Business Regulation and Essential Risk Management

Lamont Clark, Cristina Mancha, Bobby Jo Sonon, Gwendolyn Wilson, Arnie Zhang,

Business Law/531

22 April 2012
John Fossum

Business Regulation and Essential Risk Management

Common law placed the risk of loss to goods on the party who held title to the goods. Article 2 of the Uniform Commercial Code (UCC) rejects this notion and adopts concise rules for risk of loss that are not tied to title. It also gives the parties to a sales contract the right to insure the goods against loss if they have an “insurable interest” in the goods (Cheeseman, 2010 p.296). Enterprise risk management is processes to achieve future strategic objectives try to control the results that uncertain factors cause, which are expected acceptable ranges that ensure and promote the realization of the overall interests of the organization. Enterprise risk management (ERM) framework is the integration concept on the basis of the internal control framework of Fraudulent Financial Reporting National Committee of Sponsoring Organizations Commission (COSO) belonging to the Treadway Commission in September 2004. ERM is participated by the Board of Directors, management and other employees, which uses in Strategy formulation and identifies possible potential impacts on matters of the enterprise. It also manages risks within the scope of its risk appetite. ERM provides reasonable protection for the enterprise to achieve the objective. Based on the 7 Essential Elements of ERM and the role of Internal Audit by Tony Harb, a perfect enterprise risk manager should be clear what ERM will cover, what enterprise risk management is, why the ERM is becoming more important, how relative people know ERM is alive and well. Meanwhile, internal audit should link between ERM and internal audit (Harb, para.2008). Potential Tort Violations

In the business regulation simulation, there were several noticeable tort risks caused by Alumina, Inc. There are numerous regulatory risks that that can assumingly be caused by the company. They are environmental negligence such as water pollution, toxic substances, and hazardous waste. Also certain ecological factors could happen such as endangerment to species and contamination of the water, which can cause harm to the citizens that live and work near the contaminated water. The first and largest noticeable tort risk started when the Polycyclic Aromatic Hydrocarbons (PAH) levels in Lake Dira’s waters were in violation of the Environmental Protection Agency (EPA), and the Clean Water Act of 1972. “The Clean Water Act (CWA) establishes the basic structure for regulating discharges of pollutants into the waters of the United States and regulating quality standards for surface waters” (EPA, 2010). Alumina, Inc. did follow regulations set by the EPA by promptly cleaning up the water and have remained in compliance since. However, even though Alumina, Inc. promptly cleaned up the mess, and continued to remain in compliance, they were still at legal risk in the future. In the stimulation, Kelly Bates accused Alumina, Inc.’s contamination as the direct result of her daughter’s leukemia and threatened to sue Alumina, Inc. for compensatory and punitive damages. In addition, Kelly Bates believes that whether or not the contamination was cleaned up, it was still the direct cause of the leukemia, and Alumina, Inc. should have foreseen the probable damage that would occur because of its actions. In this particular situation, Alumina was able to reach a settlement and avoid costly litigation by using the alternate dispute resolution method of arbitration (Phoenix, 2009). Jennings (2006) also helps to identify various other possible problems that could have spawned within the simulation such as defamation, malice, privilege, intentional infliction of emotional distress, reasonable and prudent person, and causation. Defamation is the