Corporate Risk Management - Non-Conformance

Corporate Risk Management - Non-Conformance

In the business world today, innovation is of high importance if a company is to survive challenges in terms of competition and an increasingly sophisticated customer base. In their drive to increase innovation and creative thinking, however, a danger is that a company may overlook the importance of conformance in certain areas of management. In the areas of research and development, as well as maintenance and risk assessment, for example, conformance of both human input and product are often essential in mitigating an increased level of risk. It is therefore necessary to balance innovation with conformance in mitigating and assessing certain risks.

A lack of effective teamwork in the area of research and development for example led to considerable financial and business risks in a legal company. The team was not compiled in an effective manner. Team members could not for example work together in an adequate manner, as a result of too many leadership positions within the team. Team members were unable to allocated a leadership position to the most able team member, while there was a general air of mistrust and ego issues among team members. Team members were also unable to make decisions regarding the research and development issues to be addressed. The result was that the specific research pertaining to the case was not prepared in time. Hence the clients were in a position to sue the company or withdraw its association and investments as a result of inadequate service. A further risk implication pertains to the reputation of the company, which was damaged because of a badly constructed team.

Another lack in the area of research and development is sufficient resources. A publishing company for example employed a research team for the compilation of an information resource. This research team was however unable to locate the necessary resources to compile adequate information to complete the publication. The result of this was financial loss in terms of the failed publication. The company projected a substantial income from the publication, which was lost as a result of the lack of resources. In addition to potential income, the company's existing finances suffered as a result of its investment in the project that never came to fruition. Such risks could have been mitigated by using the company's internal research resources to determine the viability of the project before hiring outside assistance. A lack of foresight and initial risk assessment therefore resulted in the losses suffered by the company.

In the area of maintenance and risk assessment, a lack of regular spillage inspection resulted in financial, legal and environmental risks for an oil company. The oil rig was not inspected on a regular basis, which resulted in a lack of regular maintenance. Hence the damage to one of the oil containers was overlooked, and a substantial amount of spillage occurred as a result. The environment suffered considerable damage as a result, and the company lost financial resources because of the need to clean up the spillage and mitigate the environmental damage. Furthermore, the company's reputation was damaged in terms of public perception.

Also I the area of maintenance and risk assessment, a lack of adequate safety clothing resulted in injury for several workers of a construction company. Disregarding safety regulations, several workers failed to wear their hardhats on a construction site, and were injured by falling construction materials. This resulted in their injury, for which their families demanded compensation. The compensation was not however legally required, as the workers were fully informed regarding safety regulations, to which they did not conform. The company was however placed at financial risk in terms of losing labor hours and the necessity to hire additional workers to handle the workload. Labor hours were also lost to the training necessary for temporary workers. It is therefore important that conformance form part of the risk assessment procedure of a company.