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Decision Making and Problem solving : A Study on BP Deepwater Horizon

Q1: With reference to a listed company of your choice identify a recent major issue that they have had to deal with. Describe what the issue was and discuss how your chosen company dealt with it.

Q2: Critically appraise the approaches used by the organisation in trying to address this major issue. With hindsight and time suggest how the company could have responded better. What other decision making and problem solving techniques would have been most appropriate for this decision or problem.

Q3: As the company is listed on the stock market analyse how that market viewed the major issue and the company’s responses that followed. This will involve analysing the company’s share price across the period of the event.

Outline:

- Introduction

- Analysis

- Stock Market Analysis

- Conclusions

- Recommendations


Answer

Introduction

The recurring analytical suite is supposed to evaluate the embedded causes and the prospective lack of proper crisis management tools which have consequently crippled their decision-making acumens and paved the catastrophe. In terms of an empirical overview, BP, who happens to be a leading exponent of oil drilling apparatus, committed the respective catastrophe which is considered as the “worst environmental disaster in the American history”. In an empirical tone, a massive explosion was followed by a gas leak that has been found to occur in the Deepwater Horizon Oil rig. As a monstrous aftermath of that, it was accounted that 11 workers are killed coupled with 17 others who have found with serious injury. In terms ecological consequence, almost 205 million gallons of oil have been drained into the Gulf of Mexico.


BP Deepwater has previously stained their stature as an oil extracting unit and causing severe environmental blunder when there Oil refinery unit at Texas have been exploded in 2005 when a chunk of hydrocarbon vapor have came into correspondence with one of the ignition origin (Williams et al. 2014). These incidents, apart from the vivid dimension of negligence, exhibits sheer absence of crisis management skills that make their decision-making agencies inept to cope with vulnerable crises. 


 In this regard, the current study suite, as it was mentioned in the incipient phase of the assignment, intends to evaluate the underlying reasons that are vulnerable to emerge in vulnerable circumstances while recommending circumvent crisis management tools that might guide them towards coping with this catastrophes.     


Analysis

Before delving into the nuances of the contextual ecological plunder, a comparative analysis of the expected attributes and practical implements of BP appear imperative in order to consolidate the notion of negligence and the lethal lack of crisis management capabilities. It was evident from the mission statement of BP that they are obliged to endow their customers with the requisite fuel for the purposes of transportation and lubricants. In this regard, the unit associated with BP immediately set their objectives to clean up the oil spill as early as possible simply by plugging the hole to prevent the oil from dispersion. They have admitted their plunder in front of the American public immediately and held every liability on their account. 


However, the entire unit of BP deepwater appeared strategically inept since they have not have a crisis management plan which can be applicable in this circumstances despite being involved in identical incidents before. In terms of financial strategies, they have not fixed the budget for crisis management as an inevitable aftermath of the absence of the circumvent plans for crisis management. In this regard, in terms of approaches of crisis management, it resonate the impulses of Three-Phase Model, which appears to be a globally accredited and recommended model of crisis management. 


In order to present an overview of the approach used, it is imperative to present a brief description of the approach in the current context.

The Three-Phase Model 

This model suggests a sequential disintegration of the entire crisis management framework that results three distinct phases of the crisis which can be termed as holistic. The recommendation also includes the advice that intends the applicant tom perceive it as an aggregated set of activities. 

The incipient phase, which is also known as the pre-crisis phase that intends to concentrate the attention on the preparation of the preventive measure and BP Deepwater appear inept to cope with this aspect of crisis management due to the vivid absence of a circumvent crisis management tool. The following phase is typically known as the crisis-response phase and chiefly deals with the steps undertaken from the organizational side after the occurrence of the crisis. The penultimate phase is usually known as post-crisis phase and perceived as an phase that desires the recovery of the immediate crisis while addressing the strengths and weaknesses derived from the introspective suggestion regarding the treatment of such kind of issues that are vulnerable to evoke along with encouraging the respective organization to prepare themselves to combat with identical circumstances in the upcoming phases of the respective venture.


