MNC projects

HSBC

HSBC, the cartel bank= the Hong Kong and Shanghai banking Corporation or HSBC is one of the world's largest and most renowned banking and services institutions that manage is assets with a net worth of almost $3 trillion, with offices found in over 65 countries it also specializes in commercial, investment, retail, and global private banking main clients include retail consumers, small businesses, corporations, governments, and institutions the home country is London also location of HSBC headquarters why Mexico? As a large developing nation, HSBC saw an opportunity to expand their network and could provide a nation with an unstable financial situation with much needed assistance Mexico is very willing to do business with one of the most world renowned banks and it would allow them to start to build a position for themselves on the global frontier but Mexico is notorious for having the most violent drug cartels in the world timeline of crisis - pre crisis= HSBC identifies Mexico as a potential country to invest in for the future - August 2002=. HSBC acquires bital bank, and officially begins operations in Mexico. HSBC labels the bank's clients and business activities as low risk - 2002-2007=. Chinese businessman Ye Gon imports hundreds of millions of dollars worth of meth ingredients into Mexico using HSBC accounts and HSBC is alerted to suspicious activity in 2004 but ignored it and he is arrested in 2007 - February 2007=. Paul Thurston chief executive of retail banking and wealth management goes to Mexico to check on what's happening and is horrified - July 2009=. John RT the senior HSBC group compliance expert wrote a letter to the compliance director in Mexico highlighting the need for better anti money laundering controls but no changes were made - 2007-2008=. an estimated $7 billion was transported from Mexico, a high percentage of this money was the result of drug trafficking - January 2008=. investigation of HSBC activities in Mexico by Homeland Security begins - February 2008=. the head of the anti money laundering division in HSBC Mexico blazed the truth out for the world and states as much as 70% of all Mexican laundering money came from HSBC - October 2010=. OCC which is part of the Department of the Treasury releases a statement containing all of the violations being held against HSBC and stipulations for the future followed by a congressional report in 2012 - 2012=. HSBC issues an apology letter taking full responsibility for the crisis and admitting to a complete lack of necessary precautions and no executives were therefore arrested - 2012-2013=. HSBC is fined $1.9 trillion which is one of the largest fines for a financial institution in history and agrees to implement a new and effective money laundering policy - December 2017=. HSBC announces that the US is preparing to dismiss all criminal charges The source of the crisis - Lack of appropriate countermeasures from HSBC against money laundering - Mexican cartels - The new global power - financial institutions The crisis could have been prevented - Adoption of key values and a business moral code that would favor ethics over profits - implement better systems to identify and restrict high risk customers - checking the origin of investors assets and overall perform better due diligence short term consequences 2011 through 2013 - HSBC play is $4.2 billion in fines to the US and UK - net profits decreased by 16.5% prior to 2011. However, HSBC's underlying profits increased by 18% over 2011 - despite the horrible incident and define paid to the US and UK, most of the HSBC revenue comes from the Asian markets but shows a great diversification in order to cut cost HSBC reduced the staff by 10% to 260,591 - HSBC increased their dividend by 10% despite the following profit and they still had a payout ratio of 54.62% - after the devastating earnings, shares of HSBC fell by 3% to 7.06 English pounds Longer term consequences from 2014 to the present - Despite that the crisis occurred earlier, HSBC was involved in the Ponzi scheme and let these scammers move money from the US to Hong Kong - Chinese political pressure in Hong Kong between 2019 and 2020 - HSBC shares fell to 25 years low in 2020 (2.90 English pounds per share) due to covid - HSBC kept decreasing its employees to 226,000 and 2020 - Profits of HPC is extremely unstable in the last five years - dividend decreased drastically over the years - decreasing profits can also be attributed to the lack of drug money in the HSBC system now as that was evidently a major source of income - drug dealers were able to grow and prosper due to HSBC's faction, and will continue to impact the communities affected for future generations - American customers would no longer want to do business with a bank involved in illegal drug activities negatively impacting their country and they would not be viewed as trustworthy - on top of this, due to the damage to the reputation caused from this scandal, HSBC changed its focus to a place where their experience and connections would be greatly appreciated such as developing third world countries in Asia how did HSBC react - HSBC was fully aware of what was happening and completely ignored all these signs . HSBC Saudi high risk clients, still labeled Mexico as one of their lowest risk markets - saw the drug trade as an opportunity to increase revenue and tried to cover it up and hide any AML alerts - HSBC issued a public apology where they admitted everything that they were being charged with was the truth strategic recommendation - re evaluate the company's code of conduct to promote ethical behavior and develop a strong corporate culture to prevent future recurrence of such crisis - develop a new division solely responsible for monitoring both domestic and international branches for illegal or unethical activities - develop a separate division for enforcing consequences for anybody caught participating in illegal or unethical activities significance - this case had a huge impact on the banking system worldwide - this sets a precedent in the idea that right now in our society, certain institutions exist that are essentially above the law

FIFA

