The evolution of risk management activism factors

The purpose of this module is to provide you with an understanding of risk management activism factors.

The aim of this module is to provide you with the necessary information and activities to enable you to:

Comprehend risk management activism factors by:

1. Discussing the evolution of risk management activism factors.

Before we are going to discuss the evolution of risk management activism factors, we are first going to look at the risk management process as illustrated in Figure 1 below.

Union influence has been exerted not only in direct negotiations, but also through financing or supporting of safety and health research, lobbying for safety and health legislation, and backing of liability suits filed by union members.  

Today’s union activity in safety and health is greater than ever before and most companies have health and safety agreements with the unions representing the workforce. 

Demands from the broader society are having a significant influence on safety and health management.  The goals may be clustered around a concern for the “quality of life” of everyone concerned.  

As Alvin Toffler observed in The Adaptive Corporation, “Corporate retorts to the New Consumerism based on traditional economic arguments cut no ice – for the very good reason that the movement’s goals are a saner, more civilised society, not necessarily a richer one.”  

Consumers have emphasised growing concern over dangers associated with manufactured products.  Many products with formerly widespread common uses have been banned or severely restricted.  Food additives, appliances, sleepwear, furniture and even soft drink containers have all been the targets of restrictions or bans.  

In the case of the containers, for instance, the suspicion of birth defects arising from use of acrylonitrile in a plastic bottle resulted in the Monsanto Company’s closure of four plants, the layoff of 1 000 workers, a profit reduction of fifteen million dollars, and a projected one-year sales loss of one hundred million dollars.  

Environmental protection groups have also become more active over recent years and the effects of business operations on the environment is being closely monitored by such groups.

Every business is exposed to legal liability on a daily basis through the acts or omissions of its executives.  The exposure could either be to civil or to criminal liability.  This does not mean that executives are safeguarded against personal liability.  Many statutes specifically provide for individual executive responsibility.  It is therefore imperative that the risk is identified and managed.  

Typical laws that have an influence on the management of risks in businesses are :

• Occupational Health and Safety Acts.
• Environmental Conservation Acts.
• Water Acts.
• Hazardous Substances Acts.
• Compensation for Occupational Injuries and Diseases Acts.
• Soil Conservation Acts.
• Physical Planning Acts.

In addition to the above, legislative bodies have responded to the actions of individuals, courts and influence groups.  They have started inquiries and hearings, or made new laws and standards where they perceived a need or desire. 

Twenty-four hour compensation, including equal compensation for on-the-job and off-the-job accidents, already in effect in New Zealand, is being considered in other countries. 

Many jurisdictions are revising workers’ compensation laws to expand their application and their scope.  

Laws now also fix liability for disposal of materials which may at some future date affect the environment.  Other laws require the study of environmental or human impact during the design and development of products.  These are just a few of the legislative constraints on business.  They pose a real challenge to business leaders.

Technology has created a need for extensive, dynamic risk control systems.  In the past 50 years, scientists and engineers have developed more new equipment and processes than were developed in the preceding thousands of years.  Many tasks are becoming increasingly complex and demanding and the potential consequences of errors more costly.  Also, it has been shown that virtually total safety is possible … if one is able and willing to pay the price in resources.  

The psychological effect of these advances has seen greater insistence on safety where risks had previously been assumed.  People now feel that things can and should be safe.  As a result, management decision-making has been broadened to encompass the potential applications of sophisticated techniques, such as a system safety analysis and a concern for the entire useful life of a product.  

In brief, technological progress suggests these two vital considerations for management leaders: first, potential safety and health problems are being generated faster than ever before; second, no problem in the workplace is too big or complex to master through professional management. 

The character of the workplace has undergone great changes in the last decade.  Regulations exist requiring employment opportunity without bias to race, religion, sex, etc.  The economic need to have an added earner in the family, has also brought more women into work environments which were once exclusively male precincts.

Other regulations require the employment of the handicapped within their limitations.  In addition, today’s workers tend to be better educated and informed, and they expect more of their work than just a livelihood.  Each of these factors introduces new demands and new challenges for risk management.

A relatively recent and widespread cause of concern has been the toxic substances that create health hazards in the workplace.  For many years, industry has conducted research on the effects of these toxic substances, and industrial standards organisations have recommended controls and exposure limits.  But general lack of management response has led governmental groups to take over standards-settings as a logical addition to their own research and enforcement.   

Also, medical researchers, both those in governmental agencies and those working on governmental grants, are focusing their attention more and more on physical and health hazards in the workplace.  

Research is helping to define limits on exposures in those cases where problems can be avoided by limiting the amount or duration of exposure.  More importantly, research is identifying substances and by-products which have irreversible effects and, in some cases, are carcinogenic.  

The enlarged list of diseases which may be work-related presents an enlarged list of liabilities possibly causing harm to workers’ physical and/or mental health.  The consequences of new facts through medical research have sometimes been swift and drastic.  Governmental control has abruptly closed down many primary product lines, dictating a total change in the objectives of the affected businesses.  

In many cases research findings have also dictated expensive recalls of products when user experience has revealed hazards not acceptable to the people, or the legislators who represent them.

Many organisations are being pressurised by clients, employees, the community and government to comply to international codes and standards such as:

• ISO 9000 (quality).
• ISO 14000 (environment), and
• ISO 45001 (health and safety).

This brings with it additional cost and effort from management and employees.