Pre-crisis Phase: 

The steps that are expected to be taken in this phase supposed to cater the enquiry regarding the considerable reduction of the proportion of disaster vulnerable to be caused by the crisis. The components of the subsequent results appear to be the function of prevention and Preparation. The decision-making acumen that advocates the investigation of potential loopholes that are likely to pose risks and pave to a robust crisis transmits the importance of conducting risk audits which is nothing but a risk-management analogue of quality control. As per the apprehension of Cherry et al. 2017 which intends to incorporate every organization under the wrath of crises also encourages them to be prepared in order to combat with the upcoming incidents of massive disaster. Evaluating the case of BP Deepwater oil spill it is evident that due to the absence of a circumvent crisis management plan despite being stuck in such consequences earlier disable the respective oil-extracting unit to combat with the situation. 


However, the phase of preparation desires the development of prudent crisis management against the outcomes of the evaluation of prevalent incidents or the forecasted origins of risk. The preparation message is typically consisted of messages conveyed by the top management and percolated through several means of media across the consequence. Furthermore, in this regard it has been extensively observed that it actively facilitates the entry in the next phase where the organization requires responding to the crisis after its very occurrence. 


The response Phase:

This phase is typical to initiate immediately after the occurrence of the blunder which urges the respective organization to respond to the emerged crisis. This is supposed to be cardinal stage of the crisis management framework. In this phase, the organization appears destined to respond to the crisis where the respective actions need to be characterized by the mitigation of the underlying crisis. Furthermore, the actions which are vulnerable to be taken by the organization are obliged to incorporate major public opinions in this regard.


The Post-crisis Phase:

It is expected to initiate when the organization has been able to redeem their prevalent stability and in this phase, the organizations appear typical to prepare for the upcoming events in order to explore the acumens that they have developed from the prevalent incident. Some of the research scholars such as (Devine et al. 2015) have suggested that the work for amendments can still continue in this phase as the organizing framework appears determined to initiate a new entry within the prevalent domain of expertise.


Contextual suggestions of improvement

In this regard, it can also be mentioned hereby that after getting involved in several identical disasters and exhibiting gross violations of the safety measures, BP remains the same negligent as it was before. After the mammoth financial penalty that BP Deepwater has been obliged to pay after the disaster in Texas City refinery, a report team commission by Congress investigation on energy and commerce reveals the lack of circumspect contingency plans that are destined to be developed for the upcoming cases of wealth control. Apart from that, the incident of oil spilling reveals their gross lack of planning, testing and oversight. It is the ill maintenance of the blowout preventer which enable a significant volume of gas to transcend the oil rig and cause the explosion (Lauritsen et al. 2017). Though some of the academic scholars have suggested that this blunder is expected since the previous CEO of BP imposed a significant budget-cut which inherently disabled the entire unit to invest for contingency plans, it has been extensively considered that the alternative contingency plan that BP has prepared is potentially inadequate. 


In this regard, the respective unit of oil extraction can be suggested to mobilize certain equipments that might enable them to prevent the upcoming catastrophes in the recent future. In the current context, it can be mentioned that the prospective engineers have attempted a lot to reduce the causes that might lead to such disasters. The engineers have attempted to replace the blowout preventer valves after veiling it containment in order to ensure the proper plugging of the oil dispenser that might prevent the leaking of oil. In this regard, it can be mentioned that the allegation against BP regarding the delay that they have posed while acknowledging the potential flaws, it is the absence of proper crisis management and contingency plan that inherently retards the respective unit to respond readily.      


Other available approaches

In terms of managing a crisis properly, the Three phase model appears to be the best model since it deals with the underlying issue with severe sincerity and enable the applicant with the port that might facilitate the incorporation of the outcomes of critical evaluation.


Best Approach

The Three phase model of crisis management is a globally recognized and lauded model primarily because of its relative ease of implementation. Apart from that, since the model deals with the phases in a sequential fashion, the outcomes of this circumspect crisis management tool endow the applicants with a transparent image of requisite activities.                      