The Federation Internationale de Football Association is a nonprofit organization and it describes as the governing body of the Association football. It is the highest governing body of the sport and with 211 nations associated the organization has more nation members than the United nations which has 193. It was founded in 1904 and influences many people to participate and expand the knowledge on this sport it's made focus is overseeing, organizing, and encouraging international football the World Cup - FIFA organizes the World Cup event every four years, where 32 international teams compete to win the title of the best football team of the world - the World Cup is hosted by a different country every four years and is the most viewed sport event worldwide - in 2010 and 2014 events the World Cup attracted an average of 3.2 billion viewers - in 2018 the World Cup held in Russia generated FIFA $4.6 billion in revenue, money that is reinvested in the organization for its growth and finance multiple football events crisis description - in November 2010, British investigation up frozen the British media and two executive members from FIFA or suspected of selling votes. 6 involved members were suspended by FIFA's obligations - in December 2010, exploitation of FIFA, Russia is awarded the 2018 World Cup and Qatar gets the hosting rights for World Cup 2022. BBC broadcast exposes FIFA officials. They took bribes in 1990s for Russia and Qatar hosting rights - in February 2011 FIFA's Ethics Committee is involved, the executives upheld three years ban and one year ban respectively do two wrongdoing actions during the World Cup 2018 and 2022 bidding campaigns - in May 2011, FIFA suspends presidential candidate Mohammed bin Hamman and vice president Jack Warner since both had strong accusations regarding criminal mismanagement and money laundering - in June 2011, FIFA executive Mohammed Ben Harmon is found guilty of bribery and banned from international football activity for life by FIFA Ethics Committee. Warner escapes the investigation after resigning from his position - in May 2015 dismiss please made attacks at a hotel in Zurich where FIFA authorities were staying before the presidential election. The seven FIFA authorities were captured after the US Department of Justice issued a 47 count indictment charging 14 defendants with racketeering, wire fraud and money laundering - in June 2015, FIFA says there will be no revisiting of the World Cup bids. They assure the tournaments will proceed in the elected countries Russia and Qatar respectively. - In September 2015, an investigation against the president of FIFA takes place and two specific transactions at the time he was president might have caused criminal mismanagement, official data was found. - Finally in November 2020, a settlement with the US authorities was made. A Swiss bank has set aside $79.7 million to help recover financial penalties and a Swiss private bank has been cooperating with the US Department of Justice and is under pressure to improve its anti laundering controls could the crisis have been prevented= yes, if the FIFA officials did not take bribes for bidding the host countries for the World Cup of 2018 and 2020, this corruption scandal would have not have taken place Crisis response - president addressed the FIFA Congress in response to the detention. His response was not just aimed at rehabilitating FIFA's legacy, but also at reestablishing confidence in the organization's operations. Emirates airline ended its sponsorship of FIFA in November 2014 but refused to attribute the move to FIFA's misconduct, despite the fact that the same Corporation tried to end its sponsorship of FIFA and 2011 due to corruption charges against organization. FIFA declined to accept blame and as a result, the global media relentlessly belittled FIFA as an entity that was incompetent and untrustworthy. With multibillion dollar sponsors such as Coca Cola and Adidas expressing grave fears about the malice at the core of FIFA, the Federation would be insane to get its act together until the suffering catches up with them= McDonald's on the other side is unsure about the same since Americans have little tolerance towards subverted integrity and anti corruption, Along with the three above, Sony, Hyundai, and adidas have all vowed to cut relations with the ill fated federation if fairness and corruption are ignored, and Not to mention the governing council's highest administrators, provided that Swiss authorities detained 6 FIFA executives at the annual meeting in Zurich and charged them with misappropriation of funds - The amendments were focused on the 2016 FIFA reform committee suggestions and the executive committee's concurrent recommendations to the Congress in the form of draft FIFA statutes. This requires statutory good governance standards for national organizations and Confederations, such as mandatory periodic independent audit reports and independent judicial commissions to maintain power separation at all levels of football systems. It would have paved the way for major changes in global football governance, including a strong division between economic and political decision-making, increased oversight of senior managers, and contributions to women's football and human rights Short term effects - 74% of the expenditure was invested back into football - football governance expenses were calculated to be around $95 million - 33 million covered the organization of all the committees - 62 million covered all legal matters that FIFA faced - expenses are said to be around 5,368 million in 2018 - 81% was directly invested into football related events and the remaining 19% was mainly spent on administrative activities that averaged around $797 million - the expenses for development and education accounted for 1,670 million and it included the FIFA forward program that used these funds to promote football worldwide long term effects - MNCS long term a financial performance - - since 1970s FIFA's presidents have long been selected on one fundamental promise: increase of revenue - - in the long run the crisis will not have adverse effect on the financial performance of the MNC as the cash will likely supported from the media and wealthy sponsors in lieu of broadcasting and marketing rights - - have developed countries such as China, KSA and others are investing heavily in football to win the bid to host the future World Cups. Be it to become the next football superpower or to improve the global image of the country which is why Chinese companies have already stepped into FIFA's rescue financially - - Post COVID-19, the wild upward spiral of the global football economy will likely continue and the finances that have taken the hit in terms of lost revenue due to absence of fans from the football stadiums will likely recover - corporate reputation due to crisis - - after the resignation of previous presidents of the MNC and appointment of the new president with promises to eradicate corruption and improve finances but we are still far from the FIFA that we were promised - - the skepticism still surrounds the MNC's reputation which is why western multinationals have pulled out of FIFA in the past decade, worried about how FIFA's worsening image