Business Regulation Simulation

Running head: BUSINESS REGULATION SIMULATION

Business Regulation Simulation

Karen Berdugo

University of Phoenix

Enterprise Risk

MBA 560

Professor Darnell Stroble

Jul 16, 2007

Business Regulation Simulation

Introduction

Alumina Inc. is a $4 billion aluminum maker, based in the United States and operates in eight countries around the world. The United States market constitutes of 70% of its sales. The company manufactures automotive components, alumina refining, bauxite mining and aluminum smelting.

As the business manager, I am leading the effort in managing a crisis arising out of allegations of environmental damages. (University of Phoenix, 2007) In this paper, I will identify the key facts, regulations, and legal issues. The result of my decisions will need to ensure that I prevent extensive losses (environmental and commercial), preserve the company’s image and abide by the pertinent environmental statutes.

Key Facts, Regulations and Legal Issues

Five years ago, Alumina violated an EPA evaluation environmental norm but quickly mitigated the damages. Since then, the company has maintained a good compliance record. Recently, the company found itself in legal troubles when a local resident accused the company of repeatedly contaminating the waters of Lake Dira with carcinogenic effluents. The complainant alleged that the contaminated water was the sole cause of her 10-year-old daughter’s illness to leukemia. The text states that “most of the environmental laws, such as the Clean Air and Water Acts, contain citizen enforcement provisions, which grant private citizens and groups the standing to sue to challenge failures to comply with the environmental laws.” (Reed, Morehead, Shedd, & Corley, 2008). The resident was threatening to sue Alumina for negligence.

Following the accusation, the Erhwon Reporter newspaper headlined the accusations, which caused grave concern to the company management team as the company’s corporate image to the general public, competitors, clients and potential client’s was at stake.

Environment regulations are the most stringent area of the government’s regulation of business. The Environmental Protection Agency (EPA) was established to administer federal laws that concern pollution of the air and water, solid waste and toxic substance disposal, pesticide regulation, and radiation. (Reed, Morehead, Shedd, & Corley, 2008). The initial strategy in attempting to resolve this matter was to release a statement highlighting Alumina’s clean record over the five years. Positioning the company as having been in compliance over the past five years would help in maintaining Alumina’s reputation. However, this decision proved to escalate the situation further when the newspaper posted another article indicating that Alumina had responded too quickly and defensively. Therefore, I agreed with CEO’s opinion to conduct an independent investigation to check for any new violations.

By conducting these tests, the results would come from a trusted source and the outcomes would remain private. An additional benefit to doing these tests privately was if the results were favorable, Alumina could publicize the reports to counter the published allegations. Ultimately, the independent tests proved to be a good decision. The test confirmed that the company’s PAH levels were lower than the prescribed limit.

The constitution provides citizens with the Freedom of Information Act. This act allows the public to obtain information that has been made available by a corporation. After the investigation, the Erhwon Reporter journal and the complainant may request the environmental audit report to see if there was any violation of the Clean Water Act. If Alumina made the decision to refuse to issue the audit, the resident’s accusations can influence her decision to sue the company for negligence. However, releasing an entire audit can leave room for misinterpretation for the public. Therefore, the business manager decided to release a partial report. This decision proved to be beneficial for the company. The report demonstrated that there was no violation of the environment discharge norms, and gave the opportunity

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