Risk Control and the Law - Assignment Example

RISK CONTROL AND THE LAW Contents 1. Introduction………………………………………………………………………..2 2. Toyota Motor Corporation………………………………………………………...3 2.1. Nature of Activities………………………………………………………………3 2.2. Business Structure………………………………………………………………4 2.3. Advantages / Disadvantages of the business structure…………………….4 3. Legal Obligations…………………………………………………………………6 4. Remedies for minimizing risk of liability…………………………………………8 References…………………………………………………………………………9 1. Introduction The concept of risk assessment in organizations refers to an unparallel set of challenges which are likely to be faced by them during the course of their corporate proceedings. Such challenges demand suitable unification of a wide range of elements ranging from labor law, and human resources to behavioral sciences. The basic underlying objective behind developing such a risk assessment model in organizations is to safeguard it against possible threats and to guide the management in developing appropriate and efficient responses to such unforeseen situations. All organizations face uncertainties and challenges arising out of unforeseen situations which present both risk as well as opportunities. However, the ability to control such risks is directly dependent on the organizational ability and the manner in which the management develops strategies that maximizes its value. Another significant purpose behind risk control is enhancing the ability and performance of organizations and enabling it to dispense its usual course of activities and services in the most efficient manner possible in order to achieve its corporate mission. The absence of critical risk management policies or the lack of proper implementation of effective measures might lead to setbacks to the organizations leading to failure to achieve economic goals and affecting the overall competitive positioning of the organization in the industry. This essay on Risk Control and Law deals with various aspects of enterprise risk management and discusses the manner in which an organization, here, Toyota Motor Corporation, manages risks; the various obligations arising out of it; as well as the strategies adopted and remedies developed by the organization in order to minimize the impact of such risk on the organizational performance. 2. Toyota Motor Corporation The Toyota Motor Corporation is a multinational corporation headquartered in Japan, and is ranked as the largest auto manufacturing companies in the world (The Washington Post, 2009) besides being a key player in the automobile industry. It boasts of a world wide network which includes a host of ancillary business activities and production bases in North America, Europe and Asia. The auto giant has a flair for developing revolutionary products and has always been at the forefront through continuous research and development activities. The company was the first auto manufacturer in the world to develop a hybrid car The Toyota Prius in compliance with the organizational motto of manufacturing green and sustainable products. 2.1. Nature of Activities Toyota is engaged in a range of activities, apart from its business activities, in various areas including environment, traffic safety, human resource development, arts and culture, pursuit for developing a harmonious society, as well as volunteer activities. Its business activities also span a wide range of areas such as automobiles, material handling, logistics, textile machinery, and others. It is involved in the development of automobiles and automobile related products such as vehicles, engines, car air conditioning, car electronic devices etc. It carries out the development, manufacturing and sale of logistics equipment, including transportation, storage and sorting; and provides logistic solutions to businesses across the globe (Toyota, 2009). 2.2. Business Structure The Toyota Motor Corporation is a global corporation also known as a Public Limited Company. Such companies have a share capital and the liability of each member is limited to the amount of unpaid shares held by each such member. A public limited company or PLC offers its share to the public to generate funds and is also listed in stock exchanges. Figure: 1 - Toyota’s Registration Statement: (Source: SEC info, available from: http://www.secinfo.com/$/SEC/Filing.asp?T=sTKg.z17f_1ga) Figure: 2 - Toyota’s Business Structure (Source: Toyota Motor Corporation, 2008) 2.3. Advantages and Disadvantages of the business structure The type of legal entity that a firm chooses is by far one of the most crucial aspects of any business since it has a significant legal and business consequences. The form of business structure that an organization decides to adopt and implement is dependent on the amount of capital required, the capacity of the members to carry risks, as well as the scope and extent of market likely to be covered. Of the various forms of business structures, the type of business structure adopted by Toyota Motor Corporation is public limited company also known as a corporation. A corporation is a legal entity which is deemed as a legal person in the eyes of law and is conferred with the ability to transfer and hold property, raise money, sign contracts, sue and be sued, and conduct business, be liable for the contracts that it enters into and pay off debts incurred by it during the course of its corporate tenure. The corporation law restricts the liability of the shareholders of the company to the extent of shares unpaid by them, allows transferability of ownership through sale of shares, allows centralized administration which is managed through directors and officers appointed by the company, and has a perpetual existence unless it is dissolved by its members through legal proceedings or its creditors decide to file a plea for its closure through a bankruptcy proceeding (Truitt, 2004, Pp. 93). The advantages that this type of business of business structure entails include – the company can raise capital through public offering by issue of shares and debentures. A public offering requires the company to be listed on the stock exchange and the value of stocks held by the company gives it the required access to stock markets which in turn can be used for satisfying further financing needs of the company in the future. Shareholders are able to freely transfer and sell their shares, and also it helps in increasing the company’s borrowing power. Some of the apparent disadvantages of such a business structure is the loss of ownership and hence control over the corporate decisions, increase in expenditure required for compliance with legal formalities, profits are shared between a greater number of people, and the compulsory public disclosure of financial status of the company. 3. Legal Obligations The automotive industry is exposed to various laws and regulations imposed on it by the government which vary from a range of aspects such as vehicle safety, environmental protection, emission levels, fuel economy, noise and air pollution among others. Several governmental bodies lay down strict rules with a view to protect the interest of its citizens. Such rules and regulations may be in the form of trade barriers, excessive tariffs, taxes, and exchange control measures. Toyota Motor Corporation, too, along with other companies in the industry is vulnerable to such legal obligations and has incurred and is likely to incur millions of dollars in order to comply with them. Moreover, the government passes newer regulations in order to control the unfair practices in the industry and hence such regulations might affect the profitability and financial strength of organizations operating in the industry. Operating in the automotive industry exposes Toyota to several risks which include infringement of copyrights, increased product liability etc which may put additional financial burden on the company. Delay or negative outcomes of such legal proceedings might severely hamper the company’s likelihood of establishing a position of imminence in the industry and result in failed operations, inability to attain corporate goals and other similar negative outcomes. Toyota, being a global corporation, is engaged in conducting business worldwide which makes it vulnerable to the changing political climate. Occurrences such as workplace injury, unsafe working environment, strikes etc imposes additional burden on the employers and increases their liability making it inevitable for them to respond with the most appropriate strategies in order to be able to effectively safeguard the interests of the stakeholders involved and carry out its legal obligations to the best of its abilities. 4. Remedies Every industry irrespective of the sector or type of business imposes a common law / obligation on the employer seeking protection of the workers. Thus the employer must take adequate steps to ensure worker safety, since the potential cost of such damages could prove to be disastrous for the financial health of the company. One of the best remedies that employers can apply is insuring themselves against such losses. Employers need to be more vigilant about any development of in the issuance of new health practices and promptly take preventive action as required by the law. Apart from the government of respective nations there are international non governmental organizations which take active steps in ensuring that organizations adhere to the safety practices and other similar regulations laid down by the government. For instance, the United States National Institute for Safety and Health, which is a federal agency, is actively involved in overseeing the compliance of work related safety measures. Certain employers are legally bound to prevent work stress among its employees and hence organizations must initiate active measures to avoid such occurrences in order to safeguard themselves from the legal consequences in case of failure to comply with the governmental rules and regulations. Employers must ensure that their workers are able to maintain a healthy work life balance and ultimately avoid legal trappings that might occur in case of failure to comply. References: Truitt, W. B., (2004). What Entrepreneurs Need to Know about Government: A Guide to Rules and Regulations, Greenwood Publishing Group, Pp.93 The Washington Post (2009). Toyota Passes General Motors as World's Largest Carmaker, viewed: March 18, 2009 from: Toyota Motor Corporation (2008). Annual Report, Pp. 55, viewed: March 18, 2009 from: Toyota Motor Corporation (2009). Business Overview, viewed: March 18, 2009 from: Read More