would reflect on their own - - corruption charges have indeed tarnished the image of the FIFA but the new governing body of the FIFA is working with these stakeholders and bringing in reforms such as the moving the decision of the host country from the executive committee to the General Assembly - - the reputation of the MNC can be saved by making the process of deciding the next host country in a Democratic, corruption free and transparent manner - Long term effect on stakeholders due to crisis - - FIFA uses a three tier sponsorship structure, which consists of FIFA partners, FIFA World Cup sponsors and national supporters for each FIFA event. And it very unlikely that any brand or stakeholder or back out from a global event that provides such huge outreach - - hello what are the sponsors of FIFA is a beer company called Budweiser. In some countries, promotion of alcohol is not even allowed. Due to this, Budweiser might lose exposure worldwide - - similarly, no matter the reputation of the FIFA, not many stakeholders will risk losing the participation in a widely popular sporting event as FIFA World Cup - - but FIFA's management will have to mend its ways in order to avoid the investigation from the international watchdogs such as the FBI and others Strategic recommendation - Correct and positive actions: investigate the members involved, define new rules to prevent this in the future such as creating an oversight to keep managers in check, and create new programs to promote football worldwide - actions that could be improved or done better: rethink the results of the voting for the 2018 and 2022 World Cup after firing members involved in bribes a new vote could have been cast and a new system could have been developed regarding how the host country is decided, Send officials should have received longer bans from the football industry as some individuals escaped longer penalties by just revoking their job titles, and both Russia and Qatar should have been punished for bribes made to these officials and by allowing them to still host the World Cup, FIFA still supports bribery. Therefore, behavior was rewarded which should have been punished instead

JP Morgan Chase

The History of JP Morgan & Co - "Maintaining the highest standards of integrity involves faithfully meeting our commitments to all our constituents - customers, employees, the Board, shareholders, regulators - and to ourselves.." - Mission: To be the best financial services company in the world. -JP Morgan Chase & Co Background - J.P. Morgan Chase & Co is an American multinational investment bank headquartered in New York City. J.P. Morgan co founded the banking company Drexel, Morgan and Company. It became J.P. Morgan and Company in 1895 and is now JPMorgan Chase & Co (2000). JP Morgan Chase & Co is one of the oldest financial institutions in the United States, with a history dating back over 200 years. 1857 - JP Morgan is introduced to the world of banking 1871 - Drexel Morgan & Co is founded (later named JP Morgan & Co) 1877 - Chase National Bank is founded 1940 - JP Morgan goes public and begins to sell shares 1955 - Chase Manhattan Bank is created 1973 - JP Morgan & Co opens the doors to Russia and China 1995 - JP Morgan Introduces online banking 2000 - JP Morgan merges with Chase Manhattan 2004 - JP Morgan merges with Bank One 2010 - Chase introduces mobile banking What was the Princeling Internship? - Princeling internships are known to violate the FCPA (The Foreign Corrupt Practices Act) which prohibits U.S. citizens and entities from bribing foreign government officials to benefit their business interests. The Princelling Internship scandal was essentially a bribery scheme conducted by JPMorgan in which the company "hired children of government officials and other favoured referrals who were typically unqualified for the positions on their own merit" states Andrew Ceresney, director of the Securities and Exchange Commission's (SEC) enforcement division. - In 2001, JPMorgan & Co established a policy that prohibited the hiring of children or relatives of clients and potential clients in order to obtain business". That policy was soon revoked and reiterated. Starting in 2006, labeled also as the "sons and daughters program", the unjust hiring program would wrongfully and unethically help JPMorgan & Co build relationships with higher title individuals such as government officials by hiring their children to ensure business. The scandal took place in Asia to "secure Asia Pacific business". - Company employees were aware of the Unethical practice and violation of the FCPA yet chose not to disclose this information as the "business rewards and new deals were deemed too lucrative." - The bank went on to hire over 100 unqualified applicants whose jobs involved little more than proofreading and still went on to get paid the same as entry level investment bankers. - Applicants were "referred by government officials at Chinese state-owned firms, and earned at least $35 million as a result". The Princelling Internships - One of the biggest scandals in J.P.Morgan's history. - Bribery scheme that went against the FCPA - 2001, established policy that prohibited hiring of relatives in order to gain business but was later revoked - 2006, renamed practice as "sons and daughters program" that continued the bribery scheme - Company hired relatives of potential clients in order to ensure business. - Main location of scandal took place primarily in Hong Kong and China during the time where J.P.Morgan pursued expansion of growth in Asia Pacific. - 2013, program was terminated - 2016, dispute was settled and J.P.Morgan had to pay fines to the SEC. After the Scandal... - JP Morgan acknowledged and expressed their regret of the incident hiring process. JP Morgan spokesperson was quoted saying " The conduct was unacceptable, we stopped the hiring process in 2013 and took action against the people involved." - The company made improvements to its hiring program, and strethenged high corporate standards. - As a response to investigate, the bank fired six (6) employees who participated in the misconduct and took disciplinary measures to twenty-three (23) more who failed to identify/ acted in the direction of supervisors. - The company enforced $18.3 Million in penalties on former/ current employees - Based on SEC's investigation, JPMorgan quit from deals like public floats of Tianhe Chemicals and Everbright Bank, since it was linked with the children of chairmen of both companies (Lynch et al., 2016). Short term consequences - FINES TOTALLING: $264 Million - $130 Million to SEC (Securities and Exchange Commision) - $72 Million to the Department of Justice - $61.9 Million to the Federal Reserve Long