Risk Management and Mitigation Strategies at Rana Plaza

Audit Management DQ

Consider the governance of the company owning Rana Plaza and describe the regional expectations as well as best practice in this area and the benefits that adoption brings. Evaluate the governance of Rana Plaza during and after the collapse of the building against these and explain how this helped or hindered Rana Plaza.

The management of Rana Plaza failed to ensure employee safety. In such a case, workers and suppliers equate the weakest points in relation to conditions of order and input dependency, footloose sourcing practices, and hand-to-mouth contracting. One of the incidents that happened in 2013 at Sadia Garments Ltd. saw new unionized workers facing aggressive campaigns on factory management (Ayres, 2014). Workers faced threats of violence while lead organizers were sent death threats. Later, one factory supervisor attacked the Union General Secretary for Sadia Garments with a pair of scissors while demanding for the resignation (Cleanclothes.org. (n.d.). Apparel companies have shaky relationships with the major contract manufacturers from low-cost countries and often become transient as they work on contract-to-contract grounds. The deals can last shortly after the brands have a continuous pursuit of lowest cost operations and average thirds or quarters of the brand contractor portfolio turning over each year (Harris & McCaffer, 2013).

The management and governance of any company play a critical role in ensuring that the company follows all the desired industry practices. Sohel Rana owns Rana Plaza, a building that collapsed killing over 1300 people and injuring over 2500 people. Several companies majorly banks and those dealing with garments had rented the facility (Ranaplaza-arrangement.org. (n.d.). The interviewed experts on purchasing and supply in the research refer to relativity in the low industry investment level for supply chain management. As compared to subsequent sectors, there is the lack of awareness of quality issues and reliability of the suppliers in fifth and sixth tiers. The levels of risk awareness within Rana Plaza extend towards the second tier that is beyond a point that the buyers are aware of risky products that face the markets. Some of the brands that were investigation had a policy that does not source cotton from Uzbekistan that is accessible for cotton production involving child labor (Loosemore, 2013). This shows a strong and ethical supply chain approach. Bangladesh's RMG industry faces plenty of politically connected barriers for entry of low start-ups with minimal costs and is surfeit of overall supply. The market buyers propel supply chains through setting competition terms.

The fear of facing an undercut is high and the market context practices while brand purchasing while exerting significant influence for working conditions. The managers ethically induce purchasing practices for enablers of suppliers to have decent working environments. When suppliers are unchecked, short lead times for supply chains result in tight margins for imposition of some buyers and 'fast fashion' for exerting variant sets of incentives. The Capital Development Authority chief engineer by the state observed that the building's owner had not received consent to make modifications on the building. The owner had only obtained permit to work on five-story building within the local municipality (Cleanclothes.org. (n.d.). The action was in ignorance of the authorities based on Rana's political connections. Due to the collapse, most garment workers went into the streets to protest and demand Rana's arrest and other factory owners. While responding to such agitation, the Prime Minister ordered an arrest on Rana by the police as well as garment factories' owners operating within the building. Rana was arrested brought back to Dhaka as he tried to flee into India by road (Ayres, 2014).

The case of working in Bangladesh ensured that most of the brands interviewed emphasized on the relevance of cultivation of long-term relationships and suppliers based on elements of trust backed by the codes of conduct against regular audits. The suppliers of factories did not check to verify compliance by the management of Rana Plaza in their operations such as the constructions standards of the building. Most of the interviewed brands in the research were aware of workplace conditions within Bangladesh and had an acute awareness of reputational risks that such disasters had on Rana Plaza and Tareen Fashions. The variations caused questionable integrity levels in the long-term integrity for the brand. The fear for the diminishing shareholder scepticism and consumer base in the past decades forced the company to adopt extensive corporate social responsibility program (Cleanclothes.org. (n.d.). This endeared it to suppliers, prospective employees, and consumers through various environmental targets, charitable projects and efforts of managing supply chains in an ethical manner (Loosemore, 2013).

