Engro Chemicals Pakistan Limited Business Disaster Overcome

Introduction:

Engro Chemicals Pakistan Limited (Engro) was a large manufacturer and marketer of fertilizers
in Pakistan. The company incorporated in 1965 under the name of Esso Fertilizer Pakistan
Company Ltd. The company was publically listed on all the three stock exchanges in Pakistan
which are Karachi, Lahore and Islamabad. Engro was ranked as among the top companies by
KSE. A leading Pakistani business conglomerate Dawood Group had the majority 42% of shares
in Engro. During 2006, Mr. Husnain Dawood was elected as the chairman of the company.

The core business of Engro was manufacturing and marketing of fertilizers and it was a second
largest producer of Urea in the country which was produced at the plant site in Daharki. During
2007, Engros business grew rapidly but still the principle business of the company remained the
manufacturing and marketing of fertilizers. Two major fertilizers manufactured and marketed by
the company were:

1) Urea
2) Phosphates

Engro had a number of subsidiaries and joint ventures in a variety of businesses which are as
follow:

1) Engro Polymer and Chemical Ltd. (EPCL):

The Subsidiary was involved in manufacturing and sales of poly vinyl chloride (PVC).

2) Engro Vopak Terminal Ltd. (EVTL):

EVTL was a joint venture of Engro with Royal Vopak of Netherlands. It was countrys first
cryogenic ethylene storage facility.

3) Avanceon:

Engro owned 63% shareholding of Avanceon which was a leader in industrial automation
business.

4) Engro Foods Limited (EFL):

EFL was a wholly owned subsidiary of Engro which started its operation in 2007. It had
continued its expansion by adding to its brand portfolio, milk production and distribution
capacity.
 5) Engro Energy:

Engro Energy was a wholly owned subsidiary of Engro and the objective was to set up a cost
effective power plant which was targeted to add 217 MWs of electricity to national grid system.

6) Engro Eximp Pvt Ltd:

Engro Eximp was a wholly owned subsidiary of Engro which was engaged in the trading of
phosphatic fertilizers.

Management Committees:
The company was being managed through following major committees:

1. Board Compensation Committee

2. Board Audit Committee
3. Corporate Health, Safety and Environment (HSE) Committee
4. Management Committee
5. Compensation, Organization and employee development Committee

Business Risks and Control Framework:

During 2007, management Committee reviewed major financial and operational risks and made
a risk control framework which consisted of:

Clear organizational structure

Established authority limits and accountabilities
Well understood policies and procedures
Budgeting and review processes

I.T Infrastructure:
Engro business transaction data processing and communication was based on using Information
Technology at Head office and plant site at Daharki. Computers at H.O and Daharki site were
connected through fiber optic cables and H.O was connected to other locations through WAN
while EPCL and EVTL were connected to H.O through DSL link. Both head office and Daharki
plant had their own server rooms.

Applications Systems at Head Office and Plant Site:

Head Office had following communications systems and financial applications:

IBMs Lotus Notes based email system. Emails at all sites were received by servers
through a firewall.
 An in-house developed oracle based MAIDAS system for sales. There was one MIDAS
server at the plant which was accessed by plant distribution department for detailing of
urea orders to truckers and for processing their invoices. All information entered in
MIDAS at head office was automatically replicated to Plant MIDAS and same was for
Plants MIDAS whose information was replicated at H.Os MIDAS. Major tasks which
were being performed by MIDAS were Master data, bank guarantee handling, and
management of dealers accounts and shipment of goods at plant site.
SAP was being used by finance and Human resource sections at H.O and by Industrial
relationship department at plant site. Two modules being used were:
1) HR
2) Financial Control (FICO)

Major tasks being performed by SAP were Accounts Payable, General Ledger, Financial
Control, asset management, payroll processing and compensation and benefit
administration.

MAXIMO computerized maintenance management system (CMMS) was also being used
at plant site to keep a record of company assets and was also being used by purchase
department at Head office.

2007s Disaster:
In August 2007, the companys head office was completely destroyed by a fire. The office was
located in PNSC building Karachi and the fire destroyed all the equipment as well as the
hardcopies of the financial records of years 2004/05 and 2005/06 as well as the period from Jan
1, 2007 to Aug 19, 2007. The company was suddenly faced with a catastrophic loss as the
records were critical to Engros day to day operations. The end of the companys financial year
was December 31, and the external audit was due to commence in Dec 2007.

