Crisis Planning in an Uncertain World : Upheaval in Philippines Provides Multinationals Some Lessons in How to Cope

Multinational companies often operate in countries with uncertain economies and unstable politics. But what happens when the uncertainty and instability turn to chaos and the survival of employees and the preservation of assets are at stake?

The recent turmoil in the Philippines provides a good case study of how multinationals should manage in a world turned upside down.

In the weeks surrounding the February presidential elections, the country was visibly paralyzed by protests, demonstrations and rallies. Much less visibly, multinational companies were scrambling to safeguard their people and property. Their contingency planning ranged from informal discussions between the local manager and the home office to formal planning sessions involving key local and home office staff.

In the process, these companies learned several lessons on what to do and what not to do when operating a business in troubled times.

When crowds ringed Camp Crame and Camp Aquinaldo and confronted loyalist tanks, massive violence was only a gunshot away. Multinationals found it extremely difficult to contact employees to apprise them of plant shutdowns, office closures and other emergency actions.

One commercial bank reduced its vulnerability to disruption by assigning radios to key executives and laying out a meeting schedule well in advance of expected trouble. Another company held general meetings to inform employees of measures taken to protect lives and property. (After the crisis had passed, the company treated the employees to lechon , the local version of roast pig, for their dedication.) A third company designated “safe houses” in Manila for key employees and established procedures for evacuation to Clark Air Force Base in case their lives became threatened.

Many companies encouraged their employees to stockpile food, water and medical supplies. At the same time, employees worked extra shifts to build up inventory levels. A Silicon Valley firm with production facilities in Manila established a crisis management team to examine what might happen under various circumstances. The team also developed plans with designated “trigger points”--predefined events that would signal the need of a contingency plan. The company believed that this would ensure that action could be taken quickly without having to wait for an authorizing phone call that might never come.

The U.S. Embassy in Manila urged all Americans working there to register with the Embassy staff so people could be notified of any emergency evacuation.

Surprisingly Casual

Despite these warnings, some companies were surprisingly casual, downplaying the danger of the pending revolution. And, looking back, many foreigners were shocked that the revolution actually took place.

The fact is, though, that no matter how well multinationals prepare for a crisis, things probably won’t go according to plan. One company planned to purchase tickets to Hong Kong for executives, add extra guards at all locations and communicate to employees the need to avoid certain trouble spots. As it turned out, during the height of “people power,” the airport was closed and the guards, along with most employees, left for the barricades.

Why, then, go through the exercise of planning? Because planning itself has value. It identifies areas where the company is vulnerable. It forces managers to think about such decisions as who and when to evacuate, what records to carry out or leave behind, how to protect personal property. It allows staff to develop alternative plans that can be implemented without hesitation if the situation warrants. And it improves the morale of managers, who feel more in control of an inherently unpredictable situation.

Low Profile

Before trouble starts, there are ways to reduce the risk of having your company singled out for unwanted attention. A cardinal rule is to maintain a low profile, avoid media attention and remain politically neutral, despite any short-term gains that political alliances might bring.

Another rule is to minimize the number of expatriate employees and become part of the local business community. Multinationals should encourage employees to join local business associations but discourage leadership roles in these groups, because the leaders frequently are targets of hostility. It is a better idea to remain neutral when doing business in a foreign country.

Rather than be taken by surprise, companies should go through the exercise of contingency planning, including running specific scenarios and developing action plans to deal with them.

Multinationals routinely analyze the risk associated with operating in different countries by reviewing political, economic and social trends before deciding on investment levels. Although many companies had performed such analyses of the Philippines, most were surprised at the timing of the transition to the new government and the events that led up to it. Nonetheless, the risk analyses did result in reduced investment levels before the disruption. Indeed, some companies will continue to cut back their investment until the Corazon Aquino government can establish its stability.

Because the crowds in Manila miraculously avoided violence, the multinationals’ ability to cope with disruption was never fully tested. But in a world where turmoil, violence and terrorism are as commonplace as they are unpredictable, prudent multinationals will assess their vulnerabilities, review the lessons learned in Manila and pray that contingency planning remains an academic exercise.