Plan_to_Recognize_and_Minimize_Regulatory_and_Tort_Risk

Plan to Recognize and Minimize Regulatory and Tort Risk Samuel Stone LAW/531 September 13, 2009 Tracey Smith Plan to Recognize and Minimize Regulatory and Tort Risk Companies may expose themselves to risk of litigation or regulatory sanction through intentional or unintentional action or inaction. Careful evaluation, planning, and action targeting potential risk sources help to reduce exposure to these risks. A plan to reduce the risk of litigation for Alumina or similar companies follows. Identifying Sources of Risk Sources of risk illustrated in the simulated scenario revolve around potential effects of environmental contamination on the health of the local community. In the scenario, Alumina operates on the edge of Lake Dira and performs aluminum smelting at the site. This activity potentially releases what the simulation refers to as “PAH” (University of Phoenix, 2002). This acronym stands for known as polycyclic aromatic hydrocarbons – these chemicals are either highly toxic or carcinogenic (Government of British Columbia, n. d.). Alumina previously infringed on regulations governing concentrations of this chemical, but a later audit showed corrected levels. Legal risks associated directly with release of chemicals include actions by the Environmental Protection Agency for violating regulations as well as tort claims deriving from negligence associated with allowing contamination. The simulation highlighted other potential claims associated with reactions to litigation and newspaper articles about Kelly Bates and her daughter. Investigation of Kelly Bates could lead to invasion of privacy claims and cause emotional distress (University of Phoenix, 2002). Companies must take care to ensure any acquisition of information does not infringe on the rights of individuals under investigation. Even reactions to squelch public outcry may cause negative consequences. Releasing the entire Environmental Protection Agency report could detrimentally affect Alumina by exposing confidential company information not relevant to environmental impact to the public. Cheeseman indicates that the Freedom of Information Act allows access to documents but limits access to “confidential or privileged information” (2002, p. 688). Providing information to the press proactively should provide only information otherwise attainable. Identifying risks only begins with those already identified in the scenario. Identification of new risks on an ongoing basis helps timely planning to address them as they present themselves. Plans for preventions, investigation, and resolution of potential problems then reduce the associated risks. Risk Mitigation Plan The ongoing effort to identify risks should be undertaken by an internal team and headed by an appointed legal compliance executive. This committee identifies potential causes of regulatory infractions or tort exposure, develops plans to address them, delegates actions, and reviews progress on these initiatives. The committee advises senior management and should include at least one representative from the legal team, operations, and pubic. Although the committee serves to mitigate all potential for harm from regulatory and tort compliance, internal auditing regulatory compliance remains central to its purpose. For effective operation this committee must enjoy support from senior management, perform its duties independently of audited or regulated activities, develop explicit objectives and scope, and develop sufficient staff to carry out its activities (Hall, 2009). The risk assessment committee should create a list of potential hazards requiring monitoring and assign responsibility and budget to assure this testing happens. Each of those responsible for testing or monitoring reports the results back to the committee. Self monitoring carries the advantage of allowing proactive responses ahead of regulatory inspections. The company may then report these infractions voluntarily along with the plan to mitigate them. This behavior catches infractions before environmental levels build, reduces fines through self-reporting, and builds trust with the regulatory agency. Hall indicates internal audits significantly increase the ability of companies to reduce gravity-based fines through voluntary reporting (2009). Compliance issues may result from improper maintenance or calibration of equipment. They may also arise from improperly following safety procedures and requirements. The compliance committee should list equipment that requires maintenance, calibration, cleaning or decontamination that may result in compliance or safety dangers and require development of plans to maintain the equipment in proper working order by expert staff. Obvious display of safety information and Impromptu inspections of maintenance records may help. Attention to operational safety and documentation of that commitment helps satisfy the duty of care the company owes employees and the community. Training and educating staff in the importance of compliance with regulations, safety procedures, equipment maintenance and the potential dangers associated operations also satisfies a duty of care. Documentation of employee infractions and subsequent disciplinary actions act as an additional means of satisfying this duty. Failure to discipline or remove those placing other employees and the public safety would amount to negligence. Repeated infractions without action could also prove embarrassing if brought to public light. The compliance committee should guide the company in developing safety and regulatory compliance training and procedures for disciplinary action for infractions. Incidents of infraction with particular potential for legal or regulatory exposure should draw attention and investigation by members of the committee. When reports of new potential litigation resulting from compliance infractions or tort claims arise, committee members research potential solutions based on their area of expertise. Operations may initiate inspections or testing to gain additional insight in to potential sources of infractions. The legal representative investigates the law surrounding the claim and evaluates potential legal strategies. A public relations specialist may weigh in on how potential counter-measures actions affect public opinion. The compliance committee should develop guidelines governing preferred actions when confronted with claims. These guidelines should cover conduct during investigations to avoid potential claims of invasion of privacy, negotiation with litigants to avoid claims of emotional stress, and release of documents to avoid disclosure of confidential information. Policies regarding the preferred forums for resolution and estimates of costs for some common cases and potential outcomes using various resolution forums would arm those deciding how to proceed with valuable information with which to weigh options. Plan Benefits An independent internal committee may direct company action to prevent, investigate, and correct regulatory compliance issues and tort claims. The directing effort to prepare and plan for situations placing the company at legal risk helps to mitigate this risk though exercise of the duty of care owed by the company. Documenting preventative measures taken and resolution of infractions prepares both voluntary reporting and defense in court. Internal auditing and investigation resolves problems before they compound and reduces the negative consequences from them. References Cheeseman, C. (2010). Business law: legal environment, online commerce, business ethics, and international issues. (7th ed.). Upper Saddle River, New Jersey. Pearson Prentice Hall. Government of British Columbia. (n. d.). PAHs and their characteristics. Retrieved September 11, 2010 from http://www.env.gov.bc.ca/wat/wq/BCguidelines/pahs/pahs-01.htm Hall, R. (2009). The evolution and new directions in environmental auditing and compliance management. Natural Resources & Environment, 24(2), 3-8.  Retrieved September 13, 2010, from Research Library. (Document ID: 1887825321). University of Phoenix. (2002) Legal Environment of Business: Business Regulation (simulation). Retrieved on September 9, 2010 from https://ecampus.phoenix.edu/secure/aapd/vendors/tata/sims/legal/legal_simulation1.html