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Risky Business

Posted Tuesday, May 4, 2010, at 1:33 PM

Colleges have risk management courses listed right along with business ethics. Considering the way some business ventures operate, it seems like the risk management classes are well attended, but the business ethics classes are totally elective. It seems many business majors skipped the ethics classes or passed with a "D".

Goldman Sachs may turn out to be a good example of good risk management, but lousy business ethics. It appears they certainly hedged their bets with derivatives. How about BP in the Gulf of Mexico? Would Toyota with their massive recalls be included? You might think of including Massey Energy and the recent deadly coal mine explosion in West Virgina. Union Carbide and their Bhopal India disaster could likely be included, and of course the Challenger and the death of 7 Astronauts is blamed on poor risk management by allowing a launch in cold weather. Let's not forget Chernobal... billions of ruples down the drain and a dead zone for thousands of years.

There are thousands of examples available where man made problems have created a nightmare. I suppose the phrase high risk, high reward was ingrained into the business world long ago, but unfortunately it seems some business takes it beyond the limit. The reward of meeting a deadline or selling something new outweighes safely providing products in my opinion. It's not just heavy industry either. Just Google product recalls for a hint as to how often things are not as they should be.

Considering the BP fiasco in the Gulf, you have to wonder how deep BP's pockets are. Though it seems unlikely, what if they go bankrupt over this deal and the problem persists? It's not unprecedented at all that a business goes bankrupt and you and me end up paying the bills. A while back I blogged about the Summitville Mine in Colorado and the Canadian company that went bankrupt leaving an environmental mess that you and me are paying for to this day.

If you look into engineering disasters over the years, there are several factors that go into these failures. A study of the cause of some 800 engineering failures shows...

Insufficient knowledge ............................... 36%

Underestimation of influence ......................... 16%

Ignorence, carelessness, negligence .................. 14%

Forgetfulness, error ................................. 13%

Relying upon others without sufficient control ....... 9%

Objectively unknown situation ........................ 7%

Unprecise definition of responsibilities ............. 1%

Choice of bad quality ................................ 1%

Other ................................................ 3%

Looking at the major causes, it's quickly obvious that human error one way or the other is the overwhelming cause. OK, so we all make mistakes right? But when your life gets thrown into turmoil because of actions out of your control caused by someone else, lawyers, government, and who knows who all will get involved.

With the reporting of the BP gusher in the Gulf, a story about a $500,000 piece of equipment that is required by other countries was not required by the US of A has emerged. Would this piece of half million dollar equipment prevented the current crisis? I'm sure only time will tell, but considering the possible nightmare if something goes wrong, wouldn't you think it would have been at least wise to utilize all safety devices available? If it was required by regulation, we wouldn't be guessing about it, but many folks are against regulations and think business should govern itself.

So... How's that drilley spilley thingey working out? It's easy to place blame and say that we should ban off shore drilling. It's true that it's a dangerous and risky business extracting oil, but until somebody comes up with a suitable replacement, we're going to be drilling someplace for more oil and offshore is as good a place as any to look.

My whole point is really about rethinking government regulations, or coming up with smart ones at least. If the half mil device were required and staved off this mess, the regulation would be smart. When a business wants to perform dangerous or risky ventures, it would seem wise to me that public safety be considered way above the companies desire to make a buck.

Engineering disasters causing great human sufferage have been and will continue to be a problem. Regulations often can help mitigate the problems. An example is that every oil storage facility in the country has to have a containment wall around it. I guess it's common knowledge that there will be a storage facility problem It's not a matter of if we'll have major engineering disasters, but when the next one will occur.

I must have been asleep in 1986 as I don't recall hearing about the following at all, and this video is one of the most amazing things I've ever seen. Oil exploration has and will continue to cause some big problmes. I hope you will watch this short Youtube video all the way to the end as the final words ring so true...

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GI said... "..., Republican or Democrat can get behind the US leading the way in a new global business and technological frontier that the most modest estimates put at billions of dollars annually in revenue."

I ran into two articles about power and the past that you might be interested in.

From www.damninteresting.com... http://www.damninteresting.com/teslas-to...

and a proposal that has been bouncing around since WWII to power Europe and Africa...

The first link is an overview on Wikipedia... http://en.wikipedia.org/wiki/Atlantropa

More detailed info as the idea isn't dead... http://www.daviddarling.info/encyclopedi...

And a web site recommendation for www.daminteresting.com. I found this site to have over 67 pages of damn interesting articles about everything from the superfund site in Butte, Montana, to the origin of Murphy's Law.

-- Posted by Brian Hoag on Thu, May 6, 2010, at 3:50 PM

The last link should say www.damninteresting.com

-- Posted by Brian Hoag on Thu, May 6, 2010, at 3:53 PM

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