… Negotiate Better Results!How is BP responding to the Gulf Oil Spill? ¿Otra vez, Valdez?*Why not a mutual-gains approach ...
… Negotiate Better Results!disclosing information regarding the incident. BP officials said that they did know whether oil...
… Negotiate Better Results!he addressed the nation with the latest on the BP oil disaster. Some may also say that when BP’...
… Negotiate Better Results!can certainly engage in efforts to prevent this from happening again but blame-games, finger po...
… Negotiate Better Results!community, a sustainable agreement is likely to exist. As mentioned before and recommended by a...
… Negotiate Better Results!CNN (2010). http://edition.cnn.com/ORASI Consulting Group (2010). ORASI Consulting Group, servi...
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Mutual Gains Approach to Crisis Management and Risk Management BP Oil Spill


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How is BP responding to the Gulf Oil Spill? ¿Otra vez, Valdez?*
Why not a mutual-gains approach to crisis management?

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Mutual Gains Approach to Crisis Management and Risk Management BP Oil Spill

  1. 1. … Negotiate Better Results!How is BP responding to the Gulf Oil Spill? ¿Otra vez, Valdez?*Why not a mutual-gains approach to crisis management?By Luis E. Oré, JD, MA International Negotiation and Consensus Building ConsultantMany investors are trying to figure out the potential liabilities associated with various companiesassociated with the Gulf oil spill. There are many liability concerns, companies all over the world dealwith potential and challenging situation such as the Gulf oil spill; some address these challenges with atraditional public relations approach and others use a pure legalistic approach. Whether potentialinvestors consider either one as the right or wrong approach, there are other ways to tackle thesechallenges; an approach with a risk management and conflict prevention mindset may be helpful. Itmight be beneficial to factor an additional perspective while business lawyers offer advice to potentialclients. This can be a compelling topic to discuss within the legal and business community dealing withissues associated with oil spills.When incidents, accidents or disasters involving companies’ operations and performance occur, theyand their executives face affected people, angry communities, media and journalist questioning,interest-groups and advocacy-groups organizing actions. Many want to know what happened, why ithappened and who’s at fault. Most likely, companies will see their reputation challenged, credibilityreduced and trust going down the hill. Companies will have to decide how to manage information andcould respond with diverse approaches based on traditional and conventional wisdom. A “traditionallegal” approach would recommend protecting information to protect the company from exposure toliability; one may say, do not admit responsibility for things that probably the company has not done,taking blame simply will increase exposure. A “technical” approach would recommend controllinginformation; one may say, giving information to technically limited public will confuse them, do notadmit that a problem exists until is well defined and a solution is found, because saying there is aproblem without a ready solution suggests incompetence. Finally, a “public-relations” approach wouldrecommend creating information; one may say, shared information will be used against the company,disclose information in small doses maintaining and creating an image to the company advantage.On April 20 2010, eleven oil workers were killed when the BP-Gulf Coast’s Deepwater Horizon oil rigexploded and sank rupturing a pipeline 5,000 feet beneath the surface of the Gulf of Mexico whichbegan the largest oil spill in United States history. Some may challenge how upfront BP was when_____________________________________________________________________________________** Luis E. Oré is founder of ORASI Consulting Group Inc., a training and development consulting firm specializing innegotiation, consensus building, relationship management, and conflict prevention. Ore assists businesses withcross-cultural and international negotiations, strategic alliances, organizational changes, dispute resolution systemdesign, and corporate stakeholder engagement especially with natural resources investment projects between theUnited States of America and Latin-American countries. Ore has two Master of Arts degrees in conflictmanagement and in organizational and cross-cultural communication, a J.D. from the University of Lima (Peru),and extensive training in negotiation and conflict management from CMI International Group, Western KentuckyUniversity, Lipscomb University, and the Program on Negotiation at Harvard Law School. Ore is Chair 2010-2011 ofthe Association for Conflict Resolution’s International Section, collaborates with the Consensus Building Institute,and is former chair of the ACR’s International Development Committee, and an associate of the American BarAssociation. He can be contacted via email: luis.ore@orasicg.com.© 2010 by ORASI Consulting Group, Inc. All rights reserved. www.orasicg.com www.orasicg.com
