Business Risk Management for Tetra Tech Case Study Case Study

Excerpt from Case Study :

Tetra Tech EC & Risk Assessment

Discuss the evaluation of the risk management and compliance process at Tetra Tech

The risk management and compliance process at Tetra Tech is -- if you want to use a buzzword more often associated with the digital revolution than with a waste management enterprise (like, frankly, Tetra Tech) -- "crowdsourced."

Certain aspects of Tetra Tech's process seem almost enthusiastically aware of the SOX provisions protecting corporate whistle-blowers (of the sort who might have ratted out Enron or the sleaziest subprime-mortgage-vendors of the Florida panhandle a bit sooner than actually occurred, and whom Sarbanes-Oxley seems positively to encourage) as outlined in Fletcher and Newell's study of Tetra Tech: they quote management as stating to the employees "You have an obligation to raise your hand and say if I do it the way you are making me do it, it is not going to be optimal. Everything is about continuous improvement." (Fletcher and Newell, page 9).

The fact that this is framed as an ethic of continuous improvement, not as a step towards allowing inmates to run an asylum, seems to indicate that the chief benefit of crowdsourcing is that it makes risk-management into a Wikipedia-style group-project where anyone can correct an error of fact. It seems mostly designed to force potentially out-of-touch senior management to actually pay attention to the day-to-day details of the activities their subalterns plan and perform. But in its emphasis on the planning stage as being more important than the execution, Tetra Tech's strategy is definitely to be commended.

1a. Review case Exhibit 2 and analyze the components of the process as they relate to effective risk management

The flowchart named "Exhibit 2: Schematic of Task Initiation Procedure" (or TIP, as the authors of the study call it) shows Tetra Tech's own home-made map for how they approach the management of risk -- which is potentially very large in the toxic waste cleanup industry in which Tetra Tech is apparently primus inter-pares. It was instituted when two projects in one of Tetra Tech's predecessor companies got into the remediation business, which involves removal of toxic sludge and things like that, under the government's Superfund to bankroll such cleanup projects under oversight of the EPA. They rapidly discovered, with a Superfund cleanup site in New Jersey in particular, that problems of environmental devastation are, if anything, under-assessed in terms of the potentially increased financial (not to mention health) risks to the company if the ramifications of the cleanup are not fully understood before the job is undertaken.

The chief thing to remember here is that, while many businesses have cried foul over environmental legislation like the Superfund even existing at all, anyone who has the most passing interest in Superfund legislation would surely have recalled the notorious "Love Canal" case before accepting a Superfund cleanup job in New Jersey which assessed the job as relatively quick, clean, and easy. Love Canal was, in the late 1970s and early 1980s, shorthand in the mass media for a toxic waste cleanup gone horribly wrong: precisely the sort of thing that Superfund legislation was put in place to take care of. Love Canal was a neighborhood of Niagara Falls, New York, who discovered that over twenty thousand tons of toxic waste had been buried underneath their streets and homes by the Hooker Chemical corporation. The crisis began with the discoveries of birth defects and anomalies (including increased incidence of miscarriage) and grew until by 1978 President Jimmy Carter was forced to declare the area a State of Emergency -- for reasons of health, marking it as the first occasion on which the federal government disbursed emergency funds for anything other than a natural disaster. Love Canal was, of course, a primary impetus for the enactment of CERCLA, the Comprehensive Environmental Response Compensation and Liability Act, which established the Superfund in the first place to pay for this kind of work to be done. Twenty years after President Carter declared Love Canal a state of emergency, medical doctors were still warning in 1998 that -- given the increased risk of cancers (including leukaemia) that had been documented from persons who had lived in Love Canal -- the site still represented a "public health time bomb" whose massive costs were going to grow yet more massive within short order.

In other words, one could point to the fact that the original Love Canal site is not yet cleaned up -- by 2010 only ten percent of displaced families were able to return to their former homes and elected to do so -- as proof that it is very easy to underestimate the scale of Superfund-style projects, especially when the project that necessitated the creation of the Superfund in the first place is still not completed today.

b. Why do employees feel that they own the risk management and compliance process at Tetra Tech?

Employees at Tetra Tech represent the crowd to which Tetra Tech is crowdsourcing its risk assessment process. For starters this is already how the pre-existing COSO model (which pre-dates the SOX provisions by about a decade) instructed companies to view the risk assessment process: COSO depicts corporate hierarchy as a pyramid, in which activities listed at the base of the pyramid (the fat bottom on which it sits, so to speak) are activities that involve the organization as a whole, and COSO insists that risk management be one of these activities. This is presumably because as common sense and the COSO model will both tell you, allowing those members of an organization with actual hands-on knowledge of their individual bailiwick within the organization are more likely to be able to identify potential problems (having a presumably seasoned understanding of what problems are likely or able to occur within that individual bailiwick). It also assists with any case where the potential problem is going to be identified even more easily by what Jim Leonard says to Fletcher and Newell about the "naive questioner" on the staff -- "a TIP reviewer who prided herself on knowing nothing about these projects. And who asked 'off-the-wall' questions" (p. 7). This was how it became evident in the case mentioned before, which involved the toxic spill in the ocean and the truck on the old pier becoming too heavy to drive back safely. But from the way Jim Leonard narrates it, it sounds like an admission of an embarrassing failure on the part of management involved in planning that aspect of the enterprise. The mere fact that it took a "naive" questioner to ask this simply means there was not a working engineer on the staff, who would have been only too eager to point out this potential structural flaw in the plan, since most engineers enjoy sitting around and offering scathing criticism (or helpful improvements) to other engineers' plans. To some degree, though, this is why the TIP procedure seems to work: the element of competitiveness that enables Tetra Tech EC to win the Superfund contracts in the first place is based on accuracy, and the ethic of that same competitiveness (in which workers are encouraged to "correct" each other's work, in a sense) are what the tactic which I have described as the "crowdsourcing" of risk assessment is designed to encourage. That is the economic model, although I would also adduce from game theory the notion of a "nomic," or a game in which changing the rules itself becomes one of the rules. In other words, increased assessment of risk -- because everyone is asked to take part in the job -- is nothing more than an advance awareness of future problems. It is best to allow those who have a sense of the likelihood or probability of given practical real-world problems to be the ones who assess likelihood for the purposes of an organization's necessary -- and, thanks to Sarbanes-Oxley, federally mandatory -- risk assessment.

The interesting thing about this climate at Tetra Tech EC in which all employees are encouraged to be vocal with negative or contradictory opinions is that it seems to have emerged independently of the SOX's protection provisions for whistleblowers (outlined in Sarbanes-Oxley section 1107, introducing criminal penalties for any corporate retaliation against whistleblowers) creates a climate in which employees feel free to speak their mind to management, presumably each from a specific area of specialization in which one risk or another might be more readily apparent to them. The authors of this study point to an incident at Tetra Tech, when a toxic spill in the ocean was going to be cleaned up by sending an empty truck to the end of the pier, when somebody pointed out that it seemed to be a rather rickety pier, and a truck full of toxic sludge weighs considerably more than a truck as-yet-unfilled with toxic sludge, and therefore driving the truck full of toxic sludge back on the rickety pier was an idea that seemed infallibly destined to result in spilling all your…

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