Issues and crisis management


Credit cards, in this modern world, are considered as an essential form of payment system that benefits hundreds of millions of consumers throughout the world. Apart from being convenient as well as efficient, it also creates debt misery among the card users which subsequently end up with court notices, currently a major issue in Brunei Darussalam. As to worsen the situation, other commitments such as housing and car repayment make credit cards debt worse as most end up defaulting being unable to repay even the basic minimum requirements. In order to avoid this repugnant situation, both banks and credit card holders need to find a win-win solution by negotiating and mediating. It is important for them to adopt this subject in order to find better solution.

Negotiation is the process where mandated representatives of groups meet together in order to resolve their differences and to reach agreement. It is designed to reconcile differences and to reach agreements by consensus. The outcome for negotiation depends on the power relationship between the groups which involve compromise ( On the other hand, mediation is when negotiations tend to fail or stuck, independent mediator will be invited in order to facilitate in the settlement of the conflict. This case study underlined the roles of negotiation on how they approach both parties, negotiating for better solution of their conflicts which ended up with the involvement of mediator ( Therefore, the role of mediator as a problem solver is imperative for both parties by analysing on how he or she comes up with better solutions, approaches and modal used for problem solving.

In conflict management, it has to lead the conflict into a constructive end. Both parties are needed to confront and resolve the established conflicts and interact with each other. The three processes of conflict resolutions are through negotiation, mediation and arbitration ( Via my case study, the process of pre-negotiation and negotiation, both parties use integrative bargaining. During the process, the banks would attempt to define the problems encountered by their customers and suggest alternative solutions for their problems. After listing out all the problems, the next phase is to provide a plan where banks introduced a payment scheme for which the customers were given options to settle their debts by paying a certain amount, in the lowest rate, based on their nett salary. Although the banks were initially cooperative with their customers, there are times they are required to take actions in situations such as when the customers kept on avoiding their debt knowing they are unable to pay on time as agreed during negotiation. The bank will give three months notice and monthly warning letter to their clients before they decide to take legal action. Most clients with difficult backgrounds will end up in court and declared bankrupt, ruining their life as well as career. Banks are struggling for their disputes of right- people or groups entitled by previous agreement to certain rights. It will focus more on conflict issues such as legally enforceable matters in customary matters. It is settled by legal decision. Different from the customers, they are more into disputes of interest where the conflict was about the matter of opinion- person or groups entitled to some resources and privileges- where it can be solves through collective bargaining or negotiation.

When most of the problems settled in court are because of their inability to repay their debts, the Ministry of Finance (hereinafter MOF) under Brunei Government would come forward and offered to be a mediator between the two parties. The advantages of having a mediator are such that, the mediator would assist both parties in finding solutions to their problems and as an advisor on deciding a better solution. As it is a serious issue faced by almost half of the Bruneian citizens, it has been recommended that MOF used directive approaches into a structured modal where they give directive advice and guidance according to the existing rule. The financial regulator in Brunei has placed restrictions on how much the credit card issuers can set for the monthly repayment of debts. The incomes of the cardholders also determine the credit card spending limits. The moves will help to reduce card debt in the country. Starting this March, the cardholders are required to pay back at least 5% of their card bills monthly. It will be increased not less than 8% in June. Additionally, the consumers may receive a credit card only from the banks with which they hold another account. Such customers were given a period of 36 months to settle their credit card obligations to the respective banks. It is a concerted effort to curb the ever-spiralling debt crisis in domestic households.

In regards to settling the outstanding balance within 36 months, individuals who are heavily indebted to credit card providers are advised to convert their debts into personal loans to mitigate the impact of new MOF directives governing credit card debts. This is the better solutions, introduced by the banks after the MOF intrusion as a directive mediator. With all background checks, it helps their customer to pay their debts and it is easy to control the financial crisis in the nearest future.

Acting director of Bank Islam Brunei Darussalam Berhad (herein after BIBD), Javed Ahmad stated that "A personal loan is 70 % cheaper than credit card debts. It has an approximate of 7 to 8 % interest rates as opposed to the almost 30% rate on credit cards." It is a period of readjustment for a positive long run.( Goh De No, 2010)

The positive long run is to educate Bruneian customers on how important to be responsible by creating financial awareness. Majority of the Brunei population significantly reduced their personal debt and get better in managing their personal finances. The dialogue between various governmental agencies to industry players and consumers has to be stronger and influential, so that they can discuss and understand the impact of the changes, in order to adapt the ideas. It is also to create a more transparent and regulated banking environment that lowers fees and interest rates is good for everyone.

