Compliance & Risk Management - Case Study Example

REGULATORY/ COMPLIANCE RISK MANAGEMENT A Report to the Local Regulator’s Inquiry Regulatory/Compliance Risk Management Introduction This report tends to point out the significant areas associated with organizational risk management and mandatory legal compliance. It will also describe an effective regulatory/risk management process, its significance, and how it can be implemented within an organization without causing employee resistance. The report is mainly based on the writer’s perspective on compliance and risk management. RISK ASSESSMENT AND REGULATORY COMPLIANCE Identification of the risk factor is the primary work in the process of risk management. There must be efforts to patch up the problems expected from the significance of the risk identified in surveys, searches or monitoring analysis done in the plant. Risk Assessment is the careful examination of the diverse factors which might bring about the risk to workers, stakeholders, environment, and to the financial stability of the company as a whole. A company requires the assistance of some experienced regulatory risk specialists if- a) the employer is unsure of its compliance status b) the cost for legal compliance exceeds the limit c) it wants to educate members on regulations d) compliance leads the firm to a higher degree of financial risk COMPLIANCE ON FISCAL ASPECTS 1. Documentation: In order to make transparent financial statements and audit report, proper documentation of every organizational activity is required. According to the Sarbanes-Oxley Act, changing or falsifying records with objective to impede legal investigation is a punishable crime. As per SOX (Sarbanes Oxley Act) sec.404, management should conduct an evaluation that is sufficient to provide it with a reasonable basis for its annual assessment. 2. Financial expert: the presence of a financial expert is another inevitable need to avert purchase-stock malfeasance and account discrepancy. To comply with the SOX, all public companies are bound to submit report about the effectiveness of their internal accounting controls to the Securities and Exchange Commission (SEC). My organization considers it as the primary requirement for regulatory compliance because it would check unethical personal interests that might hinder legal obligation. 3. Implementation: An organization must heed its genuine concern to implement the strategies and instructions proposed by the audit report. There should be a shift in its regulatory focus to prevent the identified financial risks and fraud because a company is legally responsible for individual misconduct, although it is not necessarily liable for the full scope of it (McNeil with Brian, 8). 4. Reporting: A public company has both legal and moral obligation to report the identified accounting scandals to the Public Company Accounting Oversight Board (PCAOB). For instance, unethical practices like improper billing, documentation, notable discrepancy between the data entered in stock register and the actual stock etc are to be reported to the officials. 5. Status disclosure: Company has both legal and moral obligation to disclose reliable financial statements to its investors. It is significant because any sort of fiscal uncertainty would affect an organization’s sustainability as it might compel investors to pull out their shares. Therefore, it is important to comply with the Act in order to prevent disputes and financial misconduct effectively. 6. Identify the areas of risk: Although the areas of financial risk depend on the size, structure, and business area of an organization, generally ‘sales, purchase, and stock’ areas are vulnerable to malpractice. For instance, illegal rate adjustment is common in purchase of raw materials, machinery and other equipments. If a firm strictly maintains all details of purchase and other contracts it can avoid these malpractices. It is essential not only for organization’s stability but also for attaining legal compliance because sections 302 & 306 of the Act require top officers of public companies to certify that the Corporations financial statements are fairly presented (McNeil with Brian, 373). 7. Compliance faculty; there should a responsible monitoring faculty to verify that all instructions are effectively implemented. The compliance officer is expected to undertake the following actions; 1) Review all human activities within the organization 2) Ensure the effectiveness of regulatory methods 3) Collect information from every corner of the enterprise 4) Examine the effectiveness of risk management 5) Ensure employees awareness on regulations 6) Confirm they adhere to firm’s regulatory objectives HEALTH AND SAFEY ISSUES Another main area of compliance and risk management is associated with health and safety measures within the organization. In order to avert risk, industrial operations require strict and authentic supervision. Possible risky situations or factors can be listed as below; 1. There should be reliable experts who are able to direct the concerned hazardous works and activities. 2. Regardless of the number of employees, there should be appropriate strategies and procedures to perform industrial operations 3. Whenever high risk factors are identified, an employer has to seek the advice and permit of the responsible manager regarding the required precautions. In order to avert risk at work there are some obligatory safety measures such as isolation, monitoring equipment and protective clothing and equipment. Isolation The term ‘isolation’ significantly represents the sum of all safety measures taken to protect individuals from the possibilities of health hazards occurring from their continuous contact with the dangerous elements they happen to handle during their work or the risk factors they face at other times of their of duty times such as rest and recreation. A work place is of course dangerous to its employees in most cases as the area is generally covered with hazardous substances in the form of industrial waste, byproducts of chemical reactions or scraps and rust from mechanical locomotion of machinery used in the work. The term also covers risk factors expected from electric wires and flammable articles etc. Hazardous things must be kept safe or aloof for the ensured protection of human and animal life. According to the opinion of Stranks (95), physical, electrical or mechanical isolation of the plant impales controlled restriction of access and physical locking off of sources of power. It suggests that in certain cases it may be necessary to undertake environmental testing to ascertain whether the use of breathing apparatus is necessary before entry into a confined space. Thus isolation involves human interaction into prevention of industrial hazards in a wider sense. Monitoring equipment