malignant issue is the Ogoni crisis which led to the death of activist, Ken Saro Wiwa and awoke a spirit of self- determination in the Niger-Delta. Today, fifteen years after, Shell is still not positively perceived by the Ogoni people and by extension the whole of the Niger Delta. Strategy Leadership Governance
- 7. Historical Context Oil was first discovered in Nigeria in 1958 at Oloibiri in the present day Bayelsa State. Nigeria gained Independence in 1960 and with Independence came the active rivalry of the Regions and political actors leading to political turmoil and subsequently, a Coup’dtat. With the Coup came Military rule followed by the declaration of a Civil war. At the end of the war, an era of active prospecting began leading to the Oil boom of the 1970’s. With the Oil boom came prosperity and the development of mega- cities such as Lagos, Port-Harcourt and Abuja. Strategy Leadership Governance
- 8. Strategy Leadership Governance PART 2: Agitations from Oil-Producing Communities and the Oil Industry Reality Strategy Leadership Governance
- 9. Background of the Crisis With the discovery of Oil, came the licensing of Multi-National Oil Corporations, the allocation of On and Off-Shore Oil Blocks and a Joint Venture Partnership Agreement which spells out a revenue sharing ratio without a sound legislative platform which looks at environmental pollution, community relations and business continuity. Oil was dubbed the Black-Gold and with this gold came the Udoji Salary award which created a bogus bureaucracy and led to an era of crass-materialism and corruption. While all these were going on, trouble was brewing in the Niger-Delta… Strategy Leadership Governance
- 10. Catalyst of the Crisis Environmental Pollution Community Relations Business Continuity Oil exploration activities led to the flaring of dangerous gases unchecked and Oil spills which led to the pollution of farm-lands and water-ways, which affected the People’s source of livelihood. There was a dearth of Community Relations in the local community where these Oil Companies operated as they restricted their activities to mega cities such as Lagos and Port-Harcourt where they had Corporate Offices and carried on purely technical services in their host communities while honouring their joint venture agreements and paying their taxes to the authorities as at when due Government, more or less, abandoned the oil producing communities as Oil was placed on the Exclusive legislative list with very little allocation made in honour of the principle of derivation. The down-stream sector was undeveloped as Government paid lip-service to private- sector led development of refineries and petro-chemical plants which would have generated more employment and help reduce tension. Strategy Leadership Governance
- 11. Crisis Situations Emerge Isaac Adaka Boro’s Peoples Liberation Army Ken Saro-Wiwa’s Movement for the Survival of Ogoni People Ansari Dokubo’s Niger Delta Liberation Front A failed cessation bid in the late sixties. This was an early warning signal An Anti-Environmental Degradation movement which got to the attention of the world, led to the withdrawal of Shell from Ogoni Land in 1993 and eventually caused the death of the protagonist A militant Resource Control Movement which started after Government’s bombardment of Odi and has crystallized into an organised movement which regularly captures and holds expatriate oil workers hostage Strategy Leadership Governance
- 13. Understanding the Dynamics of the Crisis CAUSE Neglect of Ogoni Community in affairs which affect their environment and source of livelihood Environmental degradation Crisis Environmental Damage: Social and environmental costs of oil production have been extensive. They include destruction of wildlife and biodiversity, loss of fertile soil, pollution of air and drinking water, degradation of farmland and damage to aquatic ecosystems. Community Attempts at Collective Action CONSEQUENCE Local uprising: With protagonists (Ogoni 9) and Antagonists (Ogoni 4) within the local community Shell and Government sided with the Antagonists who did not have popular support within the local community Shell was unable to carry on business within Ogoniland and had to abandon their facility. Srategy Leadership Governance
- 14. OGONI CRISIS – CRITICAL TIMELINES… 1993 1994 January 4: 300,000 Ogoni protest against Shell Oil activities and the environmental destruction of Ogoni land. January 2: Mr. Saro-Wiwa is placed under house arrest. February 15-16: Shell International advisors meet with the Shell Petroleum Development Company (SPDC) in London and the Hague to consider strategies for countering the "possibility that internationally organized protest could develop" over Shell's activities in Ogoni. January 4: Dr. Owen Wiwa and Mr. Ledum are released and Mr. Saro- Wiwa's house arrest is lifted. April 18: Ken Saro-Wiwa, chairman of the resistance group "Movement for the Survival of the Ogoni People (MOSOP)," is held by the Nigerian State Security Service at Port Harcourt Airport for 16 hours without charges, is released, but then arrested 5 days later. January 11: A seven member Commission of Inquiry is installed by the Rivers State government to investigate Ogoni-Okirika clashes, and starts public sittings in Port Harcourt. December 28: Probably to prevent the start of the Ogoni Week, MOSOP leaders Dr. Owen Wiwa and Ledum Mitee, a lawyer, are arrested without being charged. The Ogoni Assembly is dispersed by Nigerian soldiers. Lt. Col. Komo states that Ogoni Week was aborted because MOSOP didn't apply for a permit Strategy Leadership Governance
- 15. PR and a Changing Business Landscape One of the most fascinating Crisis management case studies is the Shell- Ogoni affair. This affair led to the emergence of "PR ploy," "PR Ploy" and "PR effort" - the demeaning labels used to describe the way the situation was handled, as it tested the Crisis Management frame-work of a big Trans-national Corporation like Shell. In order to ride the challenges occasioned by the rapidly changing operating environment, Shell initially had uncoordinated approaches to dealing with issues arising from the activities of Human Rights / Green Movements around the world. This was largely due to the fact that the operating environment was unexpectedly distorted by the Ogoni affair and in the absence of a structure to deal with it, Shell’s image continued to dip with the unrelenting degeneration of relations with its host communities and the boycott of its products and services across the globe. Strategy Leadership Governance
