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Politicians Get Wind of Contaminated Drywall

chinese-drywall-inspection

As reported on this blog back in February, the problem of contaminated drywall residential home developers, suppliers  and construction companies imported from China for new home construction is growing and the issue is beginning to raise a stink in Washington.  Senators from a number of states are fuming about the extent of the problem.  The use of contaminated drywall in new home construction spans many states.  Florida in particular is reported to be severely effected by this product liability event.  It is estimated that contaminated drywall was installed in over 35,000 homes. Risk mitigation experts believe that it would cost approximately $100,000 per home to remove, dispose and replace  the drywall.  Developers, banks, construction companies and consumers still reeling from the recession and credit crisis would be hard pressed to meet that huge expense.

The problem of contaminated drywall has many dimensions.  It is a product liability issue, ecological hazard and has dramatic contagion capabilities that can effect financial solvency, community quality of life and international trade relations with China.  At its root, the issue of contaminated drywall is a dramatic example of the severity of  the consequences of a poorly managed supply chain.  See our post For the Want of a Nail: Lennar Homes.

The Biz Journal Article can be read here: Senators Outraged Over Chinese Drywall.

More information on Chinese drywall contamination from NACHI

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May 29, 2009 Posted by | environment, manufacturing, product liability, recession, reputational risk, supply chain, sustainability | , , , | 1 Comment

PCA Goes To The Lonesome Valley

PCA RIP

PCA RIP

On Monday came the not surprising news that Peanut Corporation of America (PCA) has filed for bankruptcy.

The practice of selling food additives laced with salmonella bacteria makes it difficult to win back the trust of customers that had been so grievously violated.

PCA’s actions to knowingly ship contaminated products that have resulted in nine deaths and have sickened 637 people in 44 states. PCA’s salmonella laced peanut paste has contaminated 2,226 processed food products. A full list of recalled products can be found on the FDA website. These potentially criminal acts by PCA’s management has demolished the PCA corporate brand making it impossible to continue as a going concern.

The Chapter 7 bankruptcy filing will liquidate the company. This strategy will protect the PCA shareholders in the privately held firm from the significant legal liability that this event has created. It does not however protect PCA’s company management and accomplices that knowingly shipped contaminated products from potential criminal prosecution. Criminal persecution of those involved should be pursued and if anyone is found guilty punishment must be severe.PCA released its contaminated product into a large and extensive supply chain. Many leading brand food processing manufacturers that use PCA’s peanut paste as an ingredient in their packaged goods products have suffered severe reputational damage to their product and company brands. Though PCA’s corporate liability may be mitigated with the bankruptcy filing, aggrieved consumers will continue to have have legal recource by filing suits against the major consumer product companies that are still in business. This could make for a record breaking class action product liability suit.

Unfortunately this tragic occurrence could have been prevented. PCA’s actions demonstrate a disturbing ambivalence toward effective sound corporate governance practices. Companies that willingly sacrifice risk management and ethical business practices for the sake of short term profits consistently undermine corporate sustainability. All may not result in a dramatic corporate implosion like PCA. But ultimately the song of corporate liquidations remains the same. Unemployment for workers, aggrieved consumers, community desertion, tortured consciences and and in some instances criminal prosecution.

RIP PCA.

You Tube Video: Fairfield Four, Lonesome Valley

Risk: corporate goverance, ethics, risk management, legal

February 18, 2009 Posted by | associations, compliance, manufacturing, Peanut Corporation of America, product liability, supply chain, sustainability | , , , , , | Leave a comment

Honda Motors Practices Enlightened Capitalism

Amidst all the layoffs, business closures and shutdowns the hard edge of capitalism is a painful experience far too many people are forced to endure. During times of plenty, the relationship of labor and capital is harmonious and symbiotic. Both parties recognize the value that each bring to the corporate community and each parties enrichment and well being is served by the degree of harmony present in that relationship. During down business cycles management may resort to layoffs to preserve the enterprise. Unfortunately this often causes resentments and hard feelings on the part of workers who have lost the means of earning a living. When workers return to their jobs this can cause problems and hurt an affirmative corporate culture that is critical to maintaining a sustainable business enterprise.

In the face of the meltdown in the automobile manufacturing sector, Honda Motors is one of a very select few that is not resorting to layoffs. Honda Motors known for product quality and leadership in product innovation and business processes is also highly respected for its treatment of employees. Honda Motors places great emphasis on the creation and maintenance of an affirmative corporate culture to sustain profitability and market leadership.

Honda Motors decision to restructure the work force, and give workers a period of paid leave until business conditions improve speaks volumes about how management respects and values the contribution labor makes to the long term sustainability of the enterprise. Any remuneration workers receive during the leave will be paid back to the company with unpaid overtime when the workers return to the production line.

The value of good will on the Honda Motor balance sheet has increased exponentially. The sustainability of an affirmative corporate culture will drive profitability, product innovation and market leadership for the many years to come.

We applaud Honda Motors for this innovative and enlightened response to the current market challenges.

You Tube Video: June Carter Cash & Johnny Cash, One Piece At A Time

Risk: sustainability, labor relations, corporate culture

February 3, 2009 Posted by | labor, reputation, risk management, sustainability | , , , , | Leave a comment

Lousiville Business Community Iced Over

The massive ice storm that raged across the US this week has left a path of devastation in its wake. Particularly hard hit was the jewel of the Ohio River, Louisville Kentucky.

Damaging ice covers the entire region and the three largest electric utilities estimate that over 700,000 people are without power. This type of disaster has an immediate impact on small and mid-size businesses. Many small businesses are shuttered due to an inability to access power. Service oriented and home based businesses are also particularly hard hit by the power outages due to their dependency on digital technologies.

Business closure means that cash registers are not ringing. During these lean times of a deepening recession weaker businesses are particularly susceptible to the negative impact of these events. A single day of lost revenue can be the difference in a small businesses ability to maintain itself as a going concern.

The importance of having a set of contingency plans to accommodate these types of business interruptions is critical even more so due to the difficult business cycle we are now confronting.

The implementation of a sound practice program as advocated by Sum2 helps businesses to address these types of risks. The Profit|Optimizer helps managers craft an effective sound practice program. Sound practices incorporates plans to mitigate the negative effects of business interruption events and initiate actions that maintains profitability during the most adverse market conditions.

You Tube Video: James Taylor and Natalie Cole, Baby It’s Cold Outside

Risk; business continuity, sustainability, disaster planning

January 30, 2009 Posted by | business continuity, disaster planning, risk management, sustainability | , , , , | Leave a comment