WV Water Contamination, a Regulatory Lesson?

Over 300,000 West Virginians are still waiting to use their tap water for cooking, cleaning, and even bathing after the discovery that a chemical used in coal processing was allowed to leak into the Elk River. Freedom Industries, the company operating the plant, and WV authorities have estimated that approximately 7,500 gallons of chemical escaped from the 40,000 gallon tank, and the early indications are that despite a lack of controls to notify the company of a problem, the company is not at fault from a regulatory perspective.

Despite the lack of regulatory grounds for federal action, the incident will carry an expensive price tag for Freedom Industries. Less than 24 hours after a chemical leak had been discovered, suits had already been filed by local organizations seeking to recover lost profits and other damages due to the effects of the leak. The class action suits, which include compensatory damages, interest, statutory damages, punitive damages, injunctive relief, and attorney fees, among other costs, will end up tallying millions of dollars, and does not include the inevitable expenditures on remediation as Freedom works to clean up the mess.[1]

Fortunately, the crisis is not a serious threat to residents’ health, but it is an example of the importance of implementing Enterprise Risk Management, even in instances where such programs are not explicitly required by regulation.

With an ERM system in place, risks can be evaluated outside the confines of regulatory impact. The chances are high that the maintenance or facilities staff within the plant was aware of the risk of a chemical spill, but lacked the risk management acumen, access and methodology to escalate their insight to the level where resources could be allocated.

Enterprise governance, risk, and compliance solutions eliminate this bottleneck by revealing the needle in the haystack, and makes the cost of not addressing the risk clear and actionable. An ERM software would have engaged the front line managers in a workflow to strengthen controls. Even the act of implementing a solution would have provided immediate relief, as the presence of an adequate ERM program would have demonstrated that the organization was actively working to prevent spills, softening the eventual impact of suit damages.

Organizations cannot afford to wait for regulatory mandates to begin formalizing an Enterprise Risk Management program. The LogicManager Analyst Team maintains that tomorrow’s surprises are manageable, and the steps to manage them are known and well documented.