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Risk Management Essay

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Paper type: Essay

Words: 973, Paragraphs: 15, Pages: 4

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Today’s corporations are not the same as the corporations of the early twentieth century. Society has seen to that with numerous lawsuits brought up against the willful misconduct and social misbehaviors many organizations have done in the past. This is more prevalent today as the world is linked and interconnected with global media and the use of the internet, so news of any violation is brought up to the public’s attention in a matter of minutes.

It does not only affect the corporation’s image at that time, but the actions of that corporation and the response that they take is communicated globally.

This can either help or hinder the identity of the corporation, and with society so well educated in the matters of the environment today, the cost of not doing anything, or just the minimum can and most probably will hurt the global sales of whatever you are selling.

Corporations have enormous amounts of pressure to be socially and environmentally responsible for their actions, and it is in the best interest for any corporation to settle most of their disputes the most efficient and quiet means possible.

Court cases involving toxic torts, damage to the environment and general misconduct involving corporations will certainly have a negative impact on the bottom line and public image and this is something shareholders frown upon.

Very seldom does the media follow stories of settlements between disputing parties that are carried out behind closed doors, for the majority of times, the details are not allowed to be made public. In order to resolve disputes between parties without the lengthy, costly- in terms of monetary and public image, and uncertain outcomes of litigation, many corporations and risk managers at these corporations are increasingly using the resources available through the alternate dispute resolution techniques.

As we will soon learn, the environment is not the only regulation that companies have to adhere to. Under the regulatory process, the government uses administrative agencies to “create and enforce the majority of all laws constituting the legal environment of business” (Reed et al, 2002, p. 174). There are various reasons to support the need for government intervention and administrative law. They provide a stable, predictable, and fair operating environment for businesses and they provide certain assurances for the consumer and the employee.

There are some governmental regulations on businesses that invoke the emotional support of community stakeholders. The lesson plan mentioned the environmental protections imposed on businesses by the Environmental Protection Agency (EPA). Others include administrative agencies at the state and local levels, as well as the federal agencies. At the state level, there is great public interest in compensation boards which rule on employee injury and accident cases. Another state agency or board may determine local utility rates for gas and electricity.

Without competition to control rates, the public must rely on regulations to protect their interests. The zoning boards of local government influence zoning laws and there can be great emotional response at their outcome (Reed et al, 2002). Federal agencies that may invoke similar emotional interest are the regulations imposed by the Housing and Urban Development agency (HUD), which determines building and housing development standards and the Consumer Product Safety Commission (CPSC) can has great impact on consumer product development with regards to safety (Chrisman & Fry, 1983).

Reed et al, (2002) lists the Federal Trade Commission (FTC), which protects the consumer from unfair business practices, the Food and Drug Administration (FDA) which prohibits the distribution of unsafe food or drugs, the Equal Employment Opportunity Commission (EEOC) which prevents employment based on discrimination, the Occupational Safety and Health Administration (OSHA) which ensures safe working conditions, and the Securities and Exchange Commission (SEC) which protects the investing public.

Knowledge of the optimum regulatory solution is a powerful weapon in the hands of the businessman when negotiating with regulatory agencies, and an advantage that is naturally his. How he uses that weapon is another matter entirely. He can volunteer it as a solution, use it as a fall-back position in negotiation, or oppose the regulation altogether on the grounds that even the best solution is too expensive, but he cannot afford not to know (Fri, 1976, p. 44).

The administrative agencies regulating business have a great impact on its operations and ultimately its success or failure. The dilemma with running a multi billion-dollar company is how to run it safely, and with standards that protect everyone involved, including the environment. Our group has come up with strategies in dealing with allegations that could be detrimental to the financial stability of our company. We have talked about other regulations where community stakeholders can make emotional arguments supportive of government intervention.

As to the situation involving Kelly Bates; we all feel that a lengthy litigation process dragged through the courts and the local and global media attention will do more harm than good. Even though we could have had a strong case against Ms. Kelly Bates because we have been a social responsible corporation in the past with only one incident, we choose to keep the media away and settle with her. In the settlement, we have agreed that she is not allowed to discuss the charges brought up against us or her settlement will be annulled.

When you are known as an industry leader of your product, you instantly become a target for scrutiny and allegations. It is up to the company to make sure they have a good legal team, and that they abide by the statutes put into place by the local government.


Coulson, R. (1993, Jan). Avoiding litigation with alternative dispute resolution. Risk Management, 40(1), 20-26. Retrieved November 24, 2004 from the ProQuest database. Chrisman, J. , & Fry, F. (1983). How government regulation affects small business. Business Forum, 8(2), 25-28. Retrieved November 26, 2004, from the EbscoHost database.

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