  2. 2. … Negotiate Better Results!disclosing information regarding the incident. BP officials said that they did know whether oil or fuel wasleaking from the sunken rig. But BP Vice President David Rainey said "it certainly has the potential to bea major spill." In a press release BP said it had dispatched 32 spill response vessels to the area, and thatwind patterns suggested the current oil slick would stay well away from land. In addition to being out ofthe public eye, an oil spill at sea is much easier to clean up and has less of an impact on wildlife. Dayslater, it was reported that a third underwater oil leak had been located in the pipeline that connectedthe rig to the oil well, according to what said Doug Suttles, chief operating officer for BP. Two otherleaks were located within 36 hours of the April 20 explosion. There is no certainty on how much oil isflowing into the Gulf of Mexico. Media reports that BP’s executives have declined invitations to newsprograms such as CNN’s AC360.While the scope and impact of one of the biggest environmental disasters in the history of the U.S.remains a mystery, people are getting angrier. There are angry public around the Gulf coast concernedabout the effects of the oil spill, online communities and advocacy groups running campaigns thoughinternet, threatening lawsuits from concerned citizens, House of Representatives passing a bill thatremoves limits on financial damages that can be awarded for accidents off the U.S. coastline, a billintroduced in the Senate proposing spill penalties to force companies to give up a years worth ofprofits, and president Obama is expecting a report from a new presidential commission tasked withinvestigating how to prevent future oil spills.A different approach could bring about better risk management and better results. After an incidentoccurs while the company is losing trust and credibility, its executives must deal with the challengingsituation with a strategic approach, an approach that is more effective than traditional and conventionalwisdom, to rebuild trust, credibility and manage potential exposure while dealing effectively withdiverse stakeholders concerns.A mutual-gains approach would recommend disclosing information. In today’s world where internet andnetworks are so pervasive concealing information is not only extremely difficult but counterproductive.Honesty is the best policy because sharing information builds credibility and contributes to rebuildingtrust, and helps protect the public from further harm and accident-involved-companies from furtherliability. If people have information available, they will be in a better position to protect themselvesfrom further damage. Sharing information contributes to open channels of communication, enablesfeedback flow, and paves the path to regained trust and credibility; while concealing information andadmitting to actions only after others have discovered it, undermines credibility. If organizations want togain public’s trust, organizations need trust their public. Companies need to be mindful and strategicwhen sharing information because too much information, poorly stated, and the timing of disclosurecan be counterproductive.A mutual-gains approach not only recommends disclosing information but acting in a trustworthyfashion, companies’ executives must say what they mean and mean what they say. Another keyprinciple and prescription to rebuild trust and credibility is to acknowledge the concerns of others, infact, downplaying angry people’s fears and worries, concerned communities, and those potentiallyaffected by an accident will raise emotions and escalate the situation. It seems president Obama followsthe recommendation of a mutual-gains approach when he decided to host the families of the 11workers killed in the BP oil rig explosion at the White House, also when he went to visit the Gulf coastarea showing his concern regarding the incident, its consequences and response efforts, as well as when www.orasicg.com
  3. 3. … Negotiate Better Results!he addressed the nation with the latest on the BP oil disaster. Some may also say that when BP’s CEOsaid he was sorry for the largest oil spill in U.S. history and the massive disruption it has caused the GulfCoast, he was also showing his concern to the Gulf residents. It is important to highlight that anotherkey prescription for companies from the mutual-gains approach perspective is that companies need toselect a good and credible spokesperson, one that is informed, experienced, clearly spoken and notcondescending to the public. A good and credible spokesperson speaks easily, confident, smoothly andcalmly while conveying honesty.What about BP’s clean-up efforts and claims management for compensation? Many recall the 1989Exxon-Valdez Oil Spill, 10 million gallons of crude oil into Alaskas Prince William Sound. After 2 monthsof the Exxon-Valdez incident, Exxon spent $115 million on the clean up; after 2 months of the BP-GulfCoast incident, BP asserts it has spent $2 billion cleaning up the oil spill. At first, Exxon acceptedresponsibility and then started finger pointing. Similarly, during the first week of BP-Gulf Oil Spill, thehead of BP Group said during a CNN interview that the accident could have been prevented, and hefocused blame on rig owner Transocean Ltd. CEO Tony Hayward said Transoceans "blowout preventer"failed to operate before the explosion and that is the key issue here, the failure of the Transocean[blowout preventer], describing the valve as "an integral part of the drilling rig," which is operated byTransocean. "The responsibility for safety on the drilling rig is with Transocean," Hayward said. "It istheir rig, their equipment, their people, their systems, their safety processes." On the other handTransocean Vice President