Regulatory risk as defined by WebFinance, Inc. is “The risk associated with the potential for laws related to a given industry, country, or type of security to change and impact relevant investments” (WebFinance, Inc., 2008).
Throughout the Legal Environment of Business Regulation simulation, there were three regulatory risks identified. This paper will identify and explain how regulatory risks could be managed through preventive, detective, and corrective measures in order to limit legal recourse in each situation.
Alumina Inc., an aluminum maker based in the state of Erehwon, near Lake Dira participates in the creation of automotive components, packaging materials, bauxite mining, alumina refining and aluminum smelting as described in the Legal Environment of Business Simulation. Alumina Inc. is regulated by region 6 of the Environment Protection Agency (EPA), and although Alumina Inc., has had an “environmental discharge” violation in a routine EPA Compliance five years ago has held an exemplary EPA record. The five year old violation was based on a polycyclic aromatic hydrocarbon (PAH) concentration above the prescribed limit and was corrected promptly with a subsequent audit. Since that time, there have been no other compliance issues. Currently, Alumina Inc., is facing a lawsuit from a concerned citizen, Ms. Bates. Ms. Bates is accusing the organization of contaminating Lake Dira which resulted in the diagnosis of leukemia for her 10 year old child. (Apollo Group, Inc., 2002).
Identified Regulatory Issues
In order to identify correctly and manage potential risks the organization should perform a risk assessment. “The risk assessment is intended to evaluate present vulnerabilities ...