The management of Rana Plaza colluded with the local authorities to override the requisite licenses and authorization. The outcome of such poor governance was the collapse of the building. It is worth noting that transparency is particularly low across the audit regime. The brands were not required to act legally on the findings and not compelled to share them with stakeholders involved. In the moments that such audits detect elements of non-compliance, the brands were able to cut business relationships without having to alert other stakeholders. In the end, government bodies, worker representatives and other brands were not in a position of taking remedial or preventative action. In theory, even as brands ceased towards doing business with dangerous facilities, such suppliers will re-appear later with the supply chain brand by taking unauthorised subcontracted tasks (Harris & McCaffer, 2013).

Rana Plaza's governance structure did not institute prpoer monitoring and evaluation measures for the building's construction through proffesioanl audits. Where social audits uncovered critical violations of suppliers especially on contracting first instances for brands, violations, suppliers and auditors, there was a need to have a collectively developed operating policies towards corrective action. The brands interviewed led to confirmations of strenuous commitment towards supporting suppliers into achieving compliance and expressing their commitment with respect to their corporate responsibility and exercising the advantage to the positive impact. The cases of extensive violations included having suppliers engage proof of resistance to changes and instances of infringements repeated based on brands that conceded defeat and walked away from offending suppliers. Other practices included business relationship termination and cancelation of orders (Fukukawa, 2014). In this case, brands setting deadlines would act on the basis of misdemeanours requiring rectification. Most of the major brands in the in-country offices had teams dedicated towards social compliance that were supplemented through full audits and frequent factory visits. The scope and size of the brand depended on internal specialist staff, and the audits carried out occasionally (Rosenau & Wilson, 2014). In summary, the rankings were useful in internal evaluation because buyers would be aware of 'orange' rated suppliers doing repeated minor breaches but would work towards correction of violations (Butler, 2014).

Question Two

a. Identify the stakeholders for Benetton, one of the fashion retail companies supplied by a manufacturing company based in Rana Plaza.

One of the stakeholders of Benetton was the employees. Centre for worker solidarity in Bangladesh and the garment workers federation were prominent figures that were tortured, murdered, and disappeared under mysterious circumstances. The harassment is a common element in Bangladesh (Benettongroup.com, 2014).

The other category of stakeholders was the international community especially the NGOs. The reason is that the few brands attempted to use the advantage towards engaging government and have proved ineffective. Some of the NGOs interviewed observed that the edge was lowered by the continued element of brands sourcing in large volumes within the RMG sector. However, they benefited from low unit costs although they were relatively unsatisfied. While they lobbied for increased minimum wages, they identified minimum wage as a critical issue fell within government remittance (Brodowski, 2014).

The third group of stakeholders was the Bangladeshi government. The government protection systemic failure on human rights and the shortage of respect to rights and freedoms of workers allowed the incident of Rana Plaza to happen. This went on past the outcry of unsafe working conditions, low wages, repression, and restrictions of labor unions that plagued the industry (Fukukawa, 2014). The nation was endowed with the responsibility of protecting the citizenry against abuses of human rights from third parties such as business enterprises, through policymaking, regulation, enforcement, and investigation. However, policymakers were part of a profit-making business and translated into strong defenders of the corruption mechanisms.

b.

Evaluate the power and influence of each of these stakeholders using Scholes and Johnson matrix, to identify your 'key players'. This evaluation should be done in terms of the stakeholders' power and interest in the corporate social responsibility aspects of Benetton.

According to the Scholes and Johnson matrix, the interest of the employee unions was to have the companies instill safety and protection efforts for the employees. Their bargaining power is in the power to call on industrial strikes and picketing. Such a scenario makes people dive into hazardous conditions while broadening the risk of brand integrity. The outcomes are similar to the occurrences in Tazreen. Few months prior Tazreen Fashions caught fire, five of the production lines for the factory were contracted to work on supply Walmart. In one of the press statements after the tragedy, the company observed that during the time of the accident, fire within the factory had not authorized production of merchandise in Walmart (Brodowski, 2014). Other suppliers were subcontracted to work on Tareen Fashions and violated Wal-Mart's labor policies. The Rana Plaza aftermath led to Wal-Mart tackling the issue through publishing 'Red List' that detailed factories from Bangladesh seemingly risky. The list attracted attention from fellow retailers with some inquiring for extended information on the questionable companies (Cleanclothes.org. (n.d.).

