RUNNING HEAD: TORT AND REGULATORY RISK
Recognizing and Minimizing Tort and Regulatory Risks Paper LAW 531/Business Law
In today’s business environment organizations have to deal with regulatory risks and tort liability on a daily basis. Organizations that do not comply with the state and federal regulations expose themselves to fines, tort liability and criminal penalties. The cost of failure to comply is not limited to fines and legal fees but also the loss of reputation and other tort liability. An organization must develop ways to prevent, detect, correct and manage risk and tort. Organizations that dedicate funds and resources to the management of these ...view middle of the document...
A local resident Kelly Bates claims this negligent tort lead to her daughter developing leukemia (University of Phoenix, 2009). Alumina could have prevented negligent tort if a compliance team had been self testing the water for PAH levels.
Detection and Management
Prevention is the ideal path to avoiding penalties of tort liability and regulatory risks. Unfortunately, risks cannot always be avoided. Even with the best compliance team, violations can accidentally occur. Early detection and management of these risks should be the second step in a plan to reduce regulation risks and tort liability. Employees should sign accountability and compliance documents. These documents should require employees to report any violations they encounter and be held responsible if they fail to do so. Employees are familiar with the specific aspects of the jobs they perform; they have the best vantage point to detect any malfunctions or errors that lead to violations. This will minimize the tort liability and penalties.
Product liability affects all organizations that manufacture a product. Product liability attempts to lessen the losses of a consumer by requiring a manufacturer or their insurer to pay for a defective product and the damages sustained from it (Jennings, 2006 pg 408). To detect product liability early, an organization should test random samples of their products. Random sampling would detect if an irregularity was occurring during the manufacturing process. If an irregularity is detected they would know the time frame, in which the irregularity first occurred, an estimated number of products affected and a forecast of the costs of liability of the products if any were sent to market.
Product liability and violation of state and federal environmental regulations are not the only areas where an organization needs to detect and manage risk. All forms of communication are high risk areas for many different torts and regulations. Advertisements and warranties are regulated by the Federal Trade Commission (FTC). The FTC mandates that all advertisements and warranties are accurate to what they state (Jennings, 2006 pg 414). If an advertisement claims that prices are 50% off, they must be half off the original price of that product and not half off of an inflated price. Ensuring that all advertisements and warranties are precisely written to state only what the manufacturer is willing to do will limit liability cases.
All statements released by a company should be carefully examined prior to releasing the statements. Facts listed in any statements should be verified for truthfulness before being released to the public especially if they pertain to other organizations or individuals. If statements are not verified for truthfulness, an organization can be accountable for defamation. Defamation is untrue statements written by one party concerning another party that is made with malice and intent to harm (Jennings, 2006 pgs 373-375). In the case,...