Adrian Rose had said its oil rig had no indication of problems before theexplosion.Regarding the oil spill cleanup and mitigation efforts, BP says it takes responsibility for responding to theDeepwater Horizon oil spill and it seems that BP takes the advice of a mutual-gains approach whendecided to work with the government; however, it seems BP has not engaged other concernedstakeholders. BP could have convened a public forum with consensus building strategies to engagediverse concerned stakeholders to harness community wisdom and obtain the best possible ideas. Atleast the Coast Guard started an initiative separate from BP to seek the best ideas that industry,universities, researchers, scientists and the public have to offer to try to contain the oil spill from theDeepwater Horizon in the Gulf of Mexico.Even though BP states that it will be responsible for the cleanup effort and with no cost to the taxpayers, someone may say that when BP says it will pay for all costs of cleaning up the oil spill that doesnot necessarily mean it is committing to restoring the Gulf to its previous state. There are also concernsabout how the cleanup is taking place, some have questioned if BP is bringing the oil to the surface orsinking it, and some may ask if BP might be using dispersants instead of skimmers for financial interests.BP has established claim offices for managing claims for compensation for damages. However, there arepeople who don’t trust in what BP is saying, complaints have increased and people want to file lawsuitsagainst PB. Even though someone may think about the Rolling Stones song “You Cant Always Get WhatYou Want”, a better liability and risk management approach might be implemented based on a mutual-gains approach. This approach recommends that companies accept responsibility, admit mistakes, andshare power. On its website, BP states it "takes full responsibility for responding to the DeepwaterHorizon incident"; however, during questioning at a congressional hearing BP has attempted to sharethe blame with some of its contractors, as its CEO did soon after the incident happened. Accidents willalways happen, but denying responsibility will only exacerbate people and communities’ anger. Once anaccident has occurred, no company can take it back; companies can only affect the future. Companies www.orasicg.com
  4. 4. … Negotiate Better Results!can certainly engage in efforts to prevent this from happening again but blame-games, finger pointingand denying responsibility will make things worse and be a waste of time, energy and resources. Lookingbackwards and seeking to blame other most likely will make companies loose more reputation,credibility and trust in the eyes of the communities. A better approach to resolve this type of challengingsituations is to look forward, engage others and jointly decide on how to better deal with the challengeat hand. Engaging a broad base of stakeholders is what a mutual-gains approach means by sharingpower. It is about sharing decision making power. By sharing power companies gain power and regaintrust and credibility.When an accident of this nature occurs it is fundamental to establish clear lines of communications,even though BP has online access, contact telephone numbers and is constantly updating its websitedisclosing information regarding how BP is working, BP has not created a space for a public forum forjoint problem solving. Good communication is not just information-giving, it is more like a two-waycommunication street, a back and forth process of gathering and disseminating information, listening forfeedback, and responding accordingly. Establishing this type of clear lines of communication means toengage in direct dialogue, face-to-face dialogue between companies and the public.The challenge is how companies deal with the consequences of unfortunate incidents. In general terms,once an accident occurs, regarding compensation for damages companies have three alternatives:Companies can do just what is required by law and wait until the courts decide the appropriatecompensation; or companies can decide to offer money to compensate the affected people and/orother forms of assistance to mitigate the effects of the accident they caused, before litigation begin; orcompanies can offer to make stakeholders better off than they were before the incident, to do so,companies can take measures immediately to stop further harm and damages and wait to offercompensation until after stakeholders and companies had an opportunity to meet to see whether andhow an equitable and fair standard for compensation can be agreed on.BP has established claim offices to deal and manage claims resulting from the Deepwater HorizonIncident. Its website says “BP is committed to paying all legitimate claims for damages resulting from theoil spill and necessary response costs. This includes: Property damage, Net loss of profits and earningcapacity, Subsistence loss and natural resource damage, Removal and cleanup costs, Cost of increasedpublic services, Net loss of government revenue. BP also will evaluate all claims for bodily injury eventhough they are not payable under the Oil Spill Pollution Act of 1990”. However, there are also concernsregarding how BP is managing claims for compensation. People say that BPs checks to pay for lostwages and income are not coming fast enough, if they come at all. The Adm. Thad Allen, retired CoastGuard commandant overseeing the response to BPs oil spill, had sent a letter to Chief Executive TonyHayward