Term Consequences - JP Morgan long term business situation ● JP morgan has steadily grown as a business since the scandal ● Every year since the settlement was announced, total assets, total deposits, and stakeholders equity have all risen ● Loans given have also increased since the settlement, but did decrease between 2018 and 2019 - JP Morgan long term financial situation ● JP Morgan stock, revenue and profit have all steadily risen in the years since the scandal ● JP Morgan recently set a profit record of 12.1 billion this past year ● JP Morgan's biggest dip in stock and revenue since the results of the scandal came in early 2020. Strategic Recommendations - The Banks should focus on recruiting bankers and employees who can help Chinese customers to traverse BOTH offshore and onshore deals - The Banks should ensure bankers explore working opportunities across the regions, therefor the company should hire candidates who can work across cultures - Employ the use of third-party professional background-checking to scrutinize bankers' family relationships. Rewarding Disagreement - Once a dishonest corporate culture is established, it is very difficult to root out. - Even honest employees will be under constant pressure to conform to the prevailing culture. One way to overcome this is to encourage and reward disagreement. An honest employee in a dishonest office may try to keep quiet and mind his or her own business for some time to go along with the group. Make it clear that you don't want your employees to always agree with you or each other and that you are always open to criticisms or unpopular opinions. This can help give an honest employee the courage to speak up against a prevailing practice that otherwise could develop into a scandal. - "confidential, just added son of #2 at SinoTruk to my team," referring to a company that is part of a state-owned trucking enterprise. He added: "I got room for a lot more hires like this (Goldman has 25)." - Email Exchange between two employees at JP Morgan and & Co Controls - As much as JP Morgan and Co head chairmen were behind the large scandal that set them back, a system of checks and balances could have been a means of protecting the business. Removing any possible opportunities of fraud by instituting a carefully planned set of internal audits and controls. - "Some companies require all major tasks to involve at least two employees, ensuring that neither employee is in a position to falsify the work without being observed." Post Crisis Analysis - Now that the storm is over (hopefully), it is time to reflect effectively! A formal analysis of what was done right, what was done wrong, what could be done better next time and how to improve various elements of crisis preparedness is another must-do activity for any Crisis Communications Team. The Realities of Unethical Practice in Business - As much as unethical practices are in no way shape or form smart to ever even consider, there are, unfortunately, ways companies have been able to conduct unethical practices without getting caught. I thought it would be interesting to dissect some for the sake of showing corruption. - The two quotes seen at the bottom are from Bloomberg Opinion, written anonymously. It was interesting to read on how strategic advice was given on how to be unethical and still avoid the crisis JP Morgan found themselves in. - - "JPMorgan was less aggressive about corrupt hiring than some of its competitors, tried harder than them to construct a compliant system, and kept careful and auditable records. And now is in more trouble than its less scrupulous competitors." - - "If your China bankers aren't even aware that hiring sons and daughters to win business might be bad, then they won't create elaborate spreadsheets tracking their misdeeds, or e-mail each other about how much they need to hire princelings to win business. They'll just do it. The most effective compliance program of all might just be "do whatever you want but never say anything in writing." How Quanxi cost JPMorgan Millions - The behaviors that guanxi culture mandates for Chinese society are corrupt when government officials engage in them Guanxi, is defined as "durable social connections and networks a firm uses to exchange favors for organizational purpose" (Gu et al. 2008). Although guanxi has been found the dominant factor for business to succeed throughout China (Lovett et al. 1999), scholars have noticed that guanxi is less salient than strategies in improving performance after China joined in the World Trade Organization (Law et al. 2003). Scholars also found that guanxi won't work in managing relationship with the public. - Guanxi loosely translates as personal connections, relationships or social networks. It implies trust and mutual obligations between parties, and it operates on personal, familial, social, business and political levels. Having good, bad or no guanxi impacts one's influence and ability to get things done. It is important for US business to understand international practices correctly, as it can make or break global business practice. - One example in 2009 involved a Chinese government official telling a senior JPMorgan banker that hiring a referred candidate would influence the bank's role in an upcoming initial public offering for a Chinese state-owned company. The candidate was soon given a position in the NYC subsidiary of JPMorgan. More than 100 young adults participated in the "Sons and Daughters program", and the estimated overall profit resulting from business opportunities gained through the Client Referral Program is more than $100 million. According to Leslie Caldwell, chief of the Department of Justice criminal division: the "So- called Sons and Daughters Program was nothing more than bribery by another name". The DOJ used a non-prosecution agreement to resolve the offences, as JPMorgan took significant action against six employees believed to be the key participants of the misconduct. - Lines can quickly blur without properly looking into certain practices and how they can potentially affect the overall growth and integrity of your corporation. Conclusion: - While JP Morgan & Co was conducting business in China, it is still an American based corporation. The United States has extensive laws protecting against foul play and unethical business behaviors that may be happening through American firms. The FCPA is a prime example of that and is the exact reason they ended up getting caught. The FCPA prohibits firms and individuals from paying bribes to foreign officials to further business deals. No matter where you start your business, you will run into issues or concerns in the country your businesses main interactions reside in.