 Stock Market Analysis

  1. Reaction of Investors to Problem and Solution

The BP Deepwater oil spill was an incident that occurred in the Gulf of Mexico. The industrial disaster started on 20.04.2010. It was an incident that had huge effects on the environments. The financial and market environment of the industry were also affected with the incident. The investors and others related parties to the organization asset up several meetings and conferences in order to gain the information about the incident and its effects on the financial markets. It is to be stated that the firm found that the investors and other financial party of the firm have lacked their interests with the financial activities with the firm. Thus it can be stated the firm had to obtain practices with such entities that had the willpower to enhance the marketing and financial conditions of the firm (Ustin et al. 2015). The primary causes of the incident are identified tried to be rectified during the time being. However, it is observed that the effects of the incident had a massive damage on the organization structures and market activities. Hence, the entities related to re organization had it difficult i n the rectification process.


Trend Analysis of Share Price During the Period


https://lh6.googleusercontent.com/TVKP-6yZ5cFoDgeX6Nb7Xh6qkMVpiN1lavDn0w_9NtyaEjQMtuS1jroaYQETs8I4GBLyj2q84khqR2ZVgCWQQlTev__VLo_c2thIcDpZ0D-JepBt--zPvIwTniNnFwLNQcsOFe07


Figure 1: Stock price fluctuations

Source: Powers et al. (2017)

According to the above figure it is observed that the stock prices for the year had fluctuated drastically. As it can be observed that the firm had highest share price of $60 at the beginning of the financial year. As the incident occurred on 20.04.2010 the stock prices have fallen drastically. Te market trends of the stock prices have been remote during the month along with the related months and have stayed low. The organizational authorities have tried and pulled of a certain portion of the market to gain the financial supports for the financial and organizational activities of the firm. However, the pull off was not adequate as the firm had it share prices enhanced by only a small margin. Thus it can even stated that the financial and market environment of the industry were also affected with the incident. The figure shows that the firm had been witnessing low stock turnovers over the financial year and had suffered huge amount of losses during the year.


Conclusions

In the light of the current study, it has been thoroughly examined that how BP has managed to deal with the controversial Deepwater Horizon Spill oil disaster against the established principles of crisis management. In this regard, the principal causes that are liable to shape this environmental disaster has been thoroughly discussed and it has been found that it is due to the transparent dimension of negligence that the management of BP has shown regarding the safety measures of the oil rig. It has also been found that there exists a flagrant lack of circumspect crisis management and contingency plans that characterized the aforementioned negligence. 


The accusation against the organization about pursuing the identical complacence regarding the cardinal issues of safety violation after the identical incident of gas explosion in Texas Refinery has been justified with concrete evidences (Jin et al. 2014). Moreover, the globally acknowledged framework of Crisis management has been discussed in order to indulge them to adhere to some prudent crisis management plans that might prevent identical cases of lethal causality. In this same regard, the unit has been recommended to disintegrate their crises further in a sequential fashion in accordance with the three consecutive phases of the proposed framework. It has been recommended immediately after the discovery that this ability of seamless disintegration of the comprising crises enable the framework with relative ease of implementation and probably that is the prime reason for the framework to acquire such global acknowledgement.   


Recommendations

In regards to the current discussion, the respective unit can be recommended to develop infrastructural expertise across the deep-sea that might have the capability to absorb if any incidents of oil spill happen. As per the simulations posed by the prospective engineers of BP, a certain circumference needs to be monitored within the sea that might prevent the oil from spilling or must possess the capability to contain the spill-over within an isolated domain (Boin and Kuipers, 2017). Apart from that, BP can be recommended to invest a certain amount of capital while creating an emergency response team who are supposed to monitor through patrolling across the well walls in order to discover any incidents of leakage immediately. This team needs to be composed of trained individuals.


Borrowing the perspective of the prospective readers of the current assignment, they can be recommended to evaluate the advantages of Three Phase model in respect to the attached incident of ecological plunder. Furthermore, they can be recommended to develop the rudimentary awareness regarding the imperativeness of crisis management and a back-up contingency plan that might enable them with the deep insight regarding the requisite skills for prudent crisis management. Apart from that, since crisis is almost an everyday affair, the readers can feel inspired since the model that has been discussed hereby indulges the systematic disintegration of the underlying components that inherently endow it with the relative ease of implementation.

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