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Quick response to collision helps Nippon Yusen save face

Despite fatal accident, company lauded for crisis management

The container ship docks at the Oi container terminal after the crash. (Provided by Nippon Yusen)

TOKYO -- A collision last month between a U.S. Navy guided-missile destroyer and a container ship off Japan's Izu Peninsula resulted in the deaths of seven U.S. sailors. The catastrophe, however, has not affected the reputation of Nippon Yusen KK, which chartered the ship.

One could argue that NYK is immune from repercussions because the vessel was not its own, but it should also be kept in mind that the company's crisis response prevented any secondary damage.

The container ship is owned and operated by Kobe-based Dainichi-Invest, which has no capital ties with NYK.

Nippon Yusen is only responsible for receiving cargo from parties that want it shipped. It then decides on ports of arrival and departure as well as the shipping route. Think of NYK as a department store that receives an order from a consumer and hires a courier to deliver it.

Like a department store cannot take charge of a courier's delivery truck, NYK does not captain the ships it hires.

Still, NYK was quick to respond. Although the collision occurred in the early hours of June 17, a Saturday, the company had a crisis management center up and running by 8 that morning.

At noon, company President Tadaaki Naito reportedly showed up at the head office, asking lawyers and Dainichi-Invest officials for the latest details.

Because Dainichi-Invest is unaccustomed to responding to accidents, NYK representatives supported its exchanges with the Japan Coast Guard.

NYK acted because it has numerous social and moral responsibilities, such as checking that communications between the ship owner, authorities and U.S. Navy officials went smoothly, a company representative said.

Emergency response measures that have been in place within the company made the speedy response possible. Since a crude oil spill in Tokyo Bay in 1997, NYK has been conducting annual emergency drills involving 30 staff members from safety management, legal affairs, public relations and other departments.

So the same morning as the accident, staff from numerous departments jumped into action, in line with a company rule that states, "Should an accident which has resulted in injury or death occur, the company is to establish a crisis management center."

On the morning after the accident, the company unloaded cargo from the container ship at the Oi container terminal along Tokyo Bay, then arranged for an alternative ship to head to Vietnam, the scheduled final destination. These efforts served to keep delays to a minimum.

The company also sent out four news releases through June 20 to keep the public up to date.

"What I thought we should prevent first and foremost," Naito said, "was reputational risks to our company."

By and large, NYK's handling of the accident has gone down well with market participants and analysts.

MSCI of the U.S., which monitors corporate scandals from an environmental, social and corporate governance standpoint, gave NYK's response to the accident a 5 on a scale of 1 to 10. Given that accidents lead to significantly lower scores, a 5 is, in effect, a relatively high evaluation.

Although NYK shares retreated 3% on June 19, the first day of trading after the accident, the price rebounded to its preaccident level on June 29.

"There was nothing wrong with the way the company handled the accident," said a representative of a major asset management company in Japan.

Now, a qualifier: NYK's response should not be worthy of the media spotlight. The company did exactly what was expected of it. However, corporate Japan has suffered through numerous scandals in which the companies involved so poorly handled the fallout that they made matters worse.

This happened last year when Mitsubishi Motors got caught up in a fuel-economy scandal. It happened in 2000 when the precursor of what is now Megmilk Snow Brand let a food-poisoning scandal get out of control.

NYK did not follow in these companies' footsteps.

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