- 16. Advocacy in a Crisis Situation At the height of the Crisis, the PR professionals working for Shell became Propagandists, taking controversial positions on issues of Human Rights, Environmental Pollution and Resource Control, which were essentially the factors responsible for the Crisis . But you know what? They had every right to do so. After-all, Strategic Communications is an advocacy profession. The objective of every PR activity is to influence public opinion. The ultimate goal is to get people to take positive action on behalf of client, organization or cause. And that in itself is controversial. Strategy Leadership Governance
- 17. An Advocate for Good or Bad? PR holds a powerful position and because of this power, PR activities are often called to question by the public, the Shell/Ogoni Affair tested PR’s power on the following issues: • Misleading Information: There were allegations by MOSOP, Amnesty International and a host of Green movements that Shell was peddling false or incorrect information designed to lead policy-makers, consumers and interested Public astray. • Influence of Policies and Government’s Action: Where Shell had the ear of Policy- makers, how Shell exerted its PR power became a cause for concern. • Discrimination: It was alleged that Shell had discriminated against their host Communities in their employment policy. • Destruction: It was also claimed that Shell deployed PR to soften its destruction of the Environment and aquatic life in the Communities where they operate. • Casualisation and Pay Inequities: Casualisation and Pay inequalities between Expatriates and Nigerians became an issue. • Gain at Expense of Others: It was claimed that Shell was making money at the expense of the ill-fortunes of their host communities. Strategy Leadership Governance
- 18. PART 4: Crisis Management: The Shell/Ogoni Affair as a Case-Study
- 19. What is Crisis Management? Crisis Management basically refers to the management of the reality of a Crisis . It involves identifying a Crisis , planning a response to the Crisis and confronting and resolving the Crisis . Crisis Management is applicable to any field of endeavour. Strategy Leadership Governance
- 20. Manifestation of Crisis • Crisis create conditions that make it difficult for Managers to make good decisions and communicate well. SITUATION • Crisiss place Organisations experiencing them in public spotlight and calls management competence into question. IMPACT Crisis impose a need for• organisations to communicate quickly, accurately and skillfully skillfully with a number of important groups. DEMAND Strategy Leadership Governance
- 21. Dimensions of a Crisis A Crisis usually has several critical dimensions which if poorly handled can disrupt or destroy best efforts at managing them. Failure to respond and communicate in ways that meet community standards and expectation will result in a series of negative consequences. The following are some of the critical dimensions of a Crisis : • - Operations • - Victims • - Trust / Credibility • - Behaviour Strategy Leadership Governance
- 22. In a Crisis Situation: Thing Go Wrong At the height of the Crisis generated by the Shell/Ogoni affair, the following went wrong: Operational response broke down. There were huge losses to Shell based on reduction in daily production of Crude Oil and colossal damage to Oil wells by the aggrieved Community. Stakeholders (both internal and external) did not initially know what was happening and were angry and negatively reactive. Rumours thrived as to the activities of Shell and real intensions of the leaders of MOSOP. Shell was perceived as inept and criminally negligent. Strategy Leadership Governance
- 23. PR and Crisis Management Strategic Communications is an anticipatory practice which attempt to foresee events, trends and issues which may develop to disrupt important relationships. Crisis precipitate a break- down in relationship because it disrupts the normal flow of interaction between an institution and its stakeholders. Since Strategic Communications manages the expectations of the crucial stakeholders of an institution, it is thus a veritable tool in Crisis Management. Strategy Leadership Governance
- 24. Media Bias Media bias against Shell is largely attributable to the following: Pressure from Environment and Conservation Groups as well as Green Movements Bias of the publishers and senior editors, and quest for relevance. For some others, it is a case of swinging temperament. They are torn between Shell’s corporate clout and pressures from anti-Shell groups. They basically swing to where the news is. Strategy Leadership Governance
- 25. Challenges Apathy and Antipathy at the local community level Mistrust and antagonism towards shell by the media and special interest groups Niger-Delta militancy and self- determination Litigation issues Strategy Leadership Governance
- 26. The Role of Communication Communication is not just passing information, but has a vital role to play in Crisis Management: • Reducing Uncertainty • Managing expectations • Demonstrating concerns • Promoting Shell / Ogoni Community Harmony • Building new networks • Building trust and commitment • Encouraging involvement through feedback and two- way communication • Prompting behaviour or ‘walking the talk’ • Learning Strategy Leadership Governance
- 27. Shell’s Mistakes Strategy Leadership Governance Shell initially pretended as if nothing was happening1. They reacted to the Crisis situation after it had gone public.2. They relied on the goodwill they had built with the Government and local3. Chiefs. They distance themselves from the media.4. They were reactive to the information MOSOP was releasing and not proactive.5. Shell spoke above their audience by speaking only with the Policy makers and not6. the aggrieved Community. They assume that truth always conquer lies.7. They ignore the feelings of their host Community and address issues only.8. They avoided the crowd and use third parties and written statements only.9. Shell did the same things again and again and expected positive results.10.
