Enterprise_Risk_Management__Product_Liability

Enterprise Risk Management: Product Liability Enterprise Risk Management: Product Liability Introduction The purpose of this document will be to examine and identify tort risks identified in the Product Liability video. Team B will identify the potential tort risks portrayed in the video, examine a particular tort case using the 7 step process, and discuss business risk mitigation and management to prevent damages from situations like the ones portrayed in the video. Potential Tort Risks Torts are, by their most basic legal definition, a civil wrong (Williams, 1982). Essentially, when one party has taken an action, willfully or not, that has resulted in a loss by one or more other parties, but no criminal law has been broken, a tort is likely to have taken place. Business organizations and private parties alike are responsible for their actions and can be held liable for torts they commit. In the Product Liability, video Non-Linear Pro is at risk of being found liable for several torts. The primary tort that NLP is at risk of is Negligence; specifically dereliction or breach of contract. NLP had both a contractual and an implied obligation to provide a product that met the specifications they promised. When the client complied with all instructions provided by NLP, they discovered the product was in fact inferior to what was promised. ERM Process The tort that team B chose to implement an Enterprise Risk Management process for is breach contract in which the lessee did not have the chance to return an offer. The lease was over $1,000 the contract must have been in writing that both would agree to be a lease. The ERM can be set as a procedure that no purchase or lease for over $1,000 can be made without upper management approval. This serves two purposes, one any asset over $1,000 needs to be inventoried two is that all contracts and large purchases are controlled by management. Management must set a procedure that provides a framework to be effective and set the tone from the top down. By management providing training in the new risk management procedure and why the procedure is important to management and the business. Management must set the roles, responsibilities, and who will be accountable for the risk management procedure to be effective. Any contracts or receipts over a thousand dollars should be reviewed by management thus providing an audit system. As time goes by, some procedures are often not on the minds of management and can be forgotten or may not seem a business need, for this reason there must be refresher training. The new risk management must be set companywide to have complete compliance. A new position of contract manager is also recommended to have a manager that is familiar with all types of contracts. The contract manager will be able to consult with counsel when needed to limit the risk and have a third party audit the process. By doing all of the above the seven elements of an effective enterprise risk management will be met. Non-Linear Pro Editing System When the editing company made the decision to try Non Liners’ editing system, the expectation for the equipment was that it would help the employees edit there videos twice as fast as the older system and that it would be “up and running in a day and a half”. Two weeks later the employees of the editing company had taken the one-day course, watched the video tutorial and even read the entire manual and they were still unable to efficiently run the equipment. To make matters worse one of the employees was even physically harmed by the equipment due to a malfunctioning part. Breach of Warranty At this point, the business manager faces the decision if he should move forward with a lawsuit on the grounds of a breach of warranty. A breach of warranty is defined as the failure of a seller to fulfill the terms of a promise, claim, or representation made concerning the quality or type of the product (Farlex, 2009). When a business manager is faced with a situation where there appears to be a breach in a products warranty it is important to consider if it is appropriate to involve legal counsel or not. While proof of negligence is not necessarily a prerequisite for moving forward with a lawsuit, a business owner would want to ensure that involving legal counsel would be worth the company’s time and efforts. There are some restrictions that would also need to be taken into consideration, the buyer or in this case the business manager would need to notify the seller promptly of the breach if they expect the seller to be held accountable (Morgan and Morgan, 2010). The fact that there was an employee injured in this particular event also plays a major role in the decision to move forward with a formal lawsuit in this case. While injury often overrides normal restrictions it would be in the business manager’s best interest to have the employee seek medical attention in an effort to document the event of the injury itself. In this particular case it would be safe to determine that the business manager should move forward in pursuing a breach of warranty and involving legal counsel. Because the equipment did not fulfill not only its promise but also because the equipment proved dangerous in that it can cause bodily injury. Summary Team B has shown the several torts that were in the video and the step that management should take to limit the risk of any more damage to the business through good policy and procedures. By using the seven elements for ERM as follows: Element 1: Management commitment Element 2: Communication and consultation Element 3: Policies and procedures Element 4: Training and education Element 5: Effective and efficient framework Element 6: RM is applied in practice Element 7: Ongoing monitoring and review We also recommend pursuing with the legal counsel a formal lawsuit in this case against Non-Linear Pro for damages of breach of contract.