BP, Deepwater Horizon Disaster

The Origins - British Petroleum 'Bp' PLC: Founded by William Knox D'Arcy and Registered on April 14th, 1909 - Entering the United States Market: Joint Venture with company Amaco - Mission: Display integrity and honesty, treat everyone with respect and dignity, and attain mutual advantage by simultaneously contributing to human progress. The Disaster - BP caused the largest environmental spill in American history in the Gulf of Mexico; known as the Deepwater Horizon Oil Spill. December 1998 - Deepwater Horizon construction begins by Hyundai Heavy Industries. February 2001 - The rig is delivered to the United States. March 2010 - Drilling operations are approved in the Macondo Prospect. April 20, 2010 - Explosion and fire on the Transocean drilling rig occurs. April 23, 2010 - Search for the employees is suspended by US coast guards. The rig was found upside down 1/4 mile away from the blow out preventer. April 24, 2010 - Oil is found leaking from a well. April 26, 2010 - BP shares fall 2% as investors were aware that the cost of the clean up and legal fees will negatively impact BP. May 1, 2010 - The coast guard announces that the leak will have long term effects on the Gulf shore. May 5, 2010 - BP successfully manages to attach a valve on the leaking pipes to end the flow of oil into the US Gulf. Key Players: - British multinational corporation ranked as the third largest in the global oil and gas industry. - Project operator at the Macondo well located in the Gulf of Mexico. - Global provider of offshore drilling operations. - Controlled and performed drilling processes at the Faulty Deepwater Horizon rig. - American manufacturer that supplies equipment for the oil and gas sector. - Equipped the blowout preventer tool to restrict immoderate levels of oil or gas flow. - American multinational company that specializes in oilfield services. - Undertook the cementing process at the Macondo well. Causes Leading Up to Macondo Well Explosion - BP's management did not fully consider risks created by time and money saving decisions. - Multiple compromises were made during the cementing process - Insufficient management and industry oversight ○ Government regulators lacked the necessary resources and technical expertise to prevent the crisis. ○ Critical aspects of drilling operations were left to the industry to decide without agency review. Immediate Causes of Blowout - Valve failures - Pressure test misinterpreted - Leak not spotted soon enough - Overwhelmed separator - Gas detection system failed - Blowout preventer (BOP) failed Initial Response During the Crisis - Rescue crew arrives - Focuses on rescuing 100+ workers still on the rig (there has been a total of 126) - CEO Tony Hayward (pictured above) made insensitive comments - BP deflects blame - Fails to communicate key messages - Replaced Hayward, ramped up social media campaigns Response After the Crisis - April: ○ Aerial dispersant operations began. ○ Sent underwater robots to activate BOP but was unsuccessful. - May: ○ Relief well drilled next to the failed well and heavy drilling mud was pumped into the well. Failed too. - June: ○ Placed a cap on top of the leaking wellhead so that it could pipe the oil and gas leaking from the well to ships on the surface. - July: ○ Prepares to place a tighter-fitting cap and had 400 oil-skimming ships to deal with the increased flow of oil as the caps are being exchanged. - August: ○ Pumped heavy drilling fluid, mud, and cement into the well and stopped flow of oil - September: ○ The well was officially sealed and cleanup continues. How well did BP respond to the crisis? - BP's crisis response was a typical example of how NOT to manage a crisis. - BP was ill prepared. - Initial crisis response was unsatisfactory. - Later on, it was considered borderline satisfactory. Short-Term Effects - Community ● Compensation for the workers that were injured and killed resulted in a loss of $183 million dollars for Transocean and BP Plc. ● As it was unsafe to go to the coast due to the oil spillage, tourism was interrupted and fishing was halted. ● The workers at the rig became unemployed shortly after the blowout. - Legal Proceedings ● More than 400 lawsuits were filed against BP during 2010. ● Internal and external investigations regarding management were pursued. ● The US government imposed a moratorium on certain offshore drilling activities, which was subsequently lifted in October 2010. - Environment ● The direct Impact on Nature was the death and poisoning of almost 100 thousand wildlife animals. - Management ● The Gulf Coast Restoration Organization (GCRO) was established to manage all aspects of the disaster. ● The Board was restructured, Andy Inglis and Tony Hayward stepped down and were replaced by Bob Dudley. - Financials ● The Gulf Coast Claims Facility (GCCF) was established to control the financial aspects of trusts and funds. ● BP decided to cancel the first-quarter dividends of 2010 as the expenses caused by the spill were too important. ● The total charges against BP were of $40.9 billion at the end of 2010. ● Shares in the NASDAQ stock market dropped from $53 to $28 per share in 3 months. Long-Term Effects ● BP's stakeholder: Anadarko Petroleum(APC.N) 25% stake Japan's Mitsui Corp 10% stake ● BP's compensation to the affected areas had risen to $62 million and set up a $20 billion account dedicated to spill compensation. ● The annual economic losses to the tourism and fishing industries in Alabama, Louisiana,Florida and Mississippi summed up to $22.3 billion. ● An estimated of 49,500 jobs would be directly threatened by the drilling ban. ● The damage to its reputation would hamper BP's future development. ● BP's finances would be weighed down by higher costs, after clean-up costs and fines have been paid. ● Exploration and Production segment would be restructured from a single business into three functional divisions (Exploration, Developments and Production). BP is still in game - BP has cooperated with both the UK and US governments. ● About 1.5% of the UK government's pension fund were invested in BP shares. ● Around 7% of the UK pension fund annual income came from BP. ● BP was assured by the Department of Energy and Climate Change (DECC) to reopen the major North Sea gas field it owned jointly with Iran. ● British government stepped in and offered cooperation and financial relief to help BP survive the huge compensation package. ● BP is the largest oil producer in the United States and had billions of dollars in contracts to supply fuel to the American military. ● BP announced to achieve zero emissions by 2050 in Feb of 2020 Preventions to the Crisis - Internal Factors ● Use the required amount and type of equipment and processes in the construction of the Macondo well ● Conduct periodic audits and assessments of technologies and workplace conditions ○ Quicker response to maintenance issues and repairs even if it requires additional time, efforts and spending ● Proper effective capping stack to restrict oil flow and seal the well - External Factors ● Clearer communication to increase cooperation between BP, Halliburton and Transocean ● Stricter regulations to ensure safety and compliance for offshore exploration and drilling processes ● Adopt the "safety case" hazard system that is used internationally Our Recommendations: - Internally ● Establish and submit independent response plans to federal agencies for approval ○ Conduct yearly training and assessment of on-site employees using live simulations ○ List the specific equipments to be used, including its functions and conditions ○ Disclose the specific amounts of financial compensations ○ Delegate clean-up responsibilities to specific parties of the project - Externally ● Have major oil and gas companies invest in a single entity (an international response company) ○ Have a collective containment response on standby ● Industry-wide commitment to risk-management of offshore operations and explorations ● Adopt an international strict liability standard (strict zero tolerance) for oil spills in litigation disputes Summary - More than a decade after the Deepwater Horizon crisis, it remains as the largest and most expensive environmental spill in the US history. - As shown by our analyses, such preventable accident had detrimental effects on an array of stakeholders. - Our recommendations focus on proper and adequate practices that can be implemented to mitigate risk and harm. - We have learned that doing the bare minimum has led to a poor emergency response, a damaged reputation, an unstable financial performance and the compromise of employee welfare and overall public safety.

