Drill Baby Drill: The Bill Comes Due

Louisiana has declared an emergency shrimping season for the off shore beds at the mouth of the Mississippi River.  The emergency harvest of shrimp, oysters and stone crabs is a desperate attempt to grab a final yield from a once bountiful aquaculture that sustained  a way of life and  helped define the regional identity  for multiple generations of Cajun people.  The spreading oil slick gushing from a toppled offshore oil platform threatens to bury that life as it covers the delicate ecology with a toxic cloak that may cast a death blow to a regions way of life.

It is estimated that 210,000 gallons of crude oil are gushing into the Gulf of Mexico every day following the explosion and collapse of British Petroleum’s Deepwater Horizon offshore drilling platform that killed 11 workers. The Transocean rig was reportedly not equipped with a special safety devise that should have capped the well with the collapse of the oil platform. This assertion is being denied by Transocean stating that the well was equipped with the devise but unfortunately it failed to work. The use of the safety devise is a regulatory requirement for any offshore drill platforms in Europe but in the United States this safety devise is not required and is considered an optional operational risk devise. Like the  recent coal miner disaster at Massey Mines, and word today that two more miners have died in Kentucky,  occupational wages sometimes result in death.  We need to understand that preservation of life and environmental safety are critical components of a cost of doing business that must be factored into ROI calculations and risk assessment scenarios.

The Coast Guard is in charge of emergency response to this growing disaster. The Coast Guard is skimming surface oil and using containment booms to control the growing oil slick. The Coast Guard is also considering igniting controlled burns of the surface oil which would release toxicity into the air. Another strategy being considered is the injection of chemicals into the spill to coagulate the oil. This strategy has never been attempted at such an extreme 5,000 foot depth and would also release additional toxins into the water. Technological solutions like the drilling of a relief well or the construction of a containment vessel would take months to accomplish. Man made solutions to cap the environmental disasters of their making always seem to pale in comparison to the scale and fury unleashed by the unrestrained power of nature.

This event marks yet another example of making an honest assessment of the true costs of our behavior and choices. Like the global economic meltdown that was the result of the unfettered credit orgy the bill for risky behavior always comes due. The continued focus on the exploitation and extraction of fossil fuels at the expense of alternative sources of energy comes at a great cost. This disaster may indeed be the death blow to an aqua industry that nurtured a region for many generations and informed a cuisine and culture highly treasured by the world. And like any excursion to a fine NOLA restaurant, someones got to pick up the tab.

The bill always comes due. We want to gorge ourselves at the well of cheap energy only to discover how dear the price of this devil’s bargain really is. Environmental degradation is the most obvious tip of a precarious iceberg that threatens to tip as it melts into an ocean of unsustainability. A destroyed eco-culture of marshlands and animals, abandoned hamlets and townships no longer able to extract a living from the land are the immediate visible signs of the cost of this deal with the devil gone bad.  We must begin to realize that the cost of cheap energy also requires our nation to continually engage in wars and military actions to protect this vital resource.  Cheap oil has badly skewed our economic infrastructure.  It has encouraged our businesses to produce inefficient cars that led to the decline of a strategic industry and destruction of cities like Detroit and Gary Indiana.  It caused the terrible moniker of rust belt cities to be pinned on a region of our country that was once the source of our nations wealth.  Cheap energy help turn our prized manufacturing centers into economic anachronisms.  Cheap oil has forestalled commitment to developing innovative green technologies that continues us to cede our position as a global manufacturing power. As we watch China and Brazil march forward with massive commitments to the development of energy innovation industries that will serve future needs of an energy dependent global economy, America is engaged in a bloody rear guard action to defend the ways of an old dying world too protect  depleting trickles of oil.

Tonight as Americans go to sleep in their energy inefficient homes it is hoped that they may pause to consider that drill baby drill is a rallying cry for an unsustainable dying future. Think of the villages along the Louisiana bayous and how their way of life is coming to an end.   Its time to consider the real costs of a Drill Baby Drill economy and begin to chart a course to a sustainable future.

You tube Music Video: Cajun Music: DL Menard and Louisiana Aces, Out My Backdoor

Risk: economic, environmental, culture

Deloitte’s Nine Principles of Risk Intelligence

Is your business risk intelligent?  A review of  the following principles offers company executives a concise outline of objectives central to a risk intelligent enterprise.   Deloitte recently published White Paper, Effective Integration, Enhanced Decision Making, The Risk Intelligent Tax Executive outlined the following nine fundamental principles.

Nine fundamental principles of a Risk Intelligence Program

1. In a Risk Intelligent Enterprise, a common definition of risk, which addresses both value preservation and value creation, is used consistently throughout the organization.

2. In a Risk Intelligent Enterprise, a common risk framework supported by appropriate standards is used throughout the organization to manage risks.

3. In a Risk Intelligent Enterprise, key roles, responsibilities, and authority relating to risk management are clearly defined and delineated within the organization.

4. In a Risk Intelligent Enterprise, a common risk management infrastructure is used to support the business units and functions in the performance of their risk responsibilities.

5. In a Risk Intelligent Enterprise, governing bodies (e.g., boards, audit committees, etc.) have appropriate transparency and visibility into the organization’s risk management practices to discharge their responsibilities.

