Risk Management And Mitigation Strategies At Rana Plaza Essay

Length: 10 pages Sources: 7 Subject: Business Type: Essay Paper: #85483251 Related Topics: Risk Management, Complacency, Audit, Auditing

Excerpt from Essay :

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...


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.


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…

Sources Used in Documents:


Ahmed S. & Lakhani, L. (2013). Bangladesh Building Collapse: An End to Recovery Efforts, a Promise of a New Start. CNN. Retrieved November 10, 2014 from http://www.cnn.com/2013/05/14/world/asia/bangladesh-building-collapse-aftermath/index.html?iref=allsearch

Ayres, A. (2014). A Guide to the Rana Plaza Tragedy, And Its Implications, In Bangladesh. Forbes. Retrieved November 10, 2014 from http://www.forbes.com/sites/alyssaayres/2014/04/24/a-guide-to-the-rana-plaza-tragedy-and-its-implications-in-bangladesh/

BBC Bengali Service (2013). Bangladesh factory collapse toll passes 1,000. BBC Bengali Service. Retrieved November 10, 2014 from http://www.bbc.com/news/world-asia-22476774

Benettongroup.com (2014). Benetton Group Backs an Initiative In Support Of the Victims of Rana Plaza and Their Families. Benettongroup.com. Retrieved November 10, 2014 from http://www.benettongroup.com/archive/press-release/benetton-group-backs-initiative-support-victims-rana-plaza-and-their-families
Burke, J. (2014). Rana Plaza: one year on from the Bangladesh factory disaster. The Guardian. Retrieved November 10, 2014 from http://www.theguardian.com/world/2014/apr/19/rana-plaza-bangladesh-one-year-on
Butler, S. (2014). Bangladesh garment workers still vulnerable a year after Rana Plaza. The Guardian. Retrieved November 10, 2014 from http://www.theguardian.com/world/2014/apr/24/bangladesh-garment-workers-rights-rana-plaza-disaster
Cleanclothes.org. (n.d.). Compensation is long overdue. Retrieved November 10, 2014 from http://www.cleanclothes.org/ranaplaza
Mustafa S. (2014). Survivors of Rana Plaza collapse wait for compensation. BBC Bengali editor. Retrieved November 10, 2014 from http://www.bbc.com/news/world-south-asia-27141385
Ranaplaza-arrangement.org. (n.d). The Rana Plaza Donors Trust Fund. Retrieved November 10, 2014 from http://www.ranaplaza-arrangement.org/fund

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