Major risks faced by Engro after the fire had left its head office in ruins was:

1. Financial Risk
2. Operational Risk

Recovery from Disaster

The information technology (IT) department had developed a disaster recovery plan (DRP) in
2005 that was exclusively related to reestablishing the IT facilities after any event that could
make the business systems inoperable.
Disaster Recovery Plan (DRP):
The main purpose of disaster recovery plan is to reduce the overall risk to the company and
minimize downtime and data loss. It is also to maintain the minimum level of service while
restoring the organization to business as usual. Moreover, DRP is also to provide step by step
procedures for recovering disrupted systems and networks, and help the organization resume
business as normal. Provide for smooth and rapid restoration of service is also one of the purpose
of disaster recovering plan.

DRP actually depends on variables such as the type of business, the processes involved, and the
level of security needed. Disaster recovery planning may be developed within an organization or
purchased as a software application or a service. There are three basic strategies that encompass
a disaster recovery plan and these strategies are:

1) Preventive measures
2) Detective measures
3) Corrective measures

Preventive Measures:

Preventive Measures will try to prevent a disaster from occurring. These measures seek to
identify and reduce risks. They are designed to mitigate or prevent an event from happening.
These measures may include keeping data backed up and off site, using protectors, installing
generators and conducting routine inspections.

Detective Measures:

Detective measures are taken to discover the presence of any unwanted events within the IT
infrastructure. Their aim is to uncover new potential threats. They may detect or uncover
unwanted events. These measures include installing fire alarms, using up-to-date antivirus
software, holding employee training sessions, and installing server and network monitoring
software.

Corrective Measures:

Corrective measures are aimed to restore a system after a disaster or otherwise unwanted event
takes place. These measures focus on fixing or restoring the systems after a disaster.

Evaluation of the Engro DRP plan:

Engro invoked its DRP as soon as the news of complete destruction of the office facilities was
received. Engro used corrective measure disaster recovery plan to overcome the problem.
Corrective measures are aimed to restore a system after a disaster or unwanted event takes place.
These measures focus on fixing or restoring the systems after a disaster. Engros efforts to
recreate data were consisting of following steps:

Temporary offices were made at locations like Engro guest houses in Karachi. Sales
accounting staff that was using MIDAS moved to plant site where there was a complete
backup of MIDAS. The backup servers at plant site were brought to Engro polymer
offices at Bahria building in order to set up critical accounting system.
Engros email system was expected to become functional as there was a computing
infrastructure already available.
Key venders like Inbox were asked to swiftly deliver required services, workstations,
laptops, low end servers, WAN/LAN, UPS and printers.
Engros core accountings systems consisted of SAP, MIDAS and MAXIMO systems.
MIDAS and MAXIMO were being operated at both plant and Head Office and a backup
was available at plant site due to Oracles replication feature. Backup was being made on
daily, weekly and monthly basis through taps. Major task was to make SAP modules
operational on servers at Engro Polymer Offices. Back-up of SAP data was being made
on weekly, monthly and annual basis by using tapes. Daily backup was kept at Head
office which was destroyed. So data of short period time was to be recreated. These
systems were not fully integrated and it allowed Engro to encounter a speedy recovery
than if all the systems had been integrated. This has definitely negated the concept of
enterprise resource planning (ERP).
A core team had been formed which analyzed gaps in electronic data.
Help had been obtained from a public accounting firm which provided temporary
accounting staff. The staff was given the task of reconciling duplicate invoices received
from all venders.
Banks through which payments had been made were approached to obtain copies of their
records.
All key vendors had been asked to send duplicate invoices
Data consisting of the necessary detail was being re-entered into the related SAP modules
based on the cutoff dates.

Enterprise Resource Planning (ERP):

Enterprise resource planning (ERP) is business management software that allows an organization
to use a system of integrated applications to manage the business. ERP software integrates all
facades of an operation, including development, manufacturing, sales and marketing. Besides, it
is also a system that integrates internal and external management information across an entire
organization to facilitate the flow of information between all business functions. In contradict to
this; Engro did not use the system that integrates with each other. Engro only focused on those
three systems that allowed them to reestablished electronic links, e-mail and internet in the
Bahria building.