demanding more information on compensation provided to people affected by the disaster.The state of Louisiana is demanding that BPs claims database be made public so it can understand whatthe reason for the holdup is. The state of Louisiana is also asking BP for $10 million to fund mentalhealth programs for those impacted by the Gulf oil spill. BP has not said whether it will fork over themoney or not. BP has established a 20 billion claims fund; however, the point is not how much moneywill be paid, but how it will be paid.It seems BP has opted for the second alternative; it has begun paying money to people helping with thecleanup efforts and established several claim offices. But, when a company that has caused damage triesto decide on its own what the appropriate response and compensation should be, a concernedcommunity is likely to resist. When compensation is seen as appropriate and fair by a concerned www.orasicg.com
  5. 5. … Negotiate Better Results!community, a sustainable agreement is likely to exist. As mentioned before and recommended by amutual-gains approach, a proven effective way to share decision-making power can bring about moreefficient and cost-effective results. A way to share decision-making power is thorough corporatestakeholder engagement. In fact, people are more likely to accept decisions, even adverse results, if theysense that the decision making process was fair and gave them an opportunity to have their concernsheard and considered seriously. Therefore, BP could have opted the third viable alternative and convenea stakeholder engagement process with the community affected by the oil spill.A stakeholder engagement process as a public forum can help mitigate the oil spill and compensate theaffected community. The stakeholder engagement process can seek advice on how to calculate a faircompensation, and can be used for joint problem-solving on a number of issues. Companies can seek toderive agreed-upon community standards to guide the payment of compensation. The secret to having asuccessful stakeholder engagement process is the use of a neutral facilitator with dispute resolution andconsensus building expertise. A neutral facilitator could help identify stakeholders, explore interests andconcerns, select representatives, and draft ground rules to govern civilized interaction during theirmeetings. The stakeholders need to agree on how decision will be made – by consensus with company’sveto power or advisory power – the group will need to agree on the design and operation of the process– public forum. For instance, Susskind and Field (1996) use an example that can be adapted to the BP OilSpill to help determine compensation for lost fishing days; in this case, the stakeholders may decide thata fisherman’s panel should be established. Representatives from fishermen’s organizations, the NationalMarine Fisheries Service, and BP might be designated by the forum to sit on the panel. The panel couldbring in consultants to describe different ways of determining how losses should be quantified, andwhat mechanism might best be used to expedite of the claims fishermen. The panel could havereviewed options and presented alternatives to the full forum for consideration. Then, depending on thegroup ground rules; they would have only advisory power, thus BP would not have delegated away itsright to make money-spending decisions. In other cases, the group might have decided to operate byconsensus, thus BP would have had the equivalent of a veto power over any recommendation of theforum.When potential investor, counselors and legal community are considering how to tackle challengingsituations such as the BP-Gulf Coast Oil Spill, they may be hesitant to decide and implement a corporatestakeholder engagement with a mutual-gains approach to crisis and risk management, but in fact, timeand again, it shows that this approach produces better and more efficient results, strengthenscommunity relations, reduces the risk of exposure and liability, and improves the image and reputationof the companies while contributing to rebuild their trust and credibility. The question is posted, whynot a stakeholder engagement and mutual-gains approach to crisis management?*¿Otra vez, Valdez? Paraphrases the Spanish expression “¿Otra vez, Andrés?” which can be translated as asurprised statement questioning: More of the same? Come on! ReferencesConsensus Building Institute (2010). CBI Involucramiento Corporativo de Actores Interesados: Solucionessostenibles para empresas y Comunidades.http://www.wiserearth.org/uploads/file/f73b0d1b5e6c3d910a65618edcf7745c/CBI%20Involucramiento%20de%20Actores%20Interesados%20y%20Stakeholders.pdf www.orasicg.com
  6. 6. … Negotiate Better Results!CNN (2010). http://edition.cnn.com/ORASI Consulting Group (2010). ORASI Consulting Group, services and resultshttp://www.wiserearth.org/uploads/file/0539962adfd5e073ab5dbfbb1671c8e8/ORASI%20Consulting%20Group%20SERVICES.pdfOre, L. (2009). Cross Cultural Negotiation & Consensus Building Strategies for Foreign InvestmentProjects: Beyond Legal Systems. State Bar of Texas ADR Section’s Alternatives Resolutions Newsletter Vol.18,No.2, 27-34 pp.http://www.wiserearth.org/uploads/file/78ace89e643adbd327d11f1337f94a23/CROSS-CULTURAL_NEGOTIATION_AND_CONSENSUS-BUILDING_STRATEGIES_FOR_FOREIGN-INVESTMENT_PROJECTS%20Luis%20Ore.pdfSusskind, L. , & Field, P. (1996). Dealing with an angry public: Mutual gains approach to resolving disputes. NY:Free Press.BP (2010). http://www.bp.com www.orasicg.com