6. In a Risk Intelligent Enterprise, executive management is charged with primary responsibility for designing, implementing, and maintaining an effective risk program.

7. In a Risk Intelligent Enterprise, business units (departments, agencies, etc.) are responsible for the performance of their business and the management of risks they take within the risk framework established by executive management.

8. In a Risk Intelligent Enterprise, certain functions (e.g., Finance, Legal, Tax, IT, HR, etc.) have a pervasive impact on the business and provide support to the business units as it relates to the organization’s risk program.

9. In a Risk Intelligent Enterprise, certain functions (e.g., internal audit, risk management, compliance, etc.) provide objective assurance as well as monitor and report on the effectiveness of an organization’s risk program to governing bodies and executive management.

Sum2’s business mission is to help small and mid-sized enterprises (SME) become risk intelligent enterprises.  Sum2’s product suites enables managers to implement sound risk management practices guided by these principles of risk intelligence.  We firmly believe that consistent practice of sound risk management  holds the key to profitability and long term sustainable growth.

Sum2’s Profit|Optimizer product series provides mangers a consistent framework and scoring methodology to assess, aggregate and price risk, identify actions, assign responsibility and align business functions to mitigate risks and achieve business goals.

Sum2’s IARP, helps managers to assess and manage the rising threat of tax risk exposures that present significant compliance risk to the enterprise.

We welcome an opportunity to help you erect a risk intelligence enterprise.

Risk: risk management, business intelligence, compliance, sustainability, profitability

Nike Resigns US Chamber of Commerce Board Seat

Nike has resigned from the board of the U.S. Chamber of Commerce for its opposition to the cap-and-trade bill now being considered by the Senate.   Nike moves comes on the heals of Exelon announcement to quit the Chamber altogether over its concern that the nations largest business lobby body was hindering legislative action to deal with the pressing problems of climate change.

As the December Copenhagen Summit on climate change nears pressure is growing on the United States to pass the cap-and-trade bill stalled in the senate. Companies with a strong commitment to corporate social responsibility agenda are becoming more vocal in support of legislative and corporate initiatives that address climate change.

Nike’s high profile action places associations and business advocacy groups on notice that it expects such groups to seek ways they can make positive contibutions to addressing pressing issue of climate change.

Nike insists that it expects the representative bodies of businesses to have a little less conversation and demands much more action to address the pressing  problem.

You Tube Video: Elvis Presley, Little Less Conversation

Risk: climate change, legislative, corporate responsibility

Managing Infuenza Pandemic Risk

The Swine Flu outbreak carries with it the potential to severely damage the financial health of small and mid-size enterprises (SMEs). Left unmanaged pandemics can impair profits, generate losses, undermine the contribution of key employees, disrupt supply chains, halt operations, undermine an enterprises financial health that can ultimately lead to bankruptcy.

Though many consider pandemics as a force majeure risk event that cannot be controlled, businesses can take steps to mitigate and manage the drastic challenges a pandemic can pose to a business. This is particularly important for businesses that find themselves in a weakened position due to the recession. Businesses that have become highly stressed due to the current business cycle are at acute risk of becoming insolvent due to the shock of this potentially catastrophic risk event. Business managers, bankers, shareholders and businesses with extended supply chains need to take steps to manage and mitigate the sever effects of pandemic risk.

The first step is to create or update a business continuity plan. Business continuity plans need to address a range of issues that includes planning for disasters and planning for the unique risk factors of an influenza pandemic need to be integrated into business processes.

All businesses are unique. Addressing a pandemic risk event in your business plan will require you to conduct a risk-management assessment on all aspects of your operations, business processes and market impact to ensure continued operation and financial health.

Some things management must consider in its review are:

• Assess how you work with employees, customers, contractors to minimize contagion threats
• Determine mission critical business functions your business requires to maintain operations
• Stress test your business operations to determine how to function with up a 40% absentee rate
• Review inventories in case foreign or domestic suppliers and transport services are interrupted
• Review your supply chains, determine at risk suppliers and identify backups
• Reorganize work spaces to minimize the spread of the disease
• Equip employees to support telecommuting
• Develop communication strategies to inform employees, customers and the media
• Use this opportunity to expand your e-commerce capability
• Promote awareness of the problems associated with pandemic flu
• Alert employees about what steps you’re taking and what they can do to limit the pandemic’s impact
• Review sick-leave and pay policies to ensure they don’t discourage workers from staying home when they’re ill
• Make backup plans if you need to pull people out of countries where the epidemic strikes
• Develop a travel policy that restricts travel to areas where the virus is active
• Stock up on masks and sanitizers, and consider staggering work hours to limit the size of gatherings

Sum2 publishes the Profit|Optimizer product series.  The Profit|Optimizer is the leading SME risk management platform that helps business managers and business stakeholders quickly assess enterprise risk factors and take considered action to mitigate and manage those risk factors. Sum2 will be releasing a pandemic risk assessment module by the close of this week.  The product will retail for $95.00 and will assist SME’s to assess, mitigate and manage the threats posed to their business by pandemics and other social disasters.

More information can be found on our website www.sum2.com.

Sum2 help our clients assess risk and realize opportunities.