Business Regulation Simulation Paper

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Business Regulation Simulation Paper

University of Phoenix

MBA/560 Enterprise Risk

Abstract

This paper identifies the key facts, regulations and legal issues in the Business Regulation Simulation regarding Alumina, a global multibillion company. It identifies several of Alumina's values and stakeholders and discusses the conflicts among the competing stakeholders according to the simulation. In addition, a summarization on the basic issues on how the internal counsel handles the regulatory issue. Three alternative solutions are also discussed using the risk analysis matrix and summarizes how these align with Alumina's values.

Business Regulation Simulation

In a global environment, businesses have many business risks and one of them is federal governmental environmental regulations. Businesses have to comply with regulations mandated by the government t or face penalties that can cost the company immensely and sometimes closure. These regulations assure that companies comply and not cause major catastrophes that can affect the environment or cause harm to human or animal populations.

The Business Regulation Simulation, featuring Alumina, a multi-billion dollar aluminum maker with subsidiaries in manufacturing automotive components, packaging materials, bauxite mining, alumina refining and aluminum smelting with its businesses in eight countries around the world, experienced legal issues that were very public. The Alumina organization falls under the control of the Environmental Protection Agency of region 6. This company, had a penalty imposed five years previously from the EPA and were now faced with a new legal issue or claim of environmental endangerment to the community with accusations from a local resident that the company caused her child of ten years to contract leukemia, a cancer illness directly related to the company's toxins.. These issues were carefully reviewed, handled and resolved using their internal legal counsel and public relations staffs to re-establish its reputation and keep the company from further litigation (Simulation, 2007).

Key Facts, Regulations, Legal Issues

One of the key facts was that Alumina was found to have high concentration levels of Polynuclear Aromatic Hydrocarbons (PAH's) in their environmental expulsion standards after an evaluation by the EPA five years earlier. Since Alumina was out of compliance, a clean up was ordered by the EPA and Alumina acted in accordance to correct the problem and a subsequent test was in compliance (Simulation, 2007).

This was an excellent course of action which helped Alumina establish itself as a responsible and environmentally friendly company. Any business that has emissions that are not processed accordingly to regulations, run the risk of ruining the environment can and therefore, the EPA's cleanup was in order.

Alumina understood that PAH's had to be monitored and cleaned up. They also understood these organic compounds are produced when materials containing carbon and hydrogen are burned. The PAH's are harmful due to their carcinogenic mutant substances (http://www.propex.com/C_f_env_pah.htm).

The environmental regulation is considered the most severe of governmental regulation of a business because of the costs involved for its rigid compliance. The penalties are strict because the government requires that businesses be responsible and ensure the preservation of the environment by complying with the EPA's regulations. This avoids a company from experiencing further punishment.

Since Alumina had concentrated levels of PAH during the EPA's testing, this regulation fell under the code of federal regulations (CFR Title 40: Protection of Environment) Region 6 which handles the states of New Mexico, Texas, Oklahoma, Arkansas, and Louisiana. The EPA develops and enforces its federal regulations enacted by Congress and is also responsible for researching and setting national standards. They issue permits to businesses, monitor and enforce compliance and can issue sanctions or demand compliance environmental quality established by the federal government (http://www.epa.gov/epahome/aboutepa.htm).

Alumina Inc.'s legal issues were the threat of a potential damaging lawsuit brought on by a local resident, a 38 year old single mother by the name of Kelly Bates. She accused Alumina of repeatedly contaminating the waters with carcinogenic effluents from its industrial processes. In addition, she also claimed that her ten year old daughter had acquired her leukemia from consuming the PAH contaminated water that Alumina had discharged five years earlier when the EPA had found them to be in violation of the environmental laws (Simulation, 2007)..

This was a legal issue that had all the elements of a large scale scandal and bad publicity, however, its managing staffs approached the problem straightforward and worked closely with their legal counsel to downplay the accusations and do more research to assure their PAH levels were in compliance before moving forward.

Values and Stakeholders; Ethical Dilemma

Because of Alumina's massive empire responsible in complying with environmental regulations and issues, it strives to place high values on the communities where they are located locally and globally. Their objective is to maintain environmental statutes by complying with all regulations and not cause environmental damages that may cause human and monetary losses.

Stakeholders are obviously the shareholders, its managing teams, employees, customers and the communities it affects environmentally. The Chairman, Roger Lloyd, is a hands-on tough leader, Chris Blake, the Chief Operating Officer who is second in command, Diane Richards, Public Relations, and Arthur Todd, Legal Counsel are the members of the corporate managing team and decision makers.

Because of the damaging accusations from Ms. Bates, the organization had several ways to resolve them. They had an option to destroy her publicly by having her prove her accusations; however, this would have caused a lot of negative publicity, media frenzy and costly litigation. Another option was work things out with Ms. Bates even though they believed their company had not been at fault for her daughter's illness.