From the case study, we learned how negotiation took place step by step. Every negotiator involves two components such as Substance (what s being negotiated) and Process (How the parties negotiate). The most fundamental step in getting better deals is to recognize that the process by which people negotiate (the how) is more important than the thing being negotiated )he what). Negotiating is a complex communication process between two people, which requires their mutual agreement to succeed (Guasco, M.P and Robinson, P.R , 2007). Both parties tried to settle their problem based on their own interest but they rathered reveal their position rather than their interest (Fisher, Ury and Patton, 1991). Positions are negotiator's stated demands and Interest are a person's underlying goal (Thompson,L. 1998). They (bank) used integrative bargaining which refers to both a process and an outcome of negotiation. Parties to negotiation may engage in behaviours to integrate their interest (Thompson,L. 1998) where at first; they (bank) define the problem faced by their customers. After defining the problems, they endeavour to identify the interest in both substantive and procedural. Moving forward in the negotiation phase, they now generate alternative solutions and preferred by their customers. Later, both parties settle on a plan proposed which at the end agreed and formalised. The bank followed the principles of negotiation where they define the conflict as mutual problem, then create optional conditions for information flow. All negotiators involve decision making in the face of uncertainty. They also tried to understand their customer's real needs and objectives which emphasize common ground and minimise the differences. They also have to make sure that what have been negotiated is adaptable and flexible to both parties (Guasco, M.P and Robinson, P.R , 2007).

Mediation is assisted negotiation. They're fact finders. The process can be applied to a range of conflicts level from interpersonal to complex multi-party disputes. They are to facilitate resolution of a dispute where negotiation has broken down. Moreover, they were to deal with difficult for example the case study. Goal of mediation is to find solution and facilitate by accepting perceptions, emotions and values in order to generate valuable outcomes. They embrace the concepts of empathy, compromise and acceptance including ideology (Weinstein, R.J., 2001). As mentioned in the case study, the mediator used directive approach to moves the parties towards resolution- interventions decisions. A mediator understands that there is a rational progression that precedes action. A mediator only has one primary goal: to assist the parties in dealing with their problems. It is the best way on educating both parties on handling serious issues. Non directive approach cannot be applied in this kind of situation where provision of a safe and conducive environment facilitating is no longer needed in critical matters. As they are the models of mediation, structured mediation is the best way to describe in this kind of situation, as the mediator gives directive advice and guidance according to the existing rule. The goals also can be broader more than just solving problems. It is a learning process and can be applied to relationships and conflicts in the future. Mediation accepts the notions of emotional elements in every aspects including lives, work and beliefs. It is also aims to be time-efficient, cost-effective and personally gratifying. Mediator is catalyst (Weinstein, R.J., 2001).

Both negotiation and mediation have their own roles played in this situation. The main key point to achieve their main goals is to be a good listener and tried to focus on the current situation. Successful negotiators understand that negotiating is a process of communication between two or more people attempting to reach agreement and they use their knowledge at that process to get better deals (Guasco, M.P and Robinson, P.R , 2007). Good negotiators exercise control over the one thing in their power-themselves-and they learn to manage their own competitive and cooperative instincts where'd they temper competition with cooperation. There is a simple phase every negotiator should remember before each negotiation: know thyself, then manage thyself to achieve success (Guasco, M.P and Robinson, P.R , 2007). Successful mediators should encourage the parties initially to evaluate options in terms of their mutual needs and interests and invites the parties to consider the possible consequences- practically and viability of various options. Mediators may also encourage parties to consider in principle agreement (Boulle, L. And Nesic, M.., 2001, p.135). Mediators is about resolving disputes where they usually used the most practical and effective means available which invest an attempts to avoid the convoluted labyrinth of the bureaucracy that forces people to engage in superfluous processes (Weinstein, R.J., 2001)

As a conclusion, by having both negotiation and mediation on problem solving and decision making is a way better on finding better solution where both parties in conflict discuss and then negotiate to find win-win solutions and when negotiation gone bad, the interventions of mediator gives them new hopes although both at the beginning, find it hard to cope with the ideas given but for a long term, it gives both side good benefit. Successful negotiators balance their own mixed motives of competition and cooperation, while at the same time discouraging the other negotiator from being too competitive (Guasco, M.P and Robinson, P.R , 2007). Whereas mediators as a therapeutic process distinguished from therapy. The key to success impartiality is maintaining the distinction between making observation and judgements which inquired thoughts, feelings and intentions. They are to listen and explore, summarize, rephrase and interpret (Weinstein, R.J., 2001).


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