Japan’s Crisis: Companies’ Response

As the Japanese people move from the horror of a gigantic earthquake, tsunami, and potential nuclear meltdown, to the slow and painful process of repairing and rebuilding, business has a role to play.

Companies provide an important social network to support employees and their families, and to help authorities distribute aid and assistance. Firms also provide an important communications channel for emergency instructions, and can help shape policy discussions to improve the response to future disasters.

CEB’s Asia HR Executive Board conducted a survey of HR managers based in Japan and the Asia-Pacific region to understand how their companies are responding, and the results are below. One clear lesson we took from the survey is that a lot of companies’ business continuity plans were inadequate for the task that faced them. So beyond the short term, but before memories fade, we urge you to review and refresh your business contingency planning. We also provide some advice on that score too.

What We’re Hearing from Companies

The survey covered a range of themes; below is a summary of results.

1. What are you doing for employees who have lost their homes and/or a significant portion of their possessions?

   Fortunately, few members report employee losses. Measures that are being taken include: 2 months advance salary; emergency loans; company-provided shelter at company expense; disaster sympathy payment; disaster leave; and coverage of basic living expenses (to be reviewed monthly).

2. How do you allocate funds raised by employees for their colleagues?

   Most have some kind of donation support in place by this point, with the Red Cross most cited as a specific partner. Many firms are matching employee contributions.

3. How are you managing employee communications?

   Most members are channeling employee communications through the local leadership team because, as one member states “it avoids confusing directions from foreign managers located outside Japan.” One member is supporting local efforts with their global PR team, and another is sending daily communication from the CEO. Communication methods vary, from teleconferences, to email and blogs, to town hall meetings. Several emphasize the importance of a daily cadence of communication.

4. Are you relocating expats?

   No respondents are requesting that expats leave, but several have policies in place to support a move within Japan or to their home country if requested.

5. What is your evacuation plan, worst case scenario, for both expats and local staff?

   Responses to this question revealed the deficiencies of pre-existing contingency plans. Many respondents are “currently working through scenarios.” Expat policies are more developed, focused on evacuation. Local staff are generally left to rely on local government agencies, although several members are securing office space and accommodation for local staff that is at greater distance from damaged nuclear facilities.

Other polls we have run show that: more than three-quarters of 72 finance and strategy executives believe the Japan crisis will slow global economic growth; more than two-thirds (69%) expect corporate insurance premiums to rise; and 40% say they are now modifying their financial forecasts for the year.

Refreshing Contingency Plans for Future Crises

We have been helping finance and strategy clients with numerous questions about reviewing and refreshing their contingency plans. These range from overhauling all crisis management support processes, to better management of supply chain risk, and market volatility.

• Crisis management support: A comprehensive plan has three parts: creating a standing team that is prepared to take control during a crisis; a process that pushes that team to focus on solutions to the problem rather than the causes of the crisis; and the preparation of a comprehensive communications plan. CFO Executive Board members should use this in-depth resource for more information.
• Supply chain risk: The majority of questions we have had from members on the crisis have been about how they should respond to supply chain disruption. In preparation for future crises, procurement managers should invest less in collecting and analyzing data on their supplier network and invest more in working with suppliers to understand their financial position, and the likelihood of them suffering insolvency. Procurement Strategy Council members can learn more from this research.
• Market volatility: As reconstruction begins, commodity prices will rise; copper, steel, and zinc are all risks. Members should prepare for commodity price spikes, and Treasury Leadership Roundtable members should use these resources to help with foreign exchange and commodity hedging.