Alarm bells ring on mining crisis management

Crises can take numerous forms for miners, from earthquakes and social unrest to disease outbreaks and the breakdown of infrastructure such as dams or power circuits, to name just a few.

When mining companies lack a disciplined approach for managing crises, the consequences can prove devastating. Workers' safety and lives may be threatened. A company can lose its licence to operate at a particular site, and new projects may be delayed or shut down. The company's reputation in the communities where it operates can suffer. Customers can defect. And lenders might withdraw funding.

While many mining majors have rigorous crisis management systems and procedures in place, BCG assessments reveal that some mining companies do not. Even among the majors, their approach may not be applied consistently across all of their sites. Some companies' emergency and crisis procedures are so complicated that they're difficult to follow. In others, only security personnel are familiar with these procedures, and management and staff aren't trained well enough on these to react appropriately when disaster strikes.  

In an industry already grappling with major challenges such as commodity price volatility and stiffening competition, no mining company can afford to take an ad hoc approach to managing crises. Developing intuitive, easy-to-use materials and tools, and training all key actors can foster a more disciplined approach.

Do we have a crisis?

To adopt a better approach, managers must first articulate what constitutes a crisis for them. For instance, managers at a mining site might decide that they have a social-unrest crisis on their hands if protests pose the risk of serious injury or death. If what is happening meets any of the defined criteria, the company will act immediately to resolve the crisis.

The best crisis management approaches address all three phases of a crisis: preparing a response should a particular crisis prove unpreventable, documenting how a crisis will be resolved if it strikes, and extracting lessons learned after the crisis to continuously improve. Setting up such an approach takes time and careful preparation initially. But once a company has completed this work, it can readily roll out the approach to other sites. 

Below, we examine these phases more closely. To illustrate key concepts, we selected a recent example from our experience in crisis management, with a multinational seeking to open a new mine and ore-shipping port on the African coast. The region where this client's site is located has experienced political instability, social unrest (including violent protests against mining companies), disease outbreaks, and natural disasters such as landslides after heavy rains. The mining company had already endured protests that had shut down work for several weeks. Managers recognised the need to better prepare for, respond to, and learn from additional crises that may erupt despite their prevention efforts.  

Before the crisis: Prepare

In the pre-crisis phase, managers should develop answers to two questions: ‘What can happen to us?' and ‘How will we prepare?' We recommend these steps:

•             Develop a risk register covering all aspects of the business and its corporate functions.

•             Create a guidebook detailing your overall procedure for managing crises.

•             Build a matrix on which you can map crisis scenarios depending on their likelihood of occurring and the seriousness of their impacts should they occur.

•             For the worst-case scenarios—those most likely to strike and those that would inflict the most devastating impacts—craft detailed emergency plans and general contingency plans.

•             Make basic preparations, such as creating an asset inventory and ensuring reserves for at least 15-30 days.

To illustrate, drawing from its previous experience with social unrest, our client developed an analysis showing worst-case scenarios for multiple aspects of the business, along with potential impacts (see figure below).

During the crisis: Solve

Savvy miners should create a generic manual applicable for resolving any crisis that may strike. This document serves as a guide through the entire duration of the crisis. Managers start using it the instant an event signals that a crisis is indeed occurring, per the criteria they have defined. The manual is a vital resource, because when any crisis hits, people are overwhelmed, and the risk of making bad decisions runs high.

The most effective manuals can be accessed immediately, and they walk people step by step through the company's approach to solving crises. Adapted from the military, the manual should define the ‘how' of resolution whenever a crisis strikes. This includes explaining:

•             Who is in charge.

•             Where the crisis management room is located.

•             Which problem-solving and decision-making processes must be followed from analysis of the ‘what' (the specific crisis at hand).

•             How to craft and communicate plans to stakeholders, including which message formats and channels must be used.

In addition, the manual should list satellite phone numbers and other information crucial to the crisis communication effort. It should also provide instructions for monitoring how various stakeholders perceive execution of the crisis management plan.

Thanks to the clarity and standardisation of information in the manual, crisis management teams can easily apply this approach to any type of crisis that may strike. Indeed, they should use this manual in parallel with the high-level scenarios they prepared in the pre-crisis phase. After all, it's impossible to create a manual covering resolution processes for every possible crisis, because crises never unfold exactly as expected. Thus, the combination of the generic manual and the high-level scenarios is a powerful tool for understanding what can go wrong and how to respond should a crisis occur. 

The generic manual developed for our client in Africa was readily available in a locker within the crisis room for the crisis management team. As it turned out, a violent riot did erupt. The crisis management immediately broke out the manual and put the resolution plan into action, which included moving personnel to a different complex, among other actions. Thanks to the team's swift, effective response, the situation was resolved without any loss of life or damage to the company's assets or operations.

After the crisis: Learn

Smart crisis management is not a one-time event. Instead, it's an ongoing process whereby managers continually update their crisis manuals and approach to reflect changes in their business and operating environments as well as lessons learned from experience. Every time a crisis is resolved, managers should seek insights into how they can do better next time. For instance, they can:

•             Generate reports on what went well and what didn't go well, drawing on analysis of action logs compiled during the crisis.

•             Use the log data to conduct structured after-action reviews, common in military organizations.

•             Carry out training and drills as needed.

Identifying gaps and weaknesses in their crisis management approach (such as unclear roles for crisis team members, or insufficient analysis of potential crisis scenarios) is crucial. By facing these shortfalls, mining managers can continually refine their approach.

While all this may seem sensible on the surface, many mining companies still have difficulty adopting this disciplined approach. One possible explanation is that they may encounter resistance from managers working in far-flung locations and sites. Some managers may feel confident that their current approaches are adequate. Others might question the idea of putting in the added time and effort required to master a new approach.

To overcome such resistance, a mining group can have a central crisis management team establish standard templates; for instance, for scenario analysis and crisis resolution manuals. These can be rolled out to local teams, who can populate the templates with information, analyses and procedures tailored to their unique situations.

Yes, strengthening a company's approach to crisis management takes upfront time, thought and effort. But the investment will pay big dividends the next time the unthinkable proves all too real. Indeed, the successful outcome at our client's African site inspired the multinational mining group to set up a similar crisis management approach at all of its other sites.

*Dr Heinz Pley (pley.heinz@bcg.com), Dr. Frédéric Geurts (geurts.frederic@bcg.com) and Matthias Tauber (tauber.matthias@bcg.com) are partners and managing directors at The Boston Consulting Group. Michael Savolainen (savolainen.michael@bcg.com) and François Lemaître (lemaitre.francois@bcg.com) are project leaders at the firm.