February 4, 2013
Marlene Wilhite, Esq.
Riordan Corporate Compliance Plan
To: Riordan Corporate Board and Officers
Riordan Manufacturing is a Fortune 1000 company specializing in the manufacture of plastic beverage containers, fans, plastic components, and medical devices with annual earnings of $46 million. The company operates divisions located in Albany, Georgia, Pontiac, Michigan, and Hangzhou, China (University of Phoenix, 2013). The following is an analysis and recommendation for an Enterprise Risk Management plan that will benefit the company and ensure its future according to its stated mission. The "Enterprise Risk Management - Integrated Framework" (2004) website describes the eight interrelated components of an Enterprise Risk Management system that include internal environment, objective setting, event identification, risk assessment, risk response, control activities, information and communication, and monitoring. A formal risk assessment has been performed that have identified several potentially serious risks that could expose the company to substantial liability, they are * Quality of medical device products manufactured at the Pontiac, Michigan, plant. * Yin Motor Company child labor.
* Drinking water contamination from chemicals released during the manufacturing process at the Hangzhou, China plant. * Employee complaints and dissatisfaction that could result with the loss of valuable employees, company knowledge, and tangible or intellectual property.
“Impact (or consequence) refers to the extent to which a risk event might affect the enterprise. Impact assessment criteria may include financial, reputational, regulatory, health, safety, security, environmental, employee, customer, and operational impacts” ("Erm Risk Assessment In Practice", 2012). Riordan Manufacturing may be exposed to significant enterprise liability impact because of some quality problems with the company’s stent products. The liability the company is exposed to could have detrimental financial repercussions because quality problems were reported with the stent products and ignored by management, which resulted in a wrongful death lawsuit from a hospital in Ohio. Damages to the company’s image have already been realized, as reporters have inquired about an FDA investigation resulting in the necessity for the company to do a press release that subsequently denied an FDA inquiry or product problem. The company will most certainly be liable for negligence because reported quality problems were ignored and cracked or broken stents were still shipped. According to Cheeseman (2010, p. 94), “A person injured by a defective product may bring an action for negligence against the negligent party. To be successful, the plaintiff must prove that the defendant breached a duty of due care to the plaintiff and thereby caused the plaintiff’s injuries”. In addition, punitive damages could be sanctioned against management for negligently ignoring problems with the product and knowingly shipping the product for use when clear safety and regulatory problems were present. Last, the company could also be held liable for retaliating against the employees who filed the concerns with product quality in violation of Title VII of the Civil Rights Act of 1964. A total of three employees were involved, two of the employees are no longer employed by the company, and the third is in the process of a job transfer to China. Recommended Actions
The officers and employees of Riordan Manufacturing owe a duty of care to their customers and the public to ensure the reliability and safety of their devices. The defect of the stents represents a breach of duty of care and the facts in the case clearly reflect negligence by management. In addition, regulatory manufacturing requirements mandated by the FDA for a medical device facility may have been broken. Immediate legal...