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  • Writer's pictureCrisis Shield

The BHP and Samarco dam crisis

In November last year, a dam holding millions of litres of mining waste in south eastern Brazil burst. The ensuing flood of mud and waste water engulfed nearby towns, destroyed homes, killed 19 people and polluted the water supply which served a quarter of a million people. Samarco – a company owned by mining giants BHP Billiton and Vale – operated the dam.

The human and environmental impact of the dam bursting was a disaster. The ramifications of the way in which BHP Billiton acted before, during and after the event also constituted a crisis for the company. In 2013, a report written by The Instituto Pristino (a not-for-profit environmental and geotechnical modelling institute) and commissioned by the state in which the dam resided, found that there was a high chance that the dam could burst if Samarco did not implement risk controls or an emergency plan to reduce the likelihood of it occurring. Furthermore, prosecutors allege that cracks had started appearing in the dam wall in 2014, and engineer Joaquim Pimenta de Avila (who designed the original dam) was called back in to inspect them. He warned Samarco more water monitoring devices needed to be installed, but said his advice was ignored. In other words, Samarco knew there was a problem but did nothing about it.

Prevention and pre-emptive preparation are essential parts of any good quality crisis management program. This includes anticipating and identifying threats your company may face, assessing risks related to those threats, and ensuring risk control strategies are applied to contain risks within a tolerable range. Preventative action can reduce the likelihood of a crisis occurring, as well as reduce the impact a crisis has on the company’s bottom line and reputation, if it does eventuate. Unfortunately, companies often fail to focus their attention and invest resources in preventative action and pre-emptive preparation, as the Samarco dam disaster exemplifies.

If a company has not developed, trained and tested relevant plans and procedures, its staff will almost certainly find it extremely difficult to respond effectively to a serious and time-critical threat.

Residents affected by the burst dam have publicly criticized Samarco’s (and in turn BHP’s) immediate response to the crisis. Samarco had no contemporary warning system in place, instead the organisation attempted to notify residents who lived near the dam by telephone. Prosecutor Carols Eduardo Pinto stated that it is, “unimaginable to think that you are in your home, you hear a big noise, and wait for the phone to ring before you get out”. Furthermore, residents living 10 hours away were not alerted of the impending danger and many of their homes were destroyed by waste and mud that flowed into a nearby river.

Additionally, people whose homes were destroyed or severely damaged were not relocated until more than a month after the incident occurred. If Samarco had undertaken proper pre-emptive planning, an evacuation route and relocation area could easily have been pre-determined to enable efficient execution of response strategies.

It wasn’t only an inadequate on-ground response that escalated the disaster to a corporate crisis for BHP and Samarco; public sentiment deemed both companies’ media response inadequate as well. BHP’s CEO, Andrew Mackenzie, appeared on Four Corners in late February and struggled to answer even the most basic questions about the crisis. When a company’s CEO becomes the corporate spokesperson for a crisis but does not perform well in the face of media scrutiny (which inevitably comes with a crisis), the company has essentially played all its aces and has no fall back strategies to remedy the company’s public position and adverse public sentiment. In some cases this situation may result in the CEO’s necessary resignation or dismissal. There are many examples of this, including the highly-publicised Deepwater Horizon oil spill and BP CEO, Anthony Hayward’s, resignation after a series of public gaffes obliterated his integrity in relation to the event, and seriously hindered the BP’s crisis response efforts.

A company’s initial on-ground, and media response are both crucial to preserving a company’s reputation and its bottom line in a crisis.

BHP, Vale and Samarco now face legal proceedings initiated by the Brazilian government. On to of the costs associated with the dam burst and recovery itself, this lawsuit will cost them millions of dollars. Meanwhile, US investors are suing BHP Billiton for fraudulently overstating its ability to manage safety risks prior to November's fatal dam burst. BHP’s share price has decreased by more than 30% since the dam burst in November last year.

The fallout from this disaster is a lesson to all companies that prevention and pre-emptive preparation matter, and are worth the investment of attention, time, people and money.

Briggs Communications specialises in creating crisis management plans and providing media training for businesses. We can help your business prepare for any type of crisis. Contact us today for your free consultation.

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