Everyone has a different risk tolerance. For example, I recently discovered that my risk tolerance for pool access is higher then previously thought.
It took three hours to get each kid ready for the pool, one hour of which was spent agonizing over an outfit. There were last minute diaper changes, food requests and preparatory complications. Once we finally made it to the pool, nature intervened, and one kid had to return home. In the meantime, it was closing time for the pool and rather than have her miss pool time, I decided I was going into the pool with her even though it was against pool rules.
The lifeguard confronted me, and I challenged him to fine me for that extra little bit of pool time. He admitted he had no authority to do that, but he said he could suspend me instead. In the end nothing happened, but I was ready to take the risk that I’d be fined or kicked out of the pool forever.
Businesses assess risk every day and when it comes to corporate compliance, they would be wise NOT to jump into the deep end of the pool. There are many reasons why risking corporate compliance risk is not worth taking on:
- The fines are steep and the penalties are severe. Environmental statutes have different penalties built into their regulatory counterparts. These include fines, some of which escalate quickly and even imprisonment for the most egregious intentional acts.
- People and the environment can get hurt. When there are disasters such as oil spills, explosions, releases of hazardous substances, etc. people who work at the company can be injured and violations of safety regulations can occur. In addition, the natural environment can be damaged. Rivers can be polluted, the air contaminated with smog and the land dirtied with dangerous chemicals. With this year’s new emphasis on environmental justice from the Biden administration, it is worth noting that people who live in adjacent areas can also be hurt through no fault or association of their own with the company.
- Corporate reputation can suffer. When there is a disaster of a large enough scale or that involves a well-known company, then reputation can suffer. The disaster becomes a public shaming, and the company can quickly lose business. Consumers may prefer to buy products that they feel good about and part of that feeling comes from associating the product with a corporate identity.
- Ethical issues matter. I hope that a company is ethical enough not to trade off long-term compliance with short-term gain. Saving a little money now but risking compliance violations in the long-term is unethical. It likely happens, but one would hope that corporations are moving toward a more ethical and justifiable means of operation.
- The benefit won’t outweigh the consequence. Liability and compliance are a very tangled web [see Biden’s Environmental Renaissance: 2021 and Beyond] of complex regulations with complex liabilities. By violating one part of a regulation, you might trigger other violations and there could be overlapping, cascading violations that you aren’t even aware of.
Safety and environmental risk are at the core of every business. No matter what industry you are in, there are activities that impact the safety of your employees and the health of the nature that surrounds you. If a corporation is going to take a risk, it should do so in a different arena, one where the negative results do not cause harm and legal liability.
Hindsight being 20/20, I realize that I probably overreacted when I risked pool suspension for the remainder of the summer because I was frustrated in the moment. The summer in the Washington, D.C. area where I live is long and hot, filled with bugs and humidity. I was lucky the lifeguard didn’t suspend us.
But hoping for a lucky break in the corporate world isn’t a strategy. Neither is risking the safety of your people and the environment.
Intelex Risk Management applications work together to identify and eliminate operational risk across the full scope of your organization’s operations. Adopt a risk management framework that identifies, assesses, mitigates and monitors risk of all types, complexities and severity levels.