- 28. What Shell Should Have Done Establish Communication s Protocol. Identify the most crucial Stakeholders. Decide on Communication methods. Anticipate issues likely to arise from Crisis . Assess the Crisis situation Develop holding statements. Identify key messages Deploy strategy Obtain feed- back Be open to criticism Fine-tune strategy based on feed-back and criticism Where Crisis emanated from a dispute, be ready to negotiate Act to resolve the issues Strategy Leadership Governance
- 29. Strategy Leadership GovernanceStrategy Leadership Governance 5. Tracking Reputation
- 30. The Need for Reputation Tracking THREAT Given the threat posed by the Ogoni Affair to Shell Operations in Nigeria - tracking reputation in order to mitigate risks come to the fore. MITIGANT The need for an alert scrutiny of social changes and outside forces - from current scenario analysis to wish-list planning - in order to find an appropriate way to monitor external environment and proffer better solutions to identified issues that might snowball into a Crisis and hurt or destroy reputation PROCESS A need to institute a periodic environmental scan and issues audit that is institution-specific and more likely to result in swift decisions and constructive changes Strategy Leadership Governance
- 31. Auditing Reputation and Tracking Reputational Risks Reputational Desires Vs Reputational Risks The Environment The Organisation Expectations by Internal and External Stakeholders Scarcity and Opportunities Actions and Initiatives Actions and Initiatives Building Networks Obtaining Feedback and Aligning Communication with Expectations
- 32. Why A Reputation Audit? OBJECTIVE • How do we move Achieve Our Goals? • The main goal of the reputation audit is the development of quality improvement strategy. CONCERNS Finding out the base• line issues Visibility and Profile• Brand Appeal• Overall perception• DIRECTION • Searching for the missing links • Audit is conducted in the form of complex all round research of the inside and outside the environment in order to identify reputation risks and proffer solutions
- 33. Mitigating Crisis… Stakeholder Management in the Development Environment
- 34. Understanding Stakeholder Dynamics Dormant Stakeholders Apathetic Stakeholders Advocate Stakeholders Adversarial Stakeholders INACTIVE ACTIVE NON-SUPPORTIVE SUPPORTIVE Source: Brad Rawlins, Brigham Young University
- 35. Creating Harmony Enabling Dialogue Timely and purposeful communication Which connects with critical stakeholders And builds positive perception While managing expectations.
- 36. Need for Stakeholder Dialogue Sessions To serve as a platform to dialogue with host Communities on development issues To enhance transparency To assist in facilitating positive developments within host communities, through action- oriented programmes
- 37. Managing Stakeholders Stakeholder Management Process Strategy Managing Expectations Action Plan Stakeholder Analysis Allies Assets / Constraints Opponents Problem Identification Affects Objectives / Goals Information Gathering
- 38. Reputation as Strategic Asset Reputation is a critical corporate asset which must be built in a strategic manner Reputation as a Strategic Business Asset Corporate organizations such as Enron, Anderson Consulting and Worldcom became extinct as a result of the erosion of their reputation Loss of Reputation = Death of Business Beyond the brand concept, organisations build and sustain their reputation through strategic interventions Social Relevance as route to building Reputation
- 41. Aligning Communications with Development Needs STRATEGIC COMMUNICATION • Send a clear and consistent message on our Development Goals and Strategic Initiatives. • Share Best Practice across critical markets and stakeholder groups. COMMUNITY ALIGNMENT • Understand Cultural Nuances • Use Key Community Spokespersons as faces and voices of the Development Project
- 42. Platforms Use of Third Party Advocates to surreptitiously endorse actions Obtain support of Advocates and media through contextual and proactive communication
- 43. Thank You