Forest fires in SE Asia have destroyed your manufacturing facility in Indonesia. The loss of this facility has reduced your production capacity in Asia by 30-35%. Your entire financial loss for the PP&E ($12.8M) is covered by your property insurance and your Insurance against the risk of loss due to an inability to conduct business, and therefore earn revenue, following a covered peril (e.g. fire, windstorm, flood, collapse, earthquake, or riot). This is a common coverage purchased by businesses of all types, especially retailers, restaurants, and manufacturers.
business interruption insurance will cover your lost profits for 12 months. In addition to the factory, most of the nearby town burned and many of your employees are now homeless. Fires in other parts of the country have also interrupted utility and transportation infrastructures, making it impossible to move raw materials or finished products for at least 4-6 months. The international news media has picked up the story and has been running reports about the families who are now unemployed and homeless. You need to make a decision about how to deal with your employees while managing the public relations situation
How is your company handling the production and human resources issues related to the damaged plant in Indonesia? In addition to the business issues, be sure to address the ethical, legal, public relations concerns and How do your decision impact the company public relations.
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I hope this gives you some areas of concern for this scenario that you can utilize in writing your own memo!
Memorandum to the CEO:
As you are well aware, devastating forest fires in Southeast Asia have wreaked havoc in the area surrounding our plant in Indonesia. Initial assessments are that the plant is completely destroyed and that absolutely nothing that will be recoverable. Our property insurance policies and our business interruption insurance policies, which we have confirmed were in force prior to the fire, will cover our $12.8M loss of the factory and 12 months of lost profits. Fire damage in multiple areas of the country have interrupted utility and transportation infrastructure and made it impossible to move raw material or product to market for another 4-6 months. In addition to the heavy business losses we suffered, the town nearest the factory, in which the majority of our employees lived, was also destroyed. Initial estimates are that 65-80% of our employees are now homeless. The situation is serious, but not hopeless; however it does require, in our opinion, decided action on our part to assist our employees, their village and the country of Indonesia.
The country management team has just concluded an emergency crisis response meeting and generated the following recommendations to address what we see as our ethical, legal, and public relations challenges. Ethically, we cannot ignore the misfortune suffered by our employees and by large sections of Indonesia. Even if the plant had been spared, we would still need to deal with the impact of homelessness on our employees. Legally, our biggest challenge will simply be execution of policy claims and timely claims payments. With the general devastation in so much of Indonesia, local insurance resources are spread thin. It ...
This solution contains a sample letter to the CEO from a country management group in Indonesia, which has suffered disastrous wildfires, affecting the business and its local employees.