[Solved] recognizing and minimizing tort and regulatory risk


            To sustain its business as a $4B aluminum maker in the United States and preserve its business relations with the eight countries it operates worldwide, Alumina Inc. must adopt a strategic plan by identifying regulatory risks which fall under the jurisdiction of Region 6 of EPA and such risks that the company may be exposed to as it conducts its day-to-day operations. The establishment of control measures in order to prevent or abate the occurrence of such risks is a tall order of the day. A contingency plan is necessary to address issues and manage risks that may be attributable to the company thereby exposing it to liabilities, lawsuits, and damages.

            Regulatory risk is defined as that risk which any company may be exposed or made liable to brought about by the enactment of stiff governmental regulations or restrictions geared towards the protection of governmental interests and society in general. A regulatory risk exposes the company to incremental costs of operation inasmuch as the governmental restriction, law, or regulation will always impose stiff measures to prevent the occurrence of perceived hazardous events. In case any of the foreseeable or unforeseeable hazards occur, the company’s liability will be heightened and sensationalized. Liability will not be limited to indemnification of damaged cost but may go so far as an order to cease and desist from further operations.

Thus, in order to manage these regulatory risks, the company must adopt a policy and procedures manual addressing regulatory risks by ensuring that accountabilities are identified, control measures are in place, regular operational audit is undertaken, and proactive assessment of environmental factors is done. The following factors must be considered in the policy and procedures manual.

1.                  Accountabilities. It is very important that the company identifies the accountabilities of identified positions in relation to its policy and procedures manual on managing regulatory risks because for all its good intents and purposes, the company cannot be the insurer of all the acts of its employees. It can only be answerable for acts which are done within the framework and guidelines of its policies. In case of negligence, inaction, or failure to act, the company may always look back to officers upon whom accountability to implement control measures have been reposed. Thus, in the case of Alumina, Inc., as part of its strategic plan, each officer should be accountable for specific measures to ensure that compliance and effective monitoring are responsibly undertaken. The top management has to set specific directions as it empowers its people in the operations to exercise good and sound discretion in protecting not only the company’s name and integrity but more so the public’s interest. A clear designation of responsibilities is an aid in determining accountabilities especially in the event of an occurrence of risks. The Chairman of the Board, the Chief Operating Officer, the Head of Public Relations, and the Legal Counsel are the important key personalities who can take an active role in ensuring that regulatory risks are proactively identified and measures to address the same are clearly defined.

2.                  Identification of regulatory risks.

The government, in its noble efforts to protect the rights of its citizens to safety and good health, is continuously assessing and evaluating environmental factors which may pose as threats to the citizens’ civil liberties. Towards this end, an alliance was formed between the Occupational Safety and Health Administration and the Environmental Protection Agency of Region 6 aimed at identifying safety, health, and environmental factors which are potential hazards brought about by the operations of various companies in the area around Region 6 (Alliance Agreement Region 6). The strategy is to work hand in hand with the various companies in identifying potential hazards such as the presence of airborne particles and establish control measures to eliminate these hazards.

Along this line and within this paradigm, Alumina Inc. should review all its operational processes and evaluate which phases in its operation may pose potential hazards to the public. The discharge of its used oil and other liquids should be carefully reviewed. The Federal Water Pollution Ac of 1972 as amended by the Clean Water Act of 1977 stipulates that facilities which discharge wastewater into receiving waters of the United States are required to procure a permit by meeting all the requirements as mandated in the said act (NPDES Reporting Requirements Handbook, 1997). It is incumbent upon Alumina, Inc. to ensure that it procures a permit as required by this Act and it conforms to all the standards set forth in the act. While it may cost the company to comply with the standards set by this act, nonetheless, it is equally responsible as a juridical entity to abide by the laws of the land to ensure that public health is not compromised by any of its operational processes. More so, as stewards of these God-given resources, it is the obligation of companies like Alumina, Inc. to preserve the waters by allowing its continued existence in its possible purest state.