Volkswagen

- Volkswagen is a German automobile manufacturer which owns twelve other brands including Audi, Skoda, Bentley, Lamborghini, Porsche, and Bugatti. - Founded in 1937, Volkswagen is the largest automobile manufacturer worldwide by sales and their largest market is China which constituted 40% of their sales. - Their German name translates to "people's car" as the brand was built to give everyday people the opportunity to own a car at a time when not many Germans were able to do so. - Their most recent endeavors have been focused on electric vehicle expansion and protecting the environment. How the Crisis Unfolded - The Volkswagen emissions crisis started to unfold in November of 2005 when Volkswagen began developing a new diesel engine for their vehicles. These new engines failed to reach the standards set by the U.S. Environmental Protection Agency in regards to nitrogen-oxide emissions that vehicles were allowed to emit. In order to deceive authorities, Volkswagen installed "defeat devices" which created inaccurate results when their vehicles were tested. The devices masked the true emissions of the vehicles and made it appear as though they were compliant. - Beginning in January 2009, Volkswagen releases their "clean diesel" vehicles to the market and falsely advertises them as being environmentally friendly. After a study by the University of West Virginia is conducted in March of 2014, it is revealed that these vehicles actually emit emissions over the legal limit. In September 2015, after allegations by the U.S. EPA, Volkswagen admits to illegally installing an estimated 600,000 defeat devices in their vehicles. In addition, the U.S. Department of Justice also sues Volkswagen for violating the Clean Air Act. On January 11, 2017, it was officially announced that Volkswagen plead guilty to three felony charges and is ordered to pay $4.3 billion in penalty fees. With all of this considered, the crisis could have most definitely been prevented if Volkswagen decided to try and develop engines that followed the new regulations instead of illegally installing these "defeat devices" to deceive both their consumers and numerous government agencies. There was an intent to deceive and an issue created by those within Volkswagen who desired profits over all else. How Volkswagen Responded to the Crisis - In response, Volkswagen published a video statement from then-CEO Martin Winterkorn on September 22, 2015. Winterkorn said that Volkswagen was dedicated to cooperating with the relevant organizations and authorities for any investigations undertaken, and "do everything necessary in order to reverse the damage this has caused", and provided an apology. Winterkorn resigned on September 23, 2015, stating that Volkswagen "needs a fresh start - also in terms of personnel" and repeating that the "process of clarification and transparency must continue." At the end of the statement, it was also mentioned that he was "not aware of any wrongdoing on (his) part." - Furthermore, Volkswagen also understated the number of affected vehicles. While they initially admitted that 600,000 cars had defeat devices installed in them, there was actually 11 million installed. Volkswagen was unable to keep their promises of transparency as the EPA later revealed there were even more defeat devices installed. - Volkswagen promised a fresh start to stakeholders, but their leadership's denial of any wrongdoing caused additional and unnecessary attention and damage. They made the crisis worse by not coming clean from the start. In January 2016, Volkswagen's new CEO Matthias Müller visited the United States and told NPR, "We didn't lie," when VW clearly did. Müller was forced to call NPR back and revise his statement. Over time, they did shift their perspective and focused largely on environmentally friendly behaviors and campaigns, as evident through their environmental mission statement. Short-Term Effects of the Crisis - After VW finally admitted to the intentional fraud made by many employees, VW's stock plummeted 20%, and its market value declined by $26.8 billion. VW was forced to recall 11 million affected cars worldwide. VW also faced a penalty of approximately $18 billion from the Environmental Protection Agency. An additional $7.3 billion was required to fix all affected cars in the coming years. - Volkswagen consumers were also devastated that the scandal might affect the resale value of their vehicles, and wanted to be be compensated far more than they were by the company. After much avoidance, VW provided $500 dollars to each consumer with one of the affected vehicles. However, the scandal was so expansive that this $500 per consumer cost the company $250 million dollars. - Short term, and long term, VW lost customer loyalty and brand image. VW's clean diesel was supposed to balance the trade-off by reducing emissions by 97% and improving fuel economy by 30%. Due to these statistics buyers were motivated to pay upward of normal pricing just to own a car that was "green" and fuel efficient. The news of the scandal however, caused consumers to have doubt in the company and the resale value of the cars with emission faking software was expected to go down by about $5,000. - Dealers considered this scandal the "Titanic" of scandals for their business. Dealers usually finance their cars instead of owning them, therefore dealers paid large interest amounts simply to have Volkswagen in their shops during the crisis. Recalls usually reap profits for dealers, but not in this case, VW had to establish some pricing floor and incentive programs to keep dealer relationships. - The VW scandal disrupted the value chain for most of its stakeholders. Production halted so suppliers of wheels, engines, fenders suffered. The next level down of production suppliers also stopped the delivery from their own suppliers of spark plugs, engine blocks, etc. The chain reaction continued to disrupt suppliers on all sides. - VW's scandal caused decrease in consumer demand for diesel vehicles, and German carmakers in general. BMW and Mercedes-Benz saw loss in profits with their diesel vehicles after the scandal. This affected all models, not only diesel. It is estimated that non-VW German carmakers lost $26.5 billion in sales. - The scam not only put VW's reputation at stake, but it also may have ruined the diesel industry forever. Andy Palmer, CEO of Aston Martin, said that this scandal would make consumers suspicious of all new VW cars, and of other car makers for some time. He predicted that the diesel engine would die a slow death. Long-Term Effects of the Crisis - Due to Volkswagen's scandal, it can encounter several issues in the long run - including gaining back its stakeholders, shareholders, dealers' trust, financial loss, and corporate reputation. ● Even though Volkswagen is experiencing positive growth but because of the cost of legal fees, public relations efforts can put