Alumina, Inc. manufactures auto parts and aluminum packaging material, mines bauxite, and refines and smelts aluminum (University of Phoenix, n.d.). After reviewing the simulation, it is easy to see how a business can be the target of legality. In this scenario, fingers were pointed at Alumina, Inc. for contaminated water that may have been the cause for a case of leukemia in a female child. In any business, management teams must take caution that tort and regulatory risk exposure is limited and that recovery plans are in place. Regulatory Risk – Preventive
Regulatory issues can be identified and managed through preventive measures such as Enterprise Risk Management (Cheeseman, 2010). Enterprise risk management is a method of analyzing all of the threats within an organization that possess risks to the achievement of a company’s mission (Cheeseman, 2010). This process is fully structured, constant, and continues to ensure that all levels of management and all departments can address these potential risks in a systematic way. This ensures that each department and its staff work in unison, to work toward a resolution. ERM is becoming more prevalent in organizations for its unique ability to head off risks before they become relevant and a problem. This is the most effective method for conducting internal audits within an organization. With an increase over the past few years in companies that have failed financially, insurance companies are no longer insuring certain areas of commercial liability. With this in mind, it is ever more important for companies to avert these types of failures that will a put their financial security at risk. An effective ERM program consists of seven key elements, which includes a commitment from management, communication and consultation, policies and procedures, training and education, an effective framework, application in practice, continual review, and monitoring. Regulatory Risk – Detective
Through detective measures Alumina, Inc. could have detected contamination with the use of the use of the newest clean technology. The company could at the very least reduce the contamination “through the application of end-of-pipe technology” (Williamson, Lynch-Wood, & Ramsay, 2006). According to the Clean Air Act, companies such as Alumina, Inc. should use the most up-to-date technology to determine the largest amount of pollutant that the public health can tolerate. Companies should use this latest technology to safely store, dispose, and transport hazardous waste under the Environmental Protection Agency (EPA). The EPA allows a company to have control over the discharge of the toxic pollutants and the Best Control Technology. Any detection of risks to the environment should be monitored on a regular basis to ensure a safe environment. Any operator at a land disposal unit should monitor the quality of ground water. This is to detect if any hazardous material is in existence. Regulatory Risk – Corrective
Regulatory risk is very serious, and this type of risk can have a big impact on a company. This is a type of risk that any company can face. Regulatory risk takes place because there may be a change in a law, which will cause the company to make changes in how business is conducted. This type of risk can cause an organization to spend more money on the operations and bring negative energy toward the competitive advantage within an organization. Members of management can identify regulatory risk within an organization through close observation, communication, and analysis. It is very important of a company to handle regulatory risks as soon as they occur to ensure that the future of the company is not in jeopardy. Many corrective measures such as identifying, planning, and recording can be used to manage regulatory risk as they occur. Identifying the causes of regulatory risk will give an organization options on how to move forward form the...