Richard Stewart, in explaining his argument on the limitations of tort liability, argues that there are three factors that must be considered in determining tort liability of any enterprise. Firstly, a regulatory control has been established by an administrative body requiring any enterprise to comply with the standards set therein. Secondly, compliance to the regulatory requirements has been faithfully observed by the enterprise. Thirdly, a public disclosure through the appropriate administrative agency of any relevant information or data which may pose as risk to public safety and health (Steward, 2009). When all these conditions are met by any enterprise, logically, ethically, and morally, preclusion from tort liability should be granted.

In the case of Alumina, Inc., its defense of proprietary and confidentiality of information is not absolute. This right as granted under civil and corporation law does not preclude the right of citizens to be informed of impending risks to their health and safety. The latter prevails over the rights of Alumina, Inc. The excuse of not divulging information as it may run the risk of giving away information to its competitors is not acceptable. Thus, where risks of violating regulatory requirements are foreseen or foreseeable, it is the obligation of Alumina, Inc. to disclose this concern to the proper administrative agency which may work hand in hand with the enterprise and other agencies of government to ensure that the risk is addressed. Liability for tort is only the consequences of ones negligent or neglectful acts but where circumstances, especially good intentions – noble, timely, and sincere – go along with it, then liability is mitigated.

3.                  Operational control measures.

In the case of Alumina, Inc., it must clearly establish control measures in all phases of its operations to ensure that compliance to regulatory requirements are met. Negligence, carelessness, neglect of duties, and nonchalance are aggravating circumstances that could pin down any enterprise and subject the same to grave consequences. Where it is shown and it is carefully established and documented that Alumina, Inc. has taken all precautionary measures to ensure that it does not pollute the air, the land, and the waters, then management can rightfully use these as legal defense in case of future tort liabilities. But until and unless such necessary measures are in place, administrative bodies tasked to monitor compliance to regulatory measures could always haunt and pound on Alumina, Inc.

At the start we said that identifying and defining accountabilities matter. This is congruent to this requirement of implementing operational control measures. Where Alumina, Inc. can clearly and definitely aver that it has established all policies, guidelines, measures, and accountabilities upon its officers, then the buck of liability may pass on the those officers who negligently performed their responsibilities. Alumina, Inc. cannot be the insurer of the tortuous acts of its employees. British physicist and mathematician Lord Kelvin once said, “When you can measure what you are speaking about, and express it in numbers, you know something about it. But when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind: it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be.” (Cited in Mcquillan 2008 Report).

4.                  Operational compliance audit.

Inasmuch as all regulatory requirements speak of regular assessments and reports, it is incumbent upon Alumina, Inc. to establish regular operational compliance audit to ensure that its policies, guidelines, standard operating procedures, employee accountabilities are all observed and faithfully complied. Without such regular assessment and evaluation, Alumina Inc. cannot wash its hands of liability in case of exposure to risks. Complying with requirements is one thing but faithfully observing the standards in all phases of operations and at all times is another. The latter ensures public safety while the former ensures procurement of permits and perpetuation of the business. An effective feedback mechanism which reports on the results of the operational compliance audit is a good strategy for Alumina, Inc. to pursue. Sharing this report and getting the involvement and support of appropriate administrative bodies to address issues and concerns would somehow exculpate Alumina, Inc. from future liability.


            In essence, what is mandated by law is for enterprises to be good corporate citizens. Alumina, Inc. like all the other companies, have been granted its juridical entity by law. Being such, it is obligated to exercise its social accountability by ensuring that it does not pose any threat nor does it harm society in general. Only when Alumina, Inc. can definitely show that it has stood up for this ideal can it readily claim exemption from liability and damages. Until such time, Alumina must comply, observe, implement, assess and evaluate its processes to ensure that regulatory risks do not pose as a threat to its existence as a company.


Agreement establishing an Alliance between the Occupational Safety and Health Administration, U.S. Department of Labor, OSHA Region 6 and U.S. Environmental Protection Agency Region 6.

NPDES Reporting Requirements Handbook. Environmental Protection Agency, Region 6 (6EN-WC). 1445 Ross Avenue, Dallas, TX 75202. August 1, 1997.

Steward, Richard B. “Regulatory compliance preclusion of tort liability: Limiting the dual-track system.” Georgetown Law Journal. May 9, 2009.

Mcquillan, Lawrence J. and Hovannes Abramyan. U.S. Tort Liability Index 2008 Report.



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