negative impact on profit. Hence, they can potentially suffer in the long run. ● Its unethical choice of the rapid growth of income and higher sales rates over sustainability and environmental awareness led the company's positioning from a top car manufacturer and seller to an inadequate and not trustworthy firm. Indeed, its reputation was damaged left a negative impact on its brand and its services. ● After the revelation of the scandal and facing a variety of environmental and civic charges against the company it will be tougher for VW to regain its dealer and consumer's trust. ● Volkswagen is constantly receiving pressure from their competitors. For instance, when the firm was stuck with legal works and public relations chaos for a persistent period, meanwhile its competitors like Ford, General Motors, Renault, BMW, Daimler, and others captured majority of the market with their new products. A Strategic Recommendation for Volkswagen - When the news of Volkswagen's wrongdoings broke to the public, Volkswagen should have taken immediate responsibility and corrective action rather than continuing their deceptive tactics. Once the original University of Virginia study was released, Volkswagen waited almost an entire year before admitting to any wrongdoings. Plus, their list of wrongdoings just continued to grow over time. Some things they should have done is immediate recalls, public apologies, and termination of those employees who were involved. Instead they did so over a much extended period of time which made consumers and the general public weary of their actions. In addition, they should also encourage more organizational openness in the company. Many of their issues came from the culture of deceit in the company because people were able to hide their wrongdoings without fear of discipline. They should work on creating more effective and widespread leadership training to avoid future issues like this. In the long term, their dedication towards environmental initiatives have been very beneficial to their public image and was a good strategic action to improve their public image. Conclusion - Volkswagen struggled significantly when the effects of their emissions crisis reached the public. While they stumbled in the first few years with refusal to accept responsibility, over time they shifted their mindset and focused on environmental sustainability. Today they are virtually unaffected by their crisis and have managed to largely recover their public image.

Boeing

2018 - Lion Air flight 610 from Tangerang, Indonesia, lost control and crashed into the Java Sea - Indonesia's National Transportation Safety committee revealed that flight 610 had airspeed indicator problems on its four previous flights - Boeing did not willingly release information relating to the crash until told and Boeing has responded on a need to know basis 2019 - FAA and other global regulatory agencies grounded the 737 Max citing software issues for contributing to recent accidents - Boeing suspended production of the 737 MAX 2020 - Boeing faced fines for the incidents and is now subject to stricter certification guidelines by the FAA - The company was able to settle over 90% of victim settlements - In December, the 737 MAX flew commercially for the first time on two years Who is responsible? - Boeing= Outsourced critical software engineering work and Failed in its transparency with the FAA - FAA Failed to ensure proper certification oversight and Unsuitable workplace practices Boeing's crisis response - Boeing thought the best way to handle the crisis was to say as little as possible, causing significant backlash from the public - November 16th, Boeing issued an operations manual to inform crew members about the procedures of handling the plane - Only 26 days after the second crash did Boeing release a prerecorded video apologizing to the public - In July 2019, Boeing's financial assistance fund budgeted for $50,000,000 to distribute among the victims families of the crash - CEO Dennis Muilenburg when is fired due to the company's execution of the management of the crisis in December 2019 - Boeing suspends the production of the 737 Max planes - After significant backlash for the way they handled the crises, Boeing began to open up, fully engaging in the investigations of the authorities - bowings crisis management effectiveness= Boeing's communications came across as disinterested, They hid information from the public in a situation where transparency is key, and Boeing's messaging was confusing, hinting at one thing and not backing it up short term consequences - $2.5 billion in settlement to the Department of Justice - $20 million fine by the Federal Aviation Administration - $7 billion in lost due to Max grounding - Stakeholders= shareholders stock value dropped by 10% to $304.00, airlines had less capacity due to Max grounding, and airline customers had increased fare prices - Rivals= Airbus reported record high deliveries of 863 aircraft and Boeing's commercial airline deliveries dropped by 53% long term consequences - Human tragedy - a storied safety reputation in jeopardy and a global bubble in aviation - grounding of 737 Max around the world - airlines shift to Airbus for jet supply strategic recommendations - employee oversight over aircraft design, electrical and development - pilot training programs - be proactive, and work to resolve the issue - meet actively with lawmakers and investigators to deduce problems - focus on innovation and change not a rush to production and ignoring internal safety measures - review corporate governance, leadership philosophes, and core competencies such as their manufacturing and supply chain - balance safety, quality, employees, partners and customers, and shareholders returns - technical and engineering expertise - innovation through R&D - improving the relationship with the Federal Aviation Administration - recertification of the Max 737 - control of the supply chain - the right make-buy strategy - a strategic non-advocate review (NAR) supply chain process

Nestle

What and where - Nestle sources much of its cocoa beans from the Ivory Coast and is the world's largest cocoa bean producer - Nestle is accused of utilizing child slave labor on the Ivory Coast where children are brought in from Mali, Burkina Faso, and other surrounding countries (major issue in this part of Africa) where did this happen and who is responsible - combination of prevalence of child labor in cocoa bean producing nations and corporations willingness to lower costs no matter what - case is still ongoing and we will need to wait for legal decision - in the meantime, Nestle claims to not have known about the child labor at the time which is hard to believe - the farmers who hired child labor share the blame two and in the end there are many factors and ruling may well go against Nestle timeline of major events - in 1996, Nestle allegedly takes advantage of child labor in the Ivory Coast - In 2005, lawsuit is brought forth against Nestle USA by 6 men from Mali - in 2010, case is dismissed by District Judge because they said the US law does not allow for suing for abuse overseas - in 2012, SCOUTS case allows for companies to be sued for abuse overseas - in 2018, federal appeals court reinstates the lawsuit - in 2020, SCOUTS takes on the Nestle case and it has not been decided on it by this current date Could this crisis have been prevented= In the current state of the world, no - It's complicated. The largest cocoa producing nations all have child labor issues such as the ivory coast, Ghana, indonesia, and Ecuador - All major chocolate companies use/have used child labor such as nestle, Hershey, mars, and more - This issue can only be solved by improving economic situation in ivory coast. And nestle can't do this by itself. - Internal policies did not prevent this Crisis response - The company works with 700,000 farmers and investigates when they hear reports of child labor - responsible sourcing standard: minimum age employment is 15 - corporate business principle: how all employees and partner should behave - Nestle cocoa plan: addressing root causes of child labor - child labor monitoring and remediation service - Nestle's implemented a child labor monitoring and remediation service to tackle child labor issues since the incident began - the initiative covers all the cocoa growing communities that Nestle operates in and has monitored over 78,580 children - this system uses local community liaison people who worked to raise awareness of child labor in communities, identify children at risk and report their findings to Nestle and other suppliers - of the 78,580 children monitored, please found 18,283 for 23% performing unacceptable tasks. As of December 2019, 55% of children identified in child labor were no longer doing unacceptable work at their most recent follow up visit (7,981 out of 14,511 children) crises consequences (short term) - corporate reputation suffered when child labor in their cocoa was brought to light - conscious consumers moved away from Nestle to other rivals such as Hershey and Mars - children involved cannot attend school or further their education - many children will face life changing injuries - at the same time of crisis Nestle financials did not suffer and in fact grew 15.5% in 1997 alone crisis consequences (long term) - Nestle is working to help mandate child labor issues which will help their corporate reputation although it was an issue they were involved in - the community around cocoa farms will receive funding to create more accessible schools to encourage families to allow their children to receive an education - internationally has been doing well financially; its net profit margin which has gone from 9.5 in 2016 to 14.4 and 2020 and is expected to increase profits as the economy recovers from COVID-19 - price of cocoa will continue to increase as Nestle will be paying higher prices to farmers to reduce child labor - government of Ivory Coast will face pressure to create more opportunities for free education - school attendance where available, has become mandatory in the Ivory Coast - farmers will receive new agricultural training and machinery tools to help increase their yield with less labor needed - children involved may face long term health problems due to hazardous work for a child and unsuitable conditions such as malnutrition and poor mental health strategic recommendation - Nestle has taken numerous steps in the right direction to rectify the situation in an attempt to resolve the crisis and below are some of the actions implemented by Nestle to rightfully combat the crisis - - Nestle has since implemented A at no tolerance policy for child labor and a firm hand approach in disciplining businesses that practice child labor - - They have partnered with communities to create educational programs to raise awareness against child labor - - collaborated with 700,000 farmers worldwide directly and indirectly to monitor any evidence of child labor - - all of Nestle suppliers must follow a policy known as the responsible sourcing standard, which has a minimum age for employment - - according to the policy, no suppliers allowed to employ any 115 or those under the completion age for compulsory education - - Nestle's corporate business principles also state their strong opposition to Child Exploitation and these principles guide how all Nestle employees and business partners should behave - - Introduction of the child labor monitoring and remediation service (CLMRS)= the first company to implement a program in order to monitor and prevent child labor in its host countries, the program will continue to monitor all cocoa growing communities under Nestle and over 78,580 children daily for instances of child labor, this program has allowed nicely to identify children at risk, raise awareness, and provide remediation measures appropriate to each case and family circumstance, examples of this include building and rehabilitating schools, delivering birth certificates, and providing school kits and other school material, and since 2018, the program has made significant progress, monitoring nearly 80,000 children at risk of child labor and helped more than 40,000 children access education - What other steps should Nestle take - - compensate the families of children who were kidnapped and forced to work - - educate local communities and farmers in order to raise awareness - - supply equipment and educational supplies for communities - - continue to play an active role in supporting regulations, policies, and the development of programs and incentives that are needed to help eliminate child labor - - continue to expand the reach of their child labor monitoring and remediation system across all cocoa supply chains in West Africa, since it has demonstrated it is effective in identifying children performing unacceptable tasks and in providing remediation - while child labor continues to exist, there is still much work for Nestle to do - - Nestle has pledged a continued support in helping tackle the root causes of child labor through collective action and engagement with all relevant stakeholders - - a statement from Nestle about their continuing battle against child labor: tackling child labor is a shared responsibility: we will play our part in helping tackle its root causes through collective action and engagement with all relevant stakeholders, including farmers, communities and children themselves, as well as governments, multilateral and nongovernmental organizations, pure companies, certification bodies, individual experts, and our value chain partners. For example, he participate in many programs such as the child learning and education facility coalition, a public-private partnership focused on scaling investments for quality education in the Ivory Coast.