Column: Risk Management

The Risk of Lawlessness

By: | April 7, 2017

Joanna Makomaski is a specialist in innovative enterprise risk management methods and implementation techniques. She can be reached at [email protected].

Laws at their core are intended to protect us, enforce our rights and help resolve disputes.

Laws are usually never invented overnight. Enduring laws can take centuries of precedent, research, philosophy and trials. Laws deter people from behaving in ways that can cause harm.

But every day I read about cuts in U.S. regulatory agency staffing, research, inspections and enforcement, coupled with a mandate to shed two rules for every one that is established. I hear unnerving calls for the “deconstruction of the administrative state.”

Why is this happening? Have laws unfairly oppressed or stifled us? Has innovation been stunted?

More curiously, what do we think will happen if we relax the rules around our rights, air, water, food, drugs, buildings, roads and the marketplace?

My own experience has given me insight, and fortunately solace as well, on the effect of government ceasing the regulation of business. Ironically, this deregulation was the impetus for me entering the risk management world.

Without rules, organizations that don’t self-regulate will eventually fail.

I worked in the oil and gas pipeline industry for 15 years as a chief engineer. Charged with hundreds of construction and refurbishments projects, there wasn’t an area of the industry, regulations and code books with which I was not familiar.

In the mid 1990s, codes started to change. This was around the time pipelines were spontaneously erupting from stress-corrosion cracking.

One thought regulators would tighten the construction rules but instead they went the other way. They wanted to shed the liability for the construction codes in the event anything went wrong.

The codes moved from being “prescriptive” to “performance” based. They now said the company could bury the pipeline as deep as they liked as long as it could be justified with a “risk assessment” — the first time I came face-to-face with the term.

With all the newfound freedom, no rules to follow and no one to say “gotcha,” we could have designed the pipeline to any inexpensive depth, and coupled it with “risk assessment” to support the decision.

Shareholders would be ecstatic, right? It would have been so easy to build to a third of the depth. But, we didn’t. Why?

We knew, call it a tacit assumption, that if we ever did cause harm, it would not be good for business. Running a safe and reliable pipeline supported our reputation.

This precious reputation was our latchkey to the backyards where we intended to run pipe, to farms whose irrigation systems we needed to disrupt and to aboriginal lands where we needed to house our equipment.

Without rules, organizations that don’t self-regulate will eventually fail. To those organizations that plan to “benefit” from the deconstruction of the administration, clearly you are also planning to fail. &

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