The implementation of safety measures and their successful trace of function depend on the monitoring system of any industrial organization. The management must provide for the continuous process of checking and evaluation of the function of all mechanical activities and strategies designed for the hazard care unit. High intensity systems are required to be operated by highly experienced hands. Hence the plant must have proficient personnel to operate the monitoring function of the plant. The monitor thus is responsible for the ascertainment of employee level skills to ensure that the work assigned to an employee goes on without worries of wrong doings or misshapenness. Study and reference of previous hazardous issues and related reports is the easiest way monitors can adopt to facilitate their work in an effective way. Particularly in chemical industries, a double time super surveillance is required for the absolute monitoring of the works being done only limited to the instructions by the immediate superior. Protective clothing and equipment Occupational hazards may not always result in major injuries or death but the brutal effect of which can lay the troublesome ways to individuals in the form of allergies that reflects the severity of asthma and recurring skin diseases. Some other form of the problem may be permanent loss of vision and hearing. Exposure to extreme conditions such as severe heat, dust or chemicals may transform the life of an individual to a distressed doom. The government exercises regulations to provide effective health and safety measures against the possible problems of permanent disabilities and allergies caused by hazardous exposure of any employee. Stranks (274) suggests that use of protective clothing, masks, goggles, gloves hat and other precautions such as protection from noise, radio electric shock etc are mandatory for the proper health safety in any industrial practice. Thus the need for a protective cover is very much essential for every industry. The company has to provide the workers with protective equipments as additional measures to fight possible risks in the plant. The safety management is to facilitate the study of relevant routs of exposure, inhalation, skin absorption and ingestion in order to provide supplementary support to the work force. The management is responsible for the health of the employee; so in case of failure to avail protective covers, an alternate measure is to be taken with immediate effect. However, these protective cover is not a permanent solution to this problem but it makes room for alternative to deal with emergency conditions only. RISK ASSESSMENT ON HEALTH AND SAFETY Every business organization at larger point of view require to have a unit specified for Risk Assessment emphasized in possible areas of risks such as injury and ill health affecting conditions within the plant. The seriousness of ill health can sometimes result in the ruin of lives and thus affect the marginal productivity of the organization. The success of the risk assessment unit in the organization depends on the effectiveness of operation of the protective devices installed in the organization. Absolutely, a risk free zone in the work area enables the employees feel a new breath of safety and they work more enthusiastically than normal conditions. Therefore, it is the responsibility of the manager to acknowledge to the workers the risk management measures taken in and updated time to time in the organization. Some risk factors are insignificant; for instance, electricity is dangerous in the plant, but if the electricity is used under proper cover and protection, it is no significant matter for consideration. All other elements involved in ensuring the safety of workers depend only on an effective risk assessment system. Risk assessment is the process by which the organization identifies and resolves issues related to precautious covers such as protective equipments, isolation and monitoring equipments. The motto of risk assessment is to identify the possibilities of risk and reduce the risk by initiating safety measures in the plant. Examples form an industrial Unit Hazardous risk elements involved in industrial production of a commodity do not ever come single. The best example of one of the worst working conditions is the one at plastic bag manufacturing units where workers are supposed to struggle for existence with reverence to various diseases for which they have only their work to blame. The risk faced by the workers during their routine work in this industry is the possibility of injury from extruder and printing machine. Speed, accuracy and control are the qualities a worker is expected to gain through his experience. Only an expert worker can come through this process without yielding up to much of risk. Apart from injury, there is a possibility of deafness due to continuous exposure to loud noise of the machines operated in the industry. The noise level is earsplitting when the raw material is in process and the sound can cause permanent deafness. Such contexts are certainly matters of concern for the employer who is responsible for the implementation of safety measures and provision for protective equipments to employees. Taking into account the intensity of the hazards in plastic industry as referred, the machinery may even cause death but does not happen in most cases. Noise hazard on the other hand is not particularly noticed but the effect of which is suffered by all the employees in a more potential way during the entire working hours. Though the injury from the machine is probable, it can sometimes prove fatal. When the frequency of occurrences is concerned, death or injury is rare but the hazards from risk caused by noise and exposure to chemicals is more frequent and can be called regular risk. People exposed to high intensity noise and chemically polluted atmosphere during continuous working hours have extensive chances of life long adversities from damages to mental and physical health. Electric shock and burn from sealing and handle fixing machines are occasional happenings to many of the workers engaged in this task. The severity level of the risks in this industrial production unit can be concluded as; a) Risk of death or major injury caused during work is a possibility in every unit while its severity is major. b) Risk of physical and mental illness due to noise and chemical exposure is considered regular. Though it is not significantly noticed, the severity level is high in this happening as the effect of the risk leaves the person permanently disable. c) Risk of electric shock or burn from sealing and handle fixing machine has less frequency of happening and the severity level of the effect is considered medium. RISK MANAGEMENT AND LEGAL COMPLIANCE Industrial hazards and precautionary measures in a unit vary according to the mode of operation, nature of work and the severity level of possible risks. Risk management is the identification, categorization and control of risk causing elements in the work place. Every employer has to make provisions for managing risk in his organization. Beyond being an individual, an employee is a citizen of the country of his origin and the organization is bound to abide by a numerous rules and regulation to ensure his safety at work place. The possibility of effective risk management depends largely on the successful and result oriented work done by the risk managers. They primarily have to study the cases of previous records of incidents related to industrial risks in other firms and to make a strong frame work of precautious tools in the organization. The conditions at any work place are altered by a number of factors such as long working hours, noise incorrect procedures and operation etc. Extended hours of working fatigue workers who in turn become unenthusiastic and hopelessly unable to put forth new ideas to work atmosphere. This scenario results in their recreation mood swings and finally affects their mental and physical health very badly. People who work at thunderous noise are also disturbed at the end of their work each day. In order to protect the work force for more productivity, the management should adopt measures to control the noise level at an audible point without causing any fatal impact on the workers. They should also remember that the health of its workers is the greatest asset of the organization. Misappropriation of time schedule is another problem that results in increased risk rate at work place. When the time schedule goes troubled, it makes room for ineffective mechanism of implementation of work plans. Moreover, the inefficiency of an employer will pave way for lapse in time management, risk assessment, monitoring of risk factors, and auditing and documentation of accounts related to the operation of an effective risk management system in the organization. Risk assessment and data auditing have a very strong relationship. The management must be aware of the previous records of risks: for example, a large number of workers in a company got shock and burns within a short duration, it shows the existence of a risk with a potential possibility to reoccur such happenings. Risk to people may be reduced a). if the company provides them with protective equipments and modern tools. b). if the proportional number of staff is deployed in order to reduce workload and stress c). if the employer insures the company and the employees e). if the organization has a good link with a hospital to deal with emergency cases. Risk to property can be reduced f). if there is facility for right time repair and proper maintenance of machinery g). if all property and assets are insured h). if electric short circuits and similar faults are resolved in time i). if all the activities and risk hours are insured j). if the employees are provided with sufficient training and information k). if the working hours and leisure time are effectively scheduled SIGNIFICANCE OF COMPLINCE Organizations focus mainly on the enhanced productivity of its workforce without required care and support to the people working for them. In a trial to minimize the cost of production or over all expenditure incurred at the plant, he intentionally ignores many essential factors of safety. People involving in jobs at high risk zones are prone to severe injuries and sometimes death. The loss of life of an individual is of course an irreparable patch on the life line of his family. Such incidents demoralize other employees and their discouraged activities result in diminishing productivity. It is needless to say that the employer has to ensure safety conditions at work place in order to improve the productivity of the workforce. But in many a case, the employer refuses to provide them with most of the required precautionary measures. This negligence is mainly because of the impatience of the employer to pass through difficult stages of government procedures for the implementation of such safety measures according to specific rules and regulations. If the employer abstains from the rules and regulations for either ignorance or the impatience in waiting for the proceedings, he will surely be answerable one day when anything goes wrong. Any trail from his side to avoid legal complications in the initial days of his enterprise will only result in a compulsory condition where he is to face the criminal charges under various Acts. For example, if a company meets with a total damage caused by fire, the fixed assets such as machinery and all furniture get destroyed. It suffers a huge financial loss from the time waste and reinvestment for reconstruction. Besides spending huge amounts for compensation, the company falls in debt after losing all its customers. On the other hand, when the company fails to meet the demands of the customers and other dependent companies, they also fall in big trouble. Apart from the loss in business, the failure in managing risks caused by pollution can damage the environment and public as well. Thus in a wider sense, the failure of a company in effectively managing risks will result in a collateral damage to entire human community. It is therefore implied that the employer should have the ultimate responsibility towards the environment in order to maintain the sustainability of his business in the long run. Risk - Information Management Employers are required to obtain up to date details of the amendments of regulations in risk management laws enforced by government. They must maintain database of data sheets on substances, risk records and audit reports of risk management accounts in order to easily comply with the regulations of relevant factory rules. Companies must provide for training and imparting accurate time schedules for working hours. Regular awareness seminars must be conducted to promote safety sensibility among all the employees. All the risks cannot be prevented completely hence, there can be few steps to minimize them. .CONCLUSION Final result of all the above steps depends on the effective implementation of policies and strategies after due consideration of law. Compliance with relevant regulations and sufficient knowledge regarding laws can help an organization run its operative functions smoothly. Implementation and monitoring of an effective system of risk management is the key to success as for today’s industrial operations. References McNeil, Barry F., Brian, Brad D. (Eds.). Internal Corporate Investigations, Section of Litigation, edn.3, American Bar Association, 2008. Print. Stranks, Jeremy. The Managers Guide to Health and Safety at Work, edn 8. Kogan Page Publishers, 2005. Print. Read More