Business Regulation Simulation
Business Regulation Simulation
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 –
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 –
References: Cheeseman, H. R. (2010). Business Law: Legal environment, online commerce, business ethics, and international issues (7th ed.). Upper Saddle River, NJ: Prentice Hall. Collins, D. A. (2010, September/October). Overseeing legal risk: First make it visible. The Corporate Board. Retrieved July, 23, 2011 from http://www.dykema.com/publications/docs/1009CollinsR.pdf University of Phoenix. (n.d). Business regulation simulation [Computer Software]. Retrieved from University of Phoenix, rEsource, Simulation, LAW531—Business Law Website. Williamson, D., Lynch-Wood, G., & Ramsay, J. (2006). Drivers of environmental behavior in manufacturing SMEs and the implications for CSR. Journal of Business Ethics, 67(3), 317-330. doi:10.1007/s10551-006-9187-1.