According to the Scholes and Johnson matrix, the government seeks to have its citizens safe and their rights and freedoms granted fairly. The government of Bangladesh has the power of closing down the industries due to non-compliance. The early days of the Accord offer substantial challenges in developing business and political environments that operated through coordination and requirements of full commitment and support of signatories (Rosenau & Wilson, 2014). For purposes of appreciating an understanding of the challenge to the extent of the building's collapse, the designs bore the excessive reiteration. Furthermore, the engineer's contributions were full of to lapses from major governmental responsibilities and organizations. Capacity deficits in terms of infrastructure and labor complacency and inspectorates across government honored the obligation of protecting human rights in prize export industries and created a significant quality assurance gap. The CSR and audits and the tripartite action should try the fulfillment. It is clear that real sustainability for the partners enhances capacities of government institutions acting as possible substitutions. The importance of building should have safety and health system as an integral development standard of industry levels as compared to parallel systems that last for a short time. The alternative is that the company managing the building should be mandated to verify all signatories of quality forms (Butler, 2014).

According to the Scholes and Johnson matrix, the international community is keen on ensuring dignity and universal suffrage of people without bias. The international donors have the power of withholding financial assistance that could cripple the Bangladeshi economy. Recently, the increased expansion of the retail industry for ready-made garments across Bangladesh resulted into increased demand to develop high-rise buildings. Most of the ordinary buildings are converted into factories while the owners of buildings focus on expound on extra floors without an ideal permission from relevant authorities as it was with Rana Plaza. The case various is an illustration of the failure by several government authorities in carrying out continuous inspections and monitoring of illegal developments in Rana Plaza. Although cracks seen on building, local media broadcast showed that the government failed to respond in ways that could save lives of people especially of the extremely impoverished workers. Far from the roles of Western companies profiting from cheap labor in Bangladesh, Western media did well in focusing on and exposing Bangladeshi political corruption to the world (Ahmed & Lakhani, 2013).

c.

Explain the limitations of your identification and assessment of the stakeholders in a. And b. above.

From the above, the experience of the Rana Plaza in Bangladesh tells of a successful and rapid development within the country dependent on industry culture and low costs of labor compared to strength of compliance, managerial or technical capacity. The major challenge of creating sustainable solutions includes poor working conditions and semi-skilled employees. This is seen by the need to improve conditions, developing capacities, and giving incentives for factory owners, government bodies, suppliers implementing alternatives of safeguarding the industry's human rights. The successes of such initiatives dependend on reforms of social auditing regimes and detection of challenges and chronic problems facing Rana Plaza while operating in Bangladesh. The developments required that brands remain cognizant of human rights variants and the business consequences that workers supported participation of stakeholders within the industry development (Butler, 2014).

Question Three

Consider the governance and risk management arrangements that should be in place over the contract between the manufacturing companies and the retail organizations.

The first risk is the increase in corruption levels in Bangladesh. Rana Plaza tragedy can be attributed to corrupt systems that were led by unethical leaders. The building was designed without adherence to proper building laws and codes and use of inferior materials. This element could be monitored from the start through engaging the concerned Bangladesh government officials. Third party companies in auditing were engaged by brands for purposes of verifying code compliance (Ahmed & Lakhani, 2013). The typical experience was that suppliers paid for such audits. Audit outcomes were assessed through various media to evaluate larger brands that graded the audit results based on risks and awarded violations ratings and colorings.

The second risk is that cursory reviews on the industrial relations status in Bangladesh explain why grassroots labor movements are weak and extremely fragmented. An independent approach to government limited the brand's power while delivering mixed messages in the sector. Where demand was particularly, the government impetus to address wages was the behest for the brands, and the outcomes were rather weak (Mustafa, 2014). The special consideration was given to government reliance on industry and identification of asset value for low-wage labor as well as inclusiveness of officials as well as elected representatives in strong personal interests and maintained status quo. The labor leaders have consistently faced physical abuse and harassment while unions are faced with high bureaucratic obstacles in organizing strike actions. Although Bangladesh ratified several ILO conventions with respect to labor rights, the actions on the ground show that the rights have not been enforced through national labor laws. Besides, the government is not guaranteeing that such rights of